Lithuania Tax Disputes: Complaint Filing Rules Explained

The Supreme Administrative Court of Lithuania (hereinafter referred to as the Supreme Administrative Court) has repeatedly addressed another topical issue: the recognition of a tax dispute complaint as not having been filed and its return to the applicant. 

Procedural Requirements for Filing a Valid Tax Dispute Complaint

The essence of the dispute is the decision adopted by the Tax Dispute Commission, whereby, pursuant to Article 153(6) of the Law on Tax Administration, the applicant's appeal against the STI‘s decision to approve the inspection report was deemed not to have been submitted and was returned to the applicant.

It is relevant to note here, and the Supreme Administrative Court of Lithuania also points this out, that Article 153(1) of the Tax Administration Act stipulates that a complaint filed in a tax dispute must specify: 1) the taxpayer's name (first name, surname), identification number (code) and address; 2) the decision being appealed, the date on which it was drawn up; 3) the circumstances on which the applicant bases his claim and the evidence supporting it; 4) the applicant's claim. 

Paragraph 2 of this article stipulates that the complaint must be signed by the taxpayer (his representative). Upon receipt of the complaint, the pre-trial tax dispute resolution authority must verify whether the complaint meets the requirements set forth in Article 153(1) and (2) of the Tax Administration Act (Article 153(4) of the Tax Administration Act).

If it finds that the complaint does not meet the requirements of this law, the pre-trial tax dispute resolution authority shall make a decision and set a 15-day deadline for the taxpayer who lodged the complaint to remedy the deficiencies. This period shall start from the date on which the decision was delivered to the taxpayer (Article 153(5) of the Tax Administration Act).

 If the taxpayer complies with the requirements specified in the decision within the 15-day period, the complaint shall be examined and deemed to have been lodged on the date of its initial submission, and the time limits for examining the tax dispute shall start to run from the date of compliance with the requirements. If the specified requirements are not met in time, the complaint shall be deemed not to have been submitted and shall be returned to the taxpayer who submitted it (Article 153(3) of the Tax Administration Act).

Case I: Lack of Legal Standing — Complaint Filed on Behalf of Another Taxpayer

The Supreme Administrative Court of Lithuania found that the tax administrator had complied with the above legal regulation and that, in principle, there was no dispute in this regard. The main issue raised was the taxpayer's interest in the decision of the State Tax Inspectorate and the legal possibility to seek judicial protection against the decision of the State Tax Inspectorate.

The panel of judges of the Supreme Administrative Court of Lithuania noted that, before examining the case on its merits, the court it must disclose what legally significant consequences the applicant seeks to achieve in defending his violated rights and interests, to what extent the applicant's rights and interests are affected by the contested act or the actions of the institution, and how they would change if the claim were upheld. Once these circumstances have been established, the person's material interest in the outcome of the case would be revealed. After all, material legal interest is manifested in the fact that the court decision to be taken in a specific case will have a direct impact on the material rights and obligations of the persons concerned. In the administrative case received for review, it is clear that the STI decision was not taken in relation to the applicant (appellant). Based on the latter legal act (the STI decision), legal consequences arose for another taxpayer, but not for UAB. 

In seeking the annulment of the decision of the State Tax Inspectorate under the Ministry of Finance of the Republic of Lithuania, the applicant acted on behalf of another person, since any possible legal correction of the STI decision would affect not the rights of the applicant, but the rights and obligations of another person. 

Therefore, the Tax Dispute Commission rightly pointed out that the complaint was filed on behalf of the applicant, but concerning the decision taken in respect of another taxpayer, UAB. Once the tax administrator had decided against the applicant, the latter could already make use of the pre-trial complaint examination procedure before the Tax Dispute Commission and judicial protection.

Ruling: Appeal Dismissed for Absence of Material Legal Interest

Taking into account the above arguments, the Supreme Administrative Court of Lithuania found that there were no grounds to overturn or amend the contested decision of the court of first instance on the grounds stated in the applicant's appeal, therefore, the contested decision of the court of first instance is left unchanged, and the applicant's appeal is dismissed.  

Case II: Complaint Submitted Without Authorisation to Represent a Bankrupt Company

Another case is noteworthy and interesting in that the applicant appealed to the State Tax Inspectorate (STI) against its decision to additionally calculate VAT, personal income tax, late payment interest on these taxes, and fines imposed, requesting that the decision be revoked and the tax dispute be suspended until a final and unappealable decision is taken in the pre-trial investigation. 

The STI, having established that the complaint had been submitted by the applicant but that it was not accompanied by a power of attorney authorising him to represent the bankrupt company (the taxpayer) and that it had been submitted after the deadline for submission, decided to remedy the deficiencies in the complaint.

 Having established that the deficiencies in the complaint had not been remedied within the specified time limit, the defendant adopted a decision considering the applicant's complaint not to have been submitted and returned it to the applicant. 

Loss of Representation Rights Upon Initiation of Bankruptcy Proceedings

The Supreme Administrative Court of Lithuania found that there was no dispute in the case that bankruptcy proceedings had been initiated by a regional court ruling and that a representative had been appointed as the bankruptcy administrator. 

Therefore, the court of first instance had rightly relied on Article 56(1) of the Law on the Insolvency of Legal Persons, which stipulates that the management bodies of a legal person lose their powers from the date of entry into force of the court ruling to initiate bankruptcy proceedings, and the rights and obligations of the management body of a legal person during the bankruptcy proceedings are exercised by the insolvency administrator (Article 56(2) and Article 66(1)(1)), Article 47(1) of the Law on Administrative Proceedings (the parties to the proceedings defend their interests in court themselves or through representatives) and Article 47(3) (cases on behalf of legal persons may be conducted by the heads of institutions, agencies, services, companies, organisations, and, in accordance with the procedure established by law and the founding documents, other employees or civil servants acting in accordance with the rights and obligations conferred on them by law, other legal acts and the founding documents.

These persons shall submit to the court documents confirming their duties) and obliged the applicant to submit a power of attorney to represent the bankrupt Company. The applicant failed to comply with the court's obligation.

The applicant submitted the complaint to the State Tax Inspectorate as a shareholder and former manager of the bankrupt company, and the decision was taken after bankruptcy proceedings had already been initiated against the Company, therefore, the defendant reasonably requested the applicant, as a natural person, to provide a power of attorney to represent the Company, because the applicant, as the former head of the Company, lost the right to act as a taxpayer after the bankruptcy proceedings were initiated in court.

Application of Precedent: Ruling in Case No. eAS-720-575/2020

The Supreme Administrative Court of Lithuania did not agree with the applicant's arguments in his appeal that there were no grounds in this case to follow the ruling of the Supreme Administrative Court of Lithuania of 4 November 2020 in administrative case No. eAS-720-575/2020. It stated that the ruling of the Supreme Administrative Court of Lithuania in question is important in several respects. 

First, it consistently maintains the position that claims brought before the court by the former head of the company, who, pursuant to Article 47 of the Law on Administrative Proceedings, does not have the right to represent the bankrupt company in administrative proceedings, cannot be accepted for consideration by an administrative court because they were submitted by an unauthorised representative.

In administrative case No. eAS-720-575/2020, the applicant applied to the court, inter alia, requesting that the State Tax Inspectorate be ordered to revoke the decision approving the inspection report, in which additional VAT, income tax, late payment interest, and fines were imposed.

The panel of judges of the court of appeal, which examined the case, assessed whether the court of first instance had reasonably refused to accept part of the applicant's complaint (regarding the obligation of the State Tax Inspectorate to revoke the decision and the obligation to adopt a new decision on the approval of the State Tax Inspectorate's inspection report, only after assessing the applicant's written comments on the State Tax Inspectorate's inspection report, noted that the aforementioned administrative acts do not establish any rights or obligations for natural persons, it does not follow from the case file that the contested State Tax Inspectorate act directly affects the applicant's subjective rights or legitimate interests, the validity of the information provided in the State Tax Inspectorate administrative act may be assessed in civil proceedings for damages. 

Therefore, the applicant's arguments in the appeal that the decision to approve the inspection act, which has entered into force, has direct legal consequences for the applicant are unfounded. Thus, the Supreme Administrative Court of Lithuania dismissed the applicant's appeal.