Tax lawsuits are legal actions initiated by taxpayers against procedures carried out by the tax office or other administrative authorities. These lawsuits, which fall under administrative jurisdiction, aim to ensure the legality of tax procedures and protect the rights of taxpayers fulfilling their obligations. Tax lawsuits, examined under two main categories—annulment actions and full remedy actions—are critically important for the proper functioning of the tax system and the fair treatment of taxpayers.
In annulment actions, the plaintiff must demonstrate that their interest has been violated. Moreover, the alleged violated interest must be (1) legitimate, (2) personal, and (3) current. For instance, a person who has been penalized with a tax fine cannot file a lawsuit unless the subject matter justifies it. Similarly, even if someone wishes to file a lawsuit for the removal of obligations due to tax debt, there must be a valid and legal debt at that time. A tax lawsuit may not qualify as an annulment action, but the same person can sue against the "tax debt" related to the tax penalty.
A legitimate interest is one that has legal validity. A plaintiff has the right to file a lawsuit to protect their interest in a legally compliant manner. Demands without legal validity are not acceptable for the admissibility of such lawsuits.
Administrative oversight is necessary regarding tax procedures and their legal compliance. While annulment lawsuits aim to protect individual rights, they also ensure the fair and legal implementation of tax obligations. These types of lawsuits are essential for the effective application of judicial review and legal control mechanisms.
Tax lawsuits are not limited to the annulment of assessments. Within the framework of the Tax Procedure Law (VUK), lawsuits can be filed before tax courts and may pertain to various types of administrative actions. However, not every lawsuit solely concerns tax penalties. Accordingly, tax lawsuits are closely related to actions filed against administrative acts, especially within the provisions of tax law. The subject of the case, including tax penalties and requests for their removal, must be addressed in detail.
The procedures carried out by the tax office must be clarified. The person who issues decisions on behalf of the tax office must ensure the inspection of files related to the legal grounds of the procedure. The initiation of tax court proceedings is also connected to this process, where the court may decide on the legal status of tax debtors.
What is a Tax Lawsuit?
A tax lawsuit is a legal action filed by taxpayers against actions taken by the administration. They are categorized into annulment actions and full remedy actions. In annulment actions, the legality of the tax procedure is challenged, and its cancellation is requested. In full remedy actions, compensation is sought for damages arising from tax procedures.
The legal nature of tax lawsuits serves not only the protection of individual interests of taxpayers but also the preservation of public order. The judicial review of actions taken by the tax administration not only safeguards taxpayers' rights within a legal framework but also ensures that the tax authority's practices are in compliance with the law.
Types of Tax Lawsuits
- Annulment Action:
An annulment action is a lawsuit filed by taxpayers against unlawful procedures carried out by tax offices and other administrative authorities. The purpose is to have the court determine that the administrative act lacks legal basis and to annul the action. Annulment actions typically involve disputes over assessments, tax penalties, or other tax-related measures.
For example, a taxpayer who objects to an unlawful tax assessment by the tax office may file an annulment action requesting correction of the unlawful act. - Full Remedy Action:
In full remedy actions, taxpayers seek compensation for material damages caused by the unlawful actions of the administration. These lawsuits are generally intended to recover losses incurred due to the actions of the tax office. Taxpayers who experience loss of rights due to tax obligations may demand compensation for the unjust conduct of the administration.
For example, a taxpayer who receives an unjust tax penalty may file a compensation lawsuit in the tax court.
Claims of Illegality in Tax Lawsuits
To file an annulment action, the plaintiff must clearly demonstrate the illegality of the administrative act. If the tax act is unlawful in terms of authority, form, cause, subject, or purpose, an annulment can be requested.
- Illegality in Terms of Authority: If the administration lacks the authority to carry out the tax act, the act must be annulled.
- Illegality in Terms of Form: If the tax act fails to meet the procedural requirements stipulated by law, it is deemed invalid.
- Illegality in Terms of Cause: The factual and legal grounds supporting the act must be properly presented; otherwise, it may be considered unlawful.
- Illegality in Terms of Subject: The subject of the tax act must be legally valid and clearly defined.
- Illegality in Terms of Purpose: The tax act must be carried out for the public interest. Acts motivated by personal or private interests are considered unlawful.
Claims of illegality in tax lawsuits are shaped by how the plaintiff specifically identifies the aspects of the administrative act that are contrary to the law. In annulment lawsuits, many claims may be raised, often covering one or more of the elements of authority, form, cause, subject, and purpose. Each element must be clearly and thoroughly explained.
Especially in tax law, annulment actions against assessment procedures involve detailed evaluations of the factual basis of the act, the scope of discretionary power, the adequacy of reasoning, and whether the action was taken for the public interest. Tax lawsuits generally challenge actions that violate the rights of taxpayers, and therefore judicial review is vital for ensuring justice.
Authority to File Tax Lawsuits and Conditions
Tax lawsuits may only be filed by individuals directly affected by the administrative act—primarily the taxpayer or persons whose rights are directly violated. The right to file a lawsuit must be based on a legitimate, personal, and current interest.
The right to file a lawsuit is not limited to taxpayers. Third parties who are directly affected by tax procedures may also initiate such actions. Plaintiffs in tax lawsuits must legally and objectively prove any grievances arising from the tax act.
Tax Courts and Competent Jurisdiction
Tax lawsuits are heard by Tax Courts, which are administrative judicial authorities. Tax courts review the legality of tax procedures. These courts also handle objections to tax office decisions. Lawsuits are usually filed with courts located in the taxpayer's place of residence or where the tax office is located. These courts ensure that tax procedures comply with the law and protect the rights of taxpayers.
Deadlines and Procedure for Filing Tax Lawsuits
Applications for tax lawsuits must be filed within specific time limits. According to the Tax Procedure Law (VUK), objections to tax procedures must generally be made within 30 days. This period begins upon notification and is a statute of limitations. Taxpayers who miss the deadline lose their right to file a lawsuit.
When filing a tax lawsuit, the plaintiff must be informed about the tax procedure in question and must clearly demonstrate its unlawfulness. Once the lawsuit is filed, the tax authority provides its defense, evidence is collected, and a court hearing is held.
Consequences of Annulment Decisions in Tax Lawsuits
If the tax court issues an annulment decision, the tax procedure is deemed invalid and considered as if it never occurred legally. The decision is binding not only for the plaintiff but also for similar cases. The annulled procedure loses its legal validity, and the administration must take new action. Moreover, the annulment has retroactive effect, meaning the procedure is invalid from the beginning.
Tax lawsuits serve not only to protect the rights of taxpayers but also to ensure that tax administration practices comply with the law. A well-functioning tax judiciary system enables taxpayers to fulfill their obligations properly and supports the sound management of public resources. As the rights of taxpayers are safeguarded, the effectiveness of the tax system increases. The proper filing of tax lawsuits and the legal conduct of proceedings ensure fair outcomes for both parties.
Originally published April 21, 2025
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.
