Communicated on 2 September 2019
FIRST SECTION
Application no. 25311/17
IMMOREKS MAKEDONIJA DOO SKOPJE
against North Macedonia
lodged on 27 March 2017
SUBJECT MATTER OF THE CASE
The applicant company, Immoreks Makedonija Doo Skopje, is a company registered in Skopje and active in the construction sector. It is represented before the Court by Mr Z. Hadji-Zafirov, lawyer practising in Skopje.
A. The circumstances of the case
The facts of the case, as submitted by the applicant, may be summarised as follows.
In 2008 the applicant company was subject to a tax audit for the period between 1 January 2005 and 31 December 2007. The authorities found that it had not been entitled to deduct the input Value Added Tax (VAT) it had paid to several suppliers for construction services. According to the tax assessment of 16 October 2008 the applicant company was ordered to pay additional 18,222,206 denars (MKD) as VAT.
On 28 October 2010 the Administrative Court granted the applicant company’s administrative action and remitted the case for reconsideration. It held, inter alia, that the relevant facts had not been correctly established, as the applicant company presented evidence attesting that the services in question had been received.
On 14 November 2011, the tax authorities issued a new tax assessment, according to which the applicant company was ordered to pay additional MKD 16,898,094 as VAT. The audit found that one of the applicant’s main suppliers, company E., refused to allow the tax authorities to audit its records. Previous audits found that company E. failed to maintain proper accounting records regarding construction materials and equipment, which was an indication that it lacked the capacity to carry out the services. They further established that some of its’ suppliers’ invoices did not contain the relevant information, as required under section 53 of the VAT legislation, and that there were discrepancies between the accounting records of the applicant company and some of its suppliers.
On 14 January 2014 the Administrative Court granted the applicant’s administrative action and remitted the case on grounds that all relevant facts had not been established in respect of the compliance of the tax obligations with the statutory limitation period.
On 7 July 2014 the tax authorities issued an identical tax assessment, according to which the applicant company was ordered to pay additional MKD 16,898,094 as VAT. They established that the relative (five-year) statutory limitation period concerning the 2005 tax debt had not expired since each decision in the proceedings had restarted the running of the time‑limit. They further noted that the absolute (ten-year) statutory limitation period regarding the 2005 tax debt was going to expire on 1 January 2016.
The applicant company unsuccessfully appealed before the Ministry of Finance.
On 27 February 2015, the applicant company lodged an administrative action, complaining about the authorities’ refusal to recognise its entitlement to VAT deduction, even though it had provided construction reports attesting to the services provided. Moreover, the authorities failed to obtain construction expert report or conduct an on-site inspection in order to evaluate the veracity of the declared VAT-chargeable supply.
On 27 August 2015 the Administrative Court dismissed the applicant company’s administrative action and endorsed the findings of the tax authorities. It further noted that the statutory limitation period in respect of the tax debt had not elapsed.
On 28 October 2015 the applicant company lodged an appeal against this decision, arguing, inter alia, that the absolute statutory limitation period in respect of the 2005 tax debt had expired.
On 6 July 2016 the Higher Administrative Court dismissed the applicant company’s appeal. It upheld the findings of the Administrative Court and the tax authorities. It further declined to deal with the arguments regarding the prescription period in respect of the 2005 tax debt on the grounds that these arguments had only been raised in the appeal. A copy of this judgment was served to the applicant company on 28 September 2016.
COMPLAINTS
The applicant company complains under Article 1 of Protocol No.1 to the Convention and Article 13 of the Convention that the domestic authorities established its tax obligation in respect to the VAT deduction entitlement contrary to the relevant domestic law and that no effective procedure to challenge that decision was available to it.
QUESTIONS TO THE PARTIES
1. With regard to the decision establishing the applicant company’s tax obligation, has there been a violation of the applicant company’s right to peaceful enjoyment of its possessions, contrary to Article 1 of Protocol No. 1?
(a) In particular, was the interference in accordance with the relevant domestic law and necessary to secure the payment of taxes or other contributions or penalties? Did it impose an excessive individual burden on the applicant company (see Euromak Metal Doo v. the former Yugoslav Republic of Macedonia, no. 68039/14, §§ 43-50, 14 June 2018 and Nazarev and others v. Bulgaria, (dec.), no. 26553/05, 25912/09, 40107/09 and 12509/10, 25 January 2011)?
(b) Having regard to the manner in which the Higher Administrative Court dealt with the compliance of the 2005 tax obligations with the absolute statutory time-limit, was the applicant company afforded judicial procedures that offer the necessary procedural guarantees (see, for general principles, Jokela v. Finland, no. 28856/95, § 45, ECHR 2002 IV)?
2. Did the applicant company have at its disposal an effective domestic remedy for its complaints, as required by Article 13 of the Convention?
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