Tax is the monetary amount imposed by the State on individuals and juristic entities aiming to finance state expenditures and provide public services to citizens (i.e health care, education, infrastructure, public parks, social services, ... etc.); all of which are fully paid for by the state. Hence, the imposition of taxes contributes to the diversification of the State's sources of revenue and enables the State to provide its services for the public interest.

To achieve this goal, the Unified Tax Procedures Law No. 206 of 2020, along with the Income Tax Law No. 91 of 2005, set out the procedures followed by the Tax Authority in determining and collecting taxes, their due dates, and the term of the statute of limitations of its claim.

However, we will focus herein on certain occasions in which the tax authority's right to claim the tax is forfeited due to the statute of limitations. Generally speaking, the statute of limitations is the passage of time on the disputed right, and arguably reflects the negligence of the right holder to claim the disputed right against his opponent although he has the ability to do so.

In order not to keep the appeal process going for an indefinite period, which leads to the disruption of the judicial process, the legislator imposes filing of the case within certain time limits. By highlighting the five-year statute of limitations, the Income Tax Law No. 91 of 2005 specified the term of the statute of limitations for taxes due to the state at five years starting from the day following the expiration of the time limit for filing the tax return. Moreover, if the right of the State forfeits due to the statute of limitation, interest and other entitlements shall fall, even if the statute of limitation period for such entitlements has not been completed.

Furthermore, the completion of the statute of limitation period as referred to herein does not mean that the court will decide it spontaneously, but rather this shall be at the request of the debtor.

Also, the aim of the legislator at forfeiting the right of the tax authority to collect the tax due from taxpayers by statute of limitation is for the stability of legal positions.

On the other hand, the statute of limitations can be interrupted for the reasons stipulated in the Income Tax Law, for instance, in case of notifying the taxpayer to pay taxes or sending a letter, a claim or a notice with the elements of the tax assessment, provided that it has to be delivered to the taxpayer or his representative by hand or registered mail.

To give an illustration, we refer below to one of the cases initiated by our office, in which the court decided that the tax authority's right to claim the tax debt for the years of the dispute has been forfeited, based on the elapse of more than five years from the date of the filing of the tax return. The court also found that the submitted documents lacked evidence that the taxpayer or his representative received a tax assessment notification by hand or registered mail.

Link To Case:

Lastly, this article sheds light on the fact that even if the statute of limitations entails the expiration of the taxpayer obligations, the debtor shall still have a sturdy incentive towards the state since the taxes paid are intended to finance public expenditure for basic facilities, education, health, etc., in order to achieve sustainable development

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.