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Enforcement of foreign tax claims is based on reciprocal EU co-operation

By March 20, 2022November 30th, 2023No Comments

The enforcement and the collection of taxes for EU member states is based on reciprocal co-operation between the EU states. This was held in a judgement delivered on 4 March 2022 by the First Hall of the Civil Courts presided by Mr Justice Christian Falzon Scerri in Kummissarju tat-Taxxi -v- Ricardo Diaz Fernandez.

The Commissioner of Inland Revenue filed an application, after the Belgian authorities asked the Maltese authorities to assist them in collecting taxes due by the Defendant. The request was based on the EU Directive 2010/24/EU Mutual Assistance for the Recovery of Claims Relating to Taxes, Duties and other Measures Order. The Defendant lives in Malta and the Commissioner of Inland Revenue (CIR) held that there are all the elements for the enforcement to take place. Article 9 of the legal notice which transposes the EU Directive, LS 460.08 states that the copy of the applica-tion must be served on the Defendant.

From the evidence produced the Belgian authorities asked the Maltese Government to collect the taxes due by the Defendant in terms of the Directive. The sum due was only €1825.52.

The Court held that Articles 9(5) and (7) allow the Court to register the claim as an executive title. The scope of the Directive is to improve the co-operation between the member states. It is also aimed to not allow people from not paying their taxes by moving from one country to another. This is in the interest of the internal market of the European Union.

The assistance is twofold. The law allows the exchange of information and the collection of the tax debts. The author Ilse De Troyer in his article Recovery Assistance in the EU: Evaluation of Directive 2010/24/EU: Time for an Update, said: “The success of mutual recovery assistance largely depends on the willingness of States to cooperate.”

In this particular case, the request is not for information, but in order to collect the debt to the Belgian tax authorities. The Directive allows the collection of all taxes, duties and other monies. The Court is not meant to investigate the content of the request. Such request to collect taxes cannot be made if the tax is being contested by the taxpayer. However, Articles 14 of the Directive limits a challenge before the Court of the country making the request. This was held in Kummissar-ju tat—Taxxi -v- Lottoland Limited. The Court may refuse assistance when the Defendant is chal-lenging the claim before the applicant authorities and when the requesting authorities would not have made use of the procedural remedies in its own country. The Court may refuse to give assis-tance, if the request to collect would cause economic problems to the taxpayer in the receiving country and when the claim is less than €1,500.

The European Court of Justice held in Eamonn Donnellan -v- The Revenue Commissioners on 26 April 2018 the reciprocal trust must be strictly interpreted.

Unless these circumstances exist the refusal to give assistance, will go against public order. In fact the Court’s role is merely a supervisory role, as the claim would have analysed by the CIR, as the competent authority. The Court even commented that this procedure before it is not required, however it is required if there is a dispute on the measures to enforce the tax debt or on notifica-tion of the claim.

Therefore strictly speaking there is no need for the Court to register the claim.  The Court invited the Minister of Finance to introduce new amendments to allow the executive title to be enforcea-ble by a judicial letter.

In this case the Court does need to stamp its seal of approval. The Belgian authorities did follow the Directive and therefore, there is no reason not to accede to the request.

The Court then moved to uphold the request and ordered that the Belgian claim is enforceable in Malta.

Av Malcolm Mifsud

Partner

Mifsud & Mifsud Advocates

The article is available on MaltaToday