The circumvention of the limitation period in tax law and recent positive case-law developments for taxpayers.

The State's right to carry out tax audits and to impose fines and other surcharges has always been of particular interest to all taxpayers, and mostly to freelancers and enterprises.

A key issue in the conduct of tax audits is the limitation period. Until when has the State the right to levy a tax e.g. due to additional data, for past years, or to impose a fine for non-issuance of a tax item by a trader? The answer is not simple. This is because there are many legal provisions that regulate the issue in question and which (intentionally?) are not clear or overlapping.


The issue of limitation period in tax law is a very lively debate in our days, because of the memorandum policies followed and their demands. The limitation period has been altered and circumvented.

Fundamental Principles of Tax Law such as the Principle of Non-Retroactivity of Tax Laws (Article 78 (2) of the Greek Constitution) are bent in the context of tax-deductive policies. And the result? Taxpayers are experiencing a legal uncertainty, cannot make any financial plan, or even worse, they will not be able to pay any sums that will be established after a long period of time.

Particularly popular practice of the Lawmaker is the extension of the time limitation of the State's right to issue and notify taxing transactions. At this point it should be noted that (a) in order to interrupt the lapse of State’s right, the taxing act is not enough to be issued within the limitation period but it must be properly communicated to the taxpayer, otherwise the State's right is time-barred and b) if the taxpayer considers that the State's right has been time-barred, he should propose it himself, since this issue is not raised by the Tribunal of its own motion.

The prolongation of the state limitation period is in principle legally permissible, but under certain conditions:

The Lawmaker, with a formal Law (Article 78 (1) of the Greek Constitution), may extend the limitation period of the State's right in case the period initially envisaged by the relevant provision that the State could exercise its right has not yet been completed upon the entry into force of the newer law (see also CC 2962/2013).

For example: According to Article 36 of the Code of Tax Procedure (L.4174 / 2013), the tax administration may issue an administrative, estimated or corrective tax assessment within five (5) years from the end of the year in which the deadline for submitting a statement expires. Therefore, regarding the income for the year 2013, the limitation started on 01/01/2015 will expire on 31/12/2019. With Art. 22 of Law 4337/2015 the limitation period was extended by one year, which was due to expire on 31/12/2015, for cases for which prosecution orders, control orders, etc. have been issued or will be issued until 31/12/2015.

The successive legislative extensions of the limitation period were halted by the Council of State which with its no. 1623/1916 decision stated that while the limitation period may be extended, even exceptionally, the limitation period must in all cases have a total, reasonable duration, in order to comply with the Constitution of proportionality.

In the same direction, one year later, the Supreme Court of Cassation of our country with the decisions no. 675 and 1738/2017 decided that the provisions of articles 11 of L.3513 / 2006, 29 of L.3697 / 2008, 10 of L.3790 / 2009 and 82 of L.3842 / 2010, by which the limitation period for the tax claims of the State in respect of periods prior to the date of publication of those laws, could not legitimately justify the issue of the income tax audit sheet because they are contrary to the Constitution.

The Council of State considered that, because of the above provisions, the reasonable time-limit of 5 years set by Article 84 (1) of the Income Tax Code was not applicable to the tax liabilities incurred during the periods covered by the above provisions. Indeed, these arrangements made it impossible to predict the end of their limitation period.

The Council of State bases its decisions first on the principle of legal certainty, which derives from the principle of the rule of law, and in particular from the provisions of Articles 2 (1) and 25 (1) of the Constitution. This principle requires the clarity and foreseeable application of the rules, in the case of provisions having a serious economic impact on the parties concerned, such as those imposing charges in the form of taxes, duties, levies and any form of penalty for breach of the relevant provisions. In order not to put the situation in question in doubt, the limitation period for the imposition of charges, in the form of taxes, fees, levies and penalties, should be laid down in advance and its duration should be sufficiently foreseeable by the administrator. After its expiration, it must not be possible to impose either an economic burden or a sanction against the administrator.

Subsequently, the Council of State relied on Article 78 (1) and (2) of the Constitution, according to which the provision in law, that the State's claim for the establishment and imposition of a specific tax is to lapse over a certain period of time, constitutes an essential element of the relevant tax guilt. “As an essential element of the tax liability, the period of limitation must be fixed in advance and any change resulting in its extension may be applied only under the conditions laid down in Article 78 (2) of the Constitution, that is to say, by a provision adopted at the latest the next year from the creation of the tax liability. Consequently, a provision of the Law on the extension of the limitation period for tax claims whose limitation is earlier than the calendar year preceding the publication of that law is invalid as contrary to the principle of legal certainty under the principle of the rule of law and to the above constitutional provisions which specialize it in tax law (...) “. Finally, in view of the Constitutional Principle of Proportionality, limitation should be reasonable.

Practical Consequences: The Council of State seemed to take into account the need for businesses (and not only) to know precisely their financial pledges. This is because the sudden accumulation of past liabilities after a long period of tax audits and a claim for the simultaneous payment of these amounts creates serious problems for the viability of an enterprise. Taxpayers in general cannot remain indefinitely "hostages" of the inaction of tax administration authorities. The purpose of the limitation period is to complete the tax pending in a reasonable time, and it should not serve other purposes by circumventing the abovementioned fundamental constitutional principles.

Following recent developments in the case law, thousands of taxpayers are paving the way for the final settlement of their tax pledges within a reasonable time, both out of court and through the courts.



Evangelia Lymperopoulou