Argentina: Taxpayer's Alternatives In Relation To A Tax Claim: Appeal The Tax Assessment Or Pay And File A Refund Claim?

A Superior Court of Justice of the City of Buenos Aires’ ruling resolved a case where a tax on gross income debt was assessed, and the taxpayer, who had previously appealed the assessment, required a plan to pay the tax debt in monthly installments. Then, the taxpayer filed a refund claim. The Court analyzed whether once the taxpayer filed an administrative appeal against an assessment the tax payer is able to initiate a refund claim in relation to the same debt.

1. Background

The Tax Authority of the City of Buenos Aires (hereinafter, the “AGIP”) assessed taxpayer’s tax on gross income debt. The latter decided to challenge the assessment through the filing of the corresponding administrative appeals and obtained an administrative final decision which dismissed its tax position. Subsequently, the taxpayer requested the AGIP to instate a plan to pay the tax debt in monthly installments –but alleging that such requirement does not imply the recognition of the debt– which was accepted by the tax authority. Then the taxpayer made a payment in advance and the first plan installment; after that he filed the claim to obtain the refund of such payments.

The AGIP  requested the rejection of the refund claim, considering that once the final administrative decision had been issued, the taxpayer had 90 days to challenge such decision legally (in accordance to Section 7 of the Administrative and Tax Litigation Code). This was not the case. Rather, the taxpayer had initiated the refund claim after the lapsing term had passed. According to the taxpayer, he had taken the right decision, considering that neither the local Tax Code nor the Administrative and Tax Litigation Code established a lapse term in order to initiate a refund claim once the payment was made. Therefore, there is no time-based impediment for the refund claim whenever the claim is initiated within the statute of limitations term (five years).

Both the First Instance Court and the Court of Appeals in Administrative and Tax Matters considered the Tax Authority’s position proper and stated that the refund claim was inadmissible. These decisions were based on the fact that once the taxpayer chooses to file an administrative appeal and obtains an administrative final decision, he/she or it has 90 days to file a lawsuit before the Justice. On the contrary, the administrative final decision becomes definitive and may not be able to be challenged.

The taxpayer appealed the Court of Appeals’ judgment before the Superior Court of Justice of the City of Buenos Aires (“TSJ”).

2. The judgment of the Superior Court of Justice

The TSJ¹ declared the formal admissibility of the appeal, and analyzed the parties’ arguments. It is important to consider that two of the judges of the Superior Court endorsed the taxpayer’s position, two of them endorsed the AGIP’s position; while Lozano, in attention to the particular circumstances of the case, granted a favorable decision to the taxpayer. It is necessary to bear in mind that if such particular circumstances had not occurred, Lozano’s decision would have been in favor of the AGIP (as he did in a previous ruling). ²

Judges Conde and Ruiz decided in favor of the AGIP’s position based on local Tax Code that provides two alternatives to challenge an assessment. On the one hand, the taxpayer is able to choose to pay the debt and to file a refund claim. The deadline for such action is the statute of limitation term and there is no other lapse term. On the other hand, the taxpayer is able appeal the assessment until he/she or it obtains an administrative final decision. If such decision is unfavorable to the taxpayer, then he/she or it has a 90-day term to file a lawsuit (and if the payments were made, seek the reimbursement of the payment). If the lawsuit is not initiated within the term, it provokes the expiry of the action by lapse of time and the forfeiture of the right. The judges understood that, once one of the alternatives is chosen (administrative appeal or to pay and to file a refund claim), taxpayers cannot discard it, thus they have to fulfill all the procedures and requirements provided for the chosen alternative.

Conversely, Judges Casás and Paz supported the taxpayer’s position. For this purpose, they considered that the fact that the taxpayer had not filed the lawsuit within the 90-day term was not enough to deny the refund claim. They based their position on the fact that the Tax Code establishes two requirements for the admissibility of the refund claim: the payment must be done and it has to be without cause. They claimed that judges are not able to demand the compliance of requirements that are not provided by law.    

As anticipated, Lozano granted his favorable decision to the taxpayer, despite his opposing position in previous judgments. In this case, he considered that as a consequence of the request and approval of the plan to pay the tax debt in monthly installments, the taxpayer could understand that the discussion was renewed; therefore, he decided to file the refund claim instead of challenge the decision through the filing of an appeal.

Consequently, the Superior Court reversed the Court of Appeals’ judgment.

3. Conclusion

A close reading of the ruling allows us to realize that there are reasonable arguments that support both positions adopted by the Judges of the Superior Court and, at the same time, that the decision, which in this “exceptional” case was in favor of the taxpayer, could have been in favor of the Tax Authority in a different case.

The resolved dispute is not unusual in tax litigation practice since taxpayers who face a tax claim usually may either appeal the Tax Authority assessment or pay the alleged debt to avoid the payment of interest, obtain a reduction in the fines’ amounts or enter into a plan to pay the tax debt in installments. In such cases, several queries arise: If the taxpayer makes the payment, shall he/she or it continue with filing of administrative appeals? Should the payment be made under protest? Once a final administrative decision is issued, can the taxpayer require a reimbursement? Should he/she or it file a lawsuit or a refund claim? How long is the term for that purpose?

Beyond the opposing positions, the matter seems to be clear enough in the jurisdiction of the City of Buenos Aires considering the previous cases and the current set-up of judges in the TSJ. Once the AGIP has assessed the taxes, the taxpayer can choose between paying and filing a refund claim or filing an appeal. If the taxpayer decides to appeal, it has to be under the terms prescribed in each Tax Code and the lawsuit must be filed within the following 90 days according to the Procedural Code. It is irrelevant whether the payment was made while the administrative appeal was being resolved or not. In other words, the term for the refund claim is the same as the statute of limitations only when the taxpayer chooses to pay and to file a refund claim instead of appealing the assessment.

The TSJ’s ruling also provides an additional message. The analysis made in this case, as well as the positions adopted by the Tax Authority and the taxpayers, can be repeated in all jurisdictions at municipal, provincial or national level. Consequently, when it comes to deciding whether to appeal an assessment or to pay the debt, it is decisive to perform a careful analysis of the Tax Codes and local procedural legislation to choose the alternative that best safeguards the taxpayer’s rights and gives an answer to the queries raised in the preceding paragraphs.

Footnotes

1. Docket No. 9989/13 “Bank Boston NA v. GCBA”, 12/23/2015.

2. “Laboratorios Mar S.A. v. GCBA”. 6/44/2014. Lozano’s dissent.

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