JOINT DISSENTING OPINION OF JUDGES ILIEVSKI AND DERENČINOVIĆ

1. The majority have taken the position that there has been no violation of Article 1 of Protocol No. 1 to the Convention, despite the applicant’s complaint that the State had audited her and ordered her to pay additional tax and interest in respect of a period which, according to Croatian legislation, was time-barred. The majority’s position was purportedly justified by the broad margin of appreciation that States have in tax matters and by the domestic legislation that gave the tax authorities broad powers to extend tax audits to previous taxation periods .

2. We cannot agree with the position of our distinguished colleagues, for several reasons.

3. In the present case, in assessing the applicant’s tax liability for 2003, the first-instance tax ruling of 28 December 2007 explicitly stated that the tax authority had included in her assessable tax base for 2003 (which was not time-barred at that time) certain sums that should have been due in respect of the previous two years (2001 and 2002, which were time-barred at that time).

4. Under section 90(1) of the General Tax Act, as in force at the relevant time, the statutory limitation period for assessing tax liability applicable to all types of taxes, including profit tax, was three years starting from the end of the year in which the tax liability first arose ( relativna zastara ). That (relative) limitation period could be interrupted by any official action on the part of the authorities, as provided in section 91 of the General Tax Act, after which the limitation period would start to run again. However, even in the event of interruption of the limitation period, under section 92 of the General Tax Act, the absolute limitation period for any tax liability – upon the expiry of which any such liability could no longer be taken into account – would expire after six years.

5. When these provisions are applied to the facts of the present case, it seems to be very clear that any assessment of the applicant’s profit tax liability for 2001 and 2002 had become time-barred on 1 January 2006 and 1 January 2007, respectively, because no action had been taken by the tax authorities that would have interrupted the limitation period provided for by section 90(1) of the General Tax Act. However, the domestic tax authorities disregarded these provisions by assessing and ordering the payment of certain unpaid taxes, first in the tax ruling of 28 December 2007 and subsequently in a second tax ruling of 20 February 2008, including taxes in respect of periods that had become time-barred (2001 and 2002). The applicant raised the objection that the limitation period had expired both with the competent tax authorities and subsequently before the domestic courts (including the Constitutional Court). However, her arguments were dismissed in summary fashion, without providing any plausible reasoning. What is more, at no time did the domestic authorities ever explain why the tax audit had not been formally extended to those periods, in particular – and as required by law – by sending the applicant a formal notice to that effect, failing which the lawfulness of any such extension would be called into question both under the General Tax Act and the relevant case-law of the administrative courts.

6. The rules governing the calculation and expiry of the different limitation periods (relative and absolute) had been set out very clearly, precisely, and unambiguously in the domestic legislation. There was, moreover, abundant domestic case-law supporting them. For example, the High Administrative Court, in judgment no. Usž-335/2014-5 of 15 April 2014, held that the relative statutory limitation period for the determination of property tax liability, which had started to run on 1 January 2007, had ended on 1 January 2010 and that, after that date, there had been no legal basis for issuing a decision determining tax liability (see also the Rijeka Administrative Court’s judgment no. UsI-1597/2012-8 of 1 December 2013).

7. It is not for the Court to interpret and apply domestic law. However, the Court is required to assess whether the domestic authorities, most notably the courts, have succeeded or failed to provide sufficient procedural safeguards against arbitrariness in the application and interpretation of domestic legislation. This is especially the case when the applicant raises relevant and well-argued objection(s), such as that raised in the present case concerning the expiry of the limitation period. In view of the legal provisions cited above and the well-established jurisprudence of the domestic courts on the matter, we consider that the arguments raised by the applicant were specific, pertinent and important (see, mutatis mutandis , Tarvydas v. Lithuania , no. 36098/19, § 52, 23 November 2021; and Mala v. Ukraine , no. 4436/07, § 48, 3 July 2014, and the authorities cited therein). Accordingly, the domestic courts should have provided a plausible reply to the applicant’s submission as to the expiry of the statutory limitation period in her case.

8. In this regard, we reiterate that limitation periods serve several important purposes , namely to ensure legal certainty by setting a time-limit on bringing judicial proceedings, protect potential defendants from stale claims which might be difficult to counter and prevent the injustice that might arise if courts were required to decide upon events which took place in the distant past on the basis of evidence which might have become unreliable and incomplete because of the passage of time (see, in the context of Article 6 of the Convention, Vegotex International S.A. v. Belgium [GC], no. 49812/09, § 116, 3 November 2022, and Oleksandr Volkov v. Ukraine , no. 21722/11, § 137, ECHR 2013; and, in the context of Article 7 of the Convention, see the Advisory opinion on the applicability of statutes of limitation to prosecution, conviction and punishment in respect of an offence constituting, in substance, an act of torture [GC], request no. P16-2021-001, Armenian Court of Cassation, § 72, 26 April 2022).

9. In the Croatian legal system, the statute of limitations is a legal principle and norm of constitutional rank . There is no doubt that statutes of limitation are part of public order and form part of the body of strict law with which all authorities, including the tax administration, are obliged to comply. Moreover, on 7 November 2014, at the meeting of its Financial, Labour and Property Department, the High Administrative Court adopted a conclusion that the statutory time-limits in tax cases were to be examined ex officio .

10. Against this background, we note that no domestic authority ever gave a substantive response to the applicant’s argument that part of her assessed tax liability had in fact been time-barred . While the tax authorities only made a general reference to section 100(5) of the General Tax Act, under which a tax audit could be extended to earlier periods under certain circumstances (see paragraphs 13 and 15 of the judgment), they failed to explain how this tallied with the statutory limitation period for the assessment of tax liability as set out in section 90 of the General Tax Act, or with section 100(1) of the General Tax Act, which provided that a tax audit could only be performed for periods in respect of which the statutory limitation period had not expired (see paragraph 20 of the judgment).

11. Subsequently, the Administrative Court of the Republic of Croatia erroneously dismissed the applicant’s argument concerning the expiry of the statutory limitation period as having been made solely in her action for judicial review (see paragraph 17 of the judgment), despite the fact that she had submitted her argument to that effect in the course of all the legal remedies she had pursued (see paragraphs 9, 11 and 14 of the judgment). Moreover, the Constitutional Court reached the same incorrect conclusion and noted, in addition, that in the applicant’s case the absolute limitation period under section 92 of the General Tax Act had not expired when the tax audit was carried out, without taking into account the effect of the (relative) statutory limitation period as defined in section 90(1) of the General Tax Act (see paragraph 19 of the judgment). As a way of observation, this interpretation of the relevant domestic legislation by the Constitutional Court is manifestly arbitrary. It goes against the logic of the limitation period under domestic law, including tax law, whereby, once the relative limitation period has expired on account of inactivity on the part of the domestic authorities, the absolute limitation period is irrelevant and does not apply. The absolute limitation period is applicable only in cases where the authorities have interrupted the relative limitation period by reason of specific, official, procedural actions. Since the limitation period might never expire in such cases, the logic of an absolute limitation period is to prevent countless interruptions of relative limitation periods as a result of procedural actions taken by the authorities. Consequently, any interpretation of the absolute limitation period that disregards relative limitation periods is not only manifestly arbitrary and unlawful but also runs counter to the very logic of distinguishing between two types of limitation periods existing at the relevant times in Croatian legislation.

12. Regrettably, the majority’s decision does not respond to this and numerous other failures on the part of the domestic authorities, including the courts, in addressing the arguments raised by the applicant. In our opinion, tolerating such blatant disregard for the law by appealing to a broad margin of appreciation in tax-related matters is not well-founded and makes protection against arbitrariness under Article 1 of Protocol No. 1 close to illusory. A broad margin of appreciation cannot be used as a shield to protect the State’s financial interests when it comes to public order issues, as was the case here. By disregarding the principle of legal certainty inherent in every substantive provision of the Convention, including Article 1 of Protocol No. 1, the majority failed to exercise the level of scrutiny expected of this Court. Therefore, we cannot but conclude that the interference with the applicant’s right to the peaceful enjoyment of her possessions was not accompanied by sufficient procedural safeguards against arbitrariness and was thus not lawful within the meaning of Article 1 of Protocol No. 1 to the Convention.

[1] Approximately 195,000 euros.

[2] Approximately 195,000 euros.