Communicated on 1 September 2016

SECOND SECTION

Application no. 44657/14 Gojko BOGOVIĆ against Croatia lodged on 12 June 2014

STATEMENT OF FACTS

The applicant, Mr Gojko Bogović , is a Croatian national who was born in 1950 and lives in Njivice . He is represented before the Court by Mr D. Beljan , a lawyer practising in Rijeka.

A. The circumstances of the case

The facts of the case, as submitted by the applicant, may be summarised as follows.

By a decision of 15 January 2003 the Rijeka office of the Ministry of Finance ’ s Tax Authority ( Ministarstvo financija , Porezna uprava , Područni ured Rijeka , hereafter “the Tax Authority” ) ordered the applicant to pay 345,110.26 Croatian kunas (HRK) in value added tax (VAT) for the period between 1 January 2001 and 30 September 2002, plus accrued interest.

On 29 July 2003 the Ministry of Finance dismissed an appeal by the applicant. However, following an action for judicial review by the applicant, that decision was quashed on 10 August 2006 by the Administrative Court ( Upravni sud Republike Hrvatske ) and the case was remitted.

In the fresh proceedings, by a decision of 29 February 2008 the Tax Authority ordered the applicant to pay HRK 383,767.89 in VAT [1] , plus accrued interest.

On 21 September 2010 the Ministry of Finance dismissed an appeal by the applicant against that decision, which thereby became final.

The applicant on 14 December 2010 brought an action for judicial review in the Administrative Court against the Ministry ’ s decision. He argued that the decision had been adopted after the absolute statutory limitation period ( apsolutna zastara ) had expired. He relied on sections 90 and 92 of the General Tax Act, according to which that period started to run from the end of the year in which his tax liability should have been determined, and expired six years later. Since in his case the tax liability had concerned the period between 1 January 2001 and 30 September 2002, the statutory limitation period had started to run from 1 January 2003 and had expired on 1 January 2009, before the Tax Authority ’ s decision of 29 February 2008 had become final on 21 September 2010.

Concurrently to that action, on 24 January 2011 the applicant instituted separate administrative proceedings with the Tax Authority, asking it to issue a decision to declare that determining his tax liability had become time-barred. He advanced the same arguments as in his action for judicial review.

By a decision of 1 February 2011 the Tax Authority rejected the applicant ’ s request. It held that his tax liability had been determined by its decision of 29 February 2008, that is, before the expiry of the absolute statutory limitation period, and that the date when that decision had become final on 21 September 2010 was irrelevant.

The applicant appealed but on 31 May 2011 the Ministry dismissed the appeal and endorsed the findings of the Tax Authority.

On 6 September 2011 the applicant again brought an action for judicial review in the Administrative Court against the Ministry ’ s decision. He argued that the decision of 29 February 2008 had not been final and that, according to the law, a tax liability was considered determined only by a final decision.

By a judgment of 6 November 2013, the Administrative Court, which in the meantime had become the High Administrative Court ( Visoki upravni sud Republike Hrvatske ), dismissed the applicant ’ s action of 6 September 2011, endorsing the reasons given by the administrative authorities. The relevant part of the judgment reads as follows:

“...the first-instance authority issued a decision on 29 February 2008, against which the plaintiff lodged an appeal which was dismissed as ill-founded by the defendant authority ’ s decision of 21 September 2010. Since the tax authority had determined that [the plaintiff is liable to pay] the VAT for 2001 and 2002 by a decision issued on 29 February 2008, and given that the absolute statutory limitation period ... for determining that liability expired on 1 January 2009, it follows that the right of the tax authority to determine the liability in question did not become time-barred.

....

Since the running of the relative statutory limitation period ... had been interrupted by the above mentioned decisions, this court also finds that the first-instance tax decision issued in the fresh proceedings on 29 February 2008 was delivered within the six-year absolute statutory limitation period for determining the tax liability.”

By another judgment, adopted on the same date, the court also dismissed the applicant ’ s earlier action of 14 December 2010. The court did not address the applicant ’ s argument that determining his tax liability had become time-barred.

The applicant then lodged a constitutional complaint against both of those judgments.

In the constitutional complaint of 30 December 2013, lodged against the first of the above judgments, he repeated his argument that a tax liability could not be considered as determined by a decision that was not final. In support of his argument he relied on the Administrative Court ’ s practice, namely, two judgments it had delivered on the same issue in 2011 in the context of judicial review proceedings instituted by third parties (see below under Relevant domestic law and practice).

In the constitutional complaint lodged on 13 January 2014 against the second of the above judgments, he complained that the High Administrative Court had failed to address his main argument that determining his tax liability had become time-barred.

By two separate decisions adopted on the same day, 26 February 2014, the Constitutional Court ( Ustavni sud Republike Hrvatske ) declared both constitutional complaints inadmissible. It held that the cases did not raise any constitutional issue.

B. Relevant domestic law and practice

1. Relevant legislation

The relevant provisions of the General Tax Act ( Op ći porezni zakon , Official Gazette no. 127/00, with subsequent amendments), which was in force between 1 January 2001 and 31 December 2008, read as follows:

VIII. Statutory limitation in tax matters

Statutory limitation

Section 90

“(1) The right of a tax authority to determine a tax liability and interest, institute administrative offence proceedings, collect taxes, interest, costs of enforcement and fines, as well as the right of a taxpayer to a refund of taxes, interest, costs of enforcement and fines shall become time-barred three years from the day when the statutory limitation period started to run.

(2) The statutory limitation period with respect to the right to determine a tax liability and interest shall begin to run after the end of the year in which the tax liability and interests should have been determined.”

Interruption of the statutory limitation period

Section 91(1) and (3)

“(1) The running of the statutory limitation period shall be interrupted by any official action by a tax authority aimed at the determination or collection of taxes, interest, costs of enforcement and fines, which has been brought to the attention of a taxpayer.

(3) Once the actions referred to in paragraph 1 or 2 of this section have been undertaken, the statutory limitation period shall start to run again.”

Absolute statutory limitation

Section 92

“The absolute statutory limitation period with respect to the right of a tax authority to determine a tax liability and interest, institute administrative offence proceedings, collect taxes, interest, costs of enforcement and fines, as well as the right of a taxpayer to a refund of taxes, interest, costs of enforcement and fines shall expire six years from the day when the statutory limitation period started to run for the first time.”

2. Relevant practice

In judgements no. Us-8793/2008 and Us-7716/2009, both of 2 June 2011, the Administrative Court quashed second-instance decisions by the Ministry of Finance on the grounds that determining a tax liability became time-barred in cases where the first-instance decisions of the Tax Administration had been issued before and the second-instance decisions of the Ministry after the expiry of the absolute statutory limitation period.

The first of those judgments was subject to review by the Supreme Court ( Vrhovni sud Republike Hrvatske ) by means of a request for the protection of legality ( zahtjev za zaštitu zakonitosti ) lodged by the Principal State Attorney of Croatia who argued that the Administrative Court had misapplied the law and pointed to that court ’ s divergent case-law on the matter. By judgement no. Uzz 31/2011 of 18 November 2014, the Supreme Court dismissed the State Attorney ’ s request and endorsed the interpretation adopted by the Administrative Court in the contested judgment. It held that a tax liability was only to be considered as definitively determined after a first-instance decision had been upheld by a second-instance decision and had thereby become final. Therefore, in cases where the first-instance decision on a tax liability had been delivered before the expiry of the absolute statutory limitation period and the second-instance decision upholding it had come after the expiry of that deadline, then the limitation period was to be considered as having expired and the taxpayer was no longer liable for the tax in question.

However, on 13 November 2015 and 4 March 2016 the High Administrative Court issued practice directions, no. Su-424/2015 and Su-122/2016 ( Zaključak sa sjednice financijskog i radnopravnog odjela ), which read as follows:

Relative statutory limitation period in tax matters

Practice direction

“The [court] stands by its current practice according to which a tax liability is [considered] determined by the first-instance tax decision. In the time between the adoption of the first-instance tax decision and the adoption of the second-instance decision on appeal the relative statutory limitation period does not run, only the absolute one.”

Absolute statutory limitation period in tax matters

Practice direction

“A second-instance decision dismissing an appeal against a first-instance decision determining a tax liability shall not be unlawful just because it was adopted after the expiry of the absolute statutory limitation period.”

COMPLAINTS

1. The applicant complains under Article 1 of Protocol No. 1 to the Convention that the domestic authorities determined his tax liability in a way that was contrary to the relevant domestic law and practice.

2. He also complains under Article 6 § 1 of the Convention that the length of the above administrative proceedings was excessive.

QUESTIONS TO THE PARTIES

1. Has the practice of the domestic courts been consistent as regards the calculation of the absolute statutory limitation period in tax matters in situations where the first-instance decision was adopted before, and the second-instance decision after the expiry of that period?

2. Were the decisions of the High Administrative Court in the applicant ’ s case in line with the interpretation adopted by the Supreme Court in its judgment no. Uzz 31/2011 of 18 November 2014?

3. If the answer to either of the above two questions is positive, was the interference with the applicant ’ s right to the peaceful enjoyment of his possessions in the form of the decision by the domestic authorities ordering him to pay the value added tax in accordance with the conditions provided for by law as required by Article 1 of Protocol No. 1 to the Convention? In particular, was that interference foreseeable?

4. If the interference was lawful, was it necessary to secure the payment of taxes or other contributions or penalties?

5. Were the tax assessment proceedings in the applicant ’ s case unduly delayed and thus contrary to Article 13 of the Convention taken in conjunction with Article 1 of Protocol No. 1 thereto, or to the State ’ s procedural positive obligations under the latter Article?

[1] A pproximately 52,767 euros (EUR) at the time.