Court rules in favour of fiscal certainty (Court of Appeal, Malta)

27 January 2011, Malta (Ref: Appell Civ. 17/2009). The Commissioner of Value Added Tax (VAT) appealed from a ruling of the VAT Appeals Board, which had ruled that an assessment made under art. 32 of the VAT Act (Laws of Malta, Cap. 406) was made out of time.

Art. 32 of the law in question deals with the power of the VAT Commissioner to make assessments and serve them on the tax payer. This is a two-stage process: first the VAT Commissioner makes a 'provisional assessment' (within 6 years from the end of the tax period) and then serves an 'actual' or 'final' assessment, within a period of not less than 30 days and not more than 6 months from when the provisional assessment was served on the tax payer. In the present case, the VAT Commissioner had made such assessments, and these were contested before the Appeals Board, and declared null. The VAT Commissioner proceeded to issue fresh assessments; next time round the VAT Appeals Board declared them out of time.

The Commissioner for VAT considered that the first VAT ruling annulled both the provisional and the final assessments, in actual fact according to the VAT Appeals Board, there was no reason to consider the earlier provisional assessments to be null. Owing to the VAT Appeals' Boards deeming the earlier provisional assessment to be valid, the Commissioner of VAT had lodged the new final assessments beyond the six month period from the issue of the provisional assessment.

The Court of Appeal upheld the position taken by the VAT Appeals Board, deeming that there was no reason to consider the provisional assessment to be null, just because the final assessment was null. The Court referred to an earlier judgement Vella noe v. Commissioner for VAT (Crt of Appeal, 11 Dec. 2009) where it was held that what is not declared null, continues to subsist. Any other interpretation would deny the tax payer of fiscal certainty, notwithstanding the passage of time, leaving that person indefinitely subject to tax. In the present case, the Court went on to state that just like the tax payer has to observe time limits imposed on him, so too must the Commissioner: any other interpretation would be unjust and would place one party at an unfair advantage over the other.

The Court of Appeal furthermore quoted from Ballut Blocks (Services) Ltd v. Commissioner of VAT (Crt of Appeal, March 2010) in which the Court observed that the relationship between the tax collector and the tax payer must be characterised by respect for the norms of the law, from which neither party should abuse. Since the tax collector requires from the tax payer a rigid and holistic respect for the law, the same is expected of him. The tax collector must adopt the same, rigid, respectful, faithful attitude towards the law.

To read the full judgement click here