Judgement issued by the Supreme Administrative Court in the case of proving the origin and source of income

For the first time, the Supreme Administrative Court decided on a case related to proving the origin and source of income (judgement no. 9 Afs 64/2019 - 52 dated 13 June 2019).

The tax administrator found out that the complainant spent higher amounts on her private expenses between 2010 and 2016 than her income from business. The administrator appealed to her to prove the origin and source of her income. The deadline for determining the 2010-2014 tax elapsed already, so the tax administrator processed only the tax periods 2015 and 2016, which were not statute-barred at that time.

The complainant contested the lawsuit for unlawfulness at the County Court. According to her view, the appeal to prove the origin and source of her income made by the tax administrator was not legitimate because it took into account a period which preceded the effectiveness of the act, which contains the concept of proving the origin and source of income (it has been a part of the Income Tax Act, sec. 38(x) since 1 December 2016) and also she questioned the estimation of the value of her assets which was the basis of the appeal.

The County Court rejected the suit (30 A 124/2018 - 39 dated 31 January 2019). According to the County Court, the appeal to prove the origin and source of income for tax periods preceding the effectiveness of the act is not inadmissibly retroactive because the substantive duty of the tax entity is not changed but it is merely a new procedural instrument used by the tax administrator. The complainant must prove the origin of her income, even for the tax periods preceding the effectiveness of the act (the appeal was defined in sec. 38(x) of the Income Tax Act), i.e. for the year 2015.

The complainant contested the decision of the County Court by a plea complaint. The complainant objected in her plea complaint that she was not provided with a sufficient analysis which would have calculated the rise in her assets. The complainant did not object to the retroactivity of the appeal at the County Court so the Supreme Administrative Court could not investigate into the query.

The Supreme Administrative Court decided that the tax administrator's questioning was legitimate and that the complainant's objections are not well-founded.