Default penalties and the limitation period

The tax authority may impose a default penalty for failure to meet various obligations, or for late, incorrect or incomplete compliance.

Although the limitation rules – five years calculated from the end of the year in which the deadline for fulfilling the obligation falls – expressly relate to tax assessment, a recent position taken by the tax authority has clarified that the same time limit also applies to the imposition of default penalties.

For example, in the case of the notification of related parties, the five-year limitation period must be calculated from the last day of the calendar year in which the notification obligation should have been fulfilled – within 15 days of concluding the first contract.

Once five years have elapsed from the last day of the calendar year in which the notification obligation should have been fulfilled, the tax authority may no longer impose a default penalty, even if the related-party relationship still exists.

If you have any questions regarding the above, please feel free to contact our expert colleague.