Who are the key regulatory authorities? How easy is it to deal with them and how long does it take to resolve standard issues?
Tax (2nd Edition)
The main regulatory bodies are the Ministry of Public Finance and the National Agency for Fiscal Administration (“NAFA”). As a general rule, taxpayer guidance is performed by NAFA and, in principle, any taxpayer can address its questions or issues with this body. However, taxpayer guidance is often vague (i.e., reiteration of the provisions of tax law) and the answering time is often long, in case such answer is effectively provided to the taxpayer.
The ATO, led by the Commissioner, is the Australian federal tax regulator. Each of the Australian states and territories also has a state revenue authority which is led by its own Commissioner of State Revenue. The ATO also administers customs and excise duty in conjunction with the Department of Immigration and Border Protection.
For each of income tax and indirect tax purposes, the ATO categorises taxpayers (on an economic group basis) into one of four broad risk groups (higher risk, key taxpayer, medium risk and lower risk). This is known as the ATO’s Risk-Differentiation Framework (RDF). The RDF categorisation is based on the likelihood of a taxpayer taking taxation positions which the ATO considers do not comply with the law and the consequences of any such potential non-compliance. A taxpayer’s categorisation may affect the likelihood of its taxation affairs being reviewed by the ATO and the means by which the ATO undertakes such review. For example, taxpayers that are deemed to be higher risk will usually be under continuous review by the ATO and may be more likely to be the subject of an exercise of the Commissioner’s formal access and information gathering powers.
The ATO issues public guidance in the form of guidelines, rulings and determinations (among other things) and also encourages taxpayers to engage with the ATO to seek private rulings. A simple private ruling request may be resolved within 28 days; however, more complex requests will often take 60 days or longer and involve the ATO requesting further information and documents from the taxpayer before it will rule on the issue. Rulings can usually be applied for in advance of a transaction taking place in order to provide certainty to the taxpayer.
Audits of taxpayers can take a few months for a discrete issue or last for over four years for audits of complex issues where large amounts of tax are in dispute.
The various state and territory revenue authorities also undertake audits, issue guidance to taxpayers and issue private rulings upon request. Each revenue authority is different, but on average a standard issue would take 3 – 4 weeks to resolve, while more complex issues could take many months and involve the revenue authority requesting additional information and documents.
France does not have a regulatory authority dedicated to tax issues. The French system is based on taxpayers' declarations and tax administration's audits, which may lead to tax reassessments by specialised bodies such as the 'Direction des vérifications nationales et internationals' (Directorate of national and international audits) for the largest companies, or local tax services for small and medium-sized enterprises (SME).
However, the French tax administration (FTA) may issue rulings in specific matters such as transfer pricing (Article L 80 B of the tax procedure code). These rulings provide the taxpayer with protection and legal certainty as the tax authorities take an official stance on a specific question.
Besides, an advanced tax ruling may be requested by a taxpayer on any particular situation which triggers a specific tax issue in order to secure this situation, such as a foreign investment fund applying for a special French tax regime (OPCI or FPCI) which refers to criteria unknown from non-French investment funds. As a general rule, it takes no less than 6 months to get an advance tax ruling.
Furthermore, special committees have been implemented in highly technical matters to improve the discussions and relationships between the FTA and the taxpayers and provide them with recommendations, such as the 'comité consultatif du crédit d'impôt pour dépenses de recherche' (committee for research and development tax credit).
The Canada Revenue Agency, known as the “CRA,” administers tax law for the federal government as well as most provinces and territories. It is also responsible for registering and overseeing the activities of charities in Canada. The CRA ‘s audit and collection functions are typically performed by CRA personnel working at one of 51 tax services offices located throughout the country, and most processing is done by one of five tax centres. Ultimate responsibility for the CRA and its administration lies with the Minister of National Revenue, a member of the Prime Minister’s Cabinet.
The CRA maintains a toll-free telephone service to answer both general tax queries and address taxpayer-specific issues, and is increasingly focusing its efforts on making information more user-friendly and accessible, particularly through the Government of Canada website. Taxpayers can access most of their tax data through a secure portal on the website, and the CRA encourages (and sometimes requires) filings and other documents to be submitted through the portal.
Standard issues are typically resolved at the audit stage, through discussions and meetings with the auditor responsible for the file; auditors’ assessment proposals must be approved by their Team Leaders before being finalized. Taxpayers who disagree with a tax assessment may file an objection and have the matter reconsidered by the CRA’s internal appeals division, and the remaining issues are often resolved at that stage. However, there is often a significant delay (3 - 9 months) between the time an objection is filed and the time it is reviewed by the appeals division.
The length of time required to resolve tax issues varies significantly, depending on the complexity of the issues and the amounts at issue. Most tax issues, whether standard or complex, are resolved without the need for the taxpayer to initiate court proceedings, but the process can easily take a year or more, particularly in complex or contentious matters.
The key regulatory authority that is competent for tax matters is the Federal Ministry of Finance, which is hierarchically structured and has authority over the central tax administration and the local tax administrations. The same structure can be found in the three Regions.
The local tax administrations are in general quite available for dealing with standard issues. More complex issues can be dealt with by a higher tax administration, such as the central tax administration. In a pre-tax return filing phase, certainty over the interpretation of tax laws can be obtained by means of a ruling delivered by the advance ruling commission, which falls under the authority of the Federal Ministry of Finance. Obtaining such ruling usually takes two to three months. Tax disputes that are still in the administrative phase (ie that have not yet been brought to court) can be submitted to a tax mediation service.
The time needed for solving standard issues will strongly vary depending on the competent service and the complexity of the issue.
The key regulatory authorities are the National Revenue Agency and the Customs Agency. It is not easy to deal with any of them. Usually any kind of issue cannot be resolved without initiating a lawsuit.
The IRS is a part of the U.S. Treasury Department and is the regulatory authority of the United States for tax. The most recently available survey from the IRS Oversight Board shows that in 2014, 74% percent of taxpayers were satisfied with their interactions with the IRS, a drop of 4 percentage points from 2013. The drop in satisfaction may be due to budgetary constraints that have somewhat limited the ability of the IRS to provide taxpayer services.
The length of time to resolve tax issues varies greatly and depends on the complexity of the issues. There is no standard amount of time that a tax dispute will take to resolve. Although the vast majority of tax disputes are settled prior to litigation, some disputes, especially those that go to litigation, can take years to resolve.
The State Fiscal Service of Ukraine (hereinafter – SFS) and its territorial bodies are the main regulatory tax authorities in Ukraine. In most cases, it is not easy to deal with them.
If the taxpayer does not agree with the actions and decisions of the tax authorities, then one can appeal them by administrative procedure and/or in a judicial proceeding.
The administrative appeal procedure is not obligatory and is considered a pre-trial procedure for resolving a dispute. Usually it is not very effective. According to statistics provided by SFS, during 2016 taxpayers filed 11,758 initial complaints in administrative procedures against actions of the tax authorities. Only 3,024 of them were fully or partly satisfied.
However, a taxpayer is entitled to submit a complaint to the superior fiscal body within 10 calendar days after receiving a disputed decision. This term can be prolonged under certain circumstances, provided for by the law: for instance, in the case of the absence of a taxpayer on the territory of Ukraine.
After the receipt of the complaint, the relevant tax authority shall adopt a reasonable decision and send it to the taxpayer within 20 calendar days. At the same time, this term can be prolonged for not more than 60 calendar days under the decision of the head (deputy head or authorized person) of the relevant tax authority.
If the administrative procedure is not successful, the taxpayer shall have the right to file a lawsuit in court within one month. If the taxpayer does not use the administrative procedure, the term for appeal to the court is 1095 days.
In the case where the taxpayer is not sure of any tax issue, the taxpayer has the right to request that the tax authorities provide an individual tax consultation. If the taxpayer acts in accordance with such consultation, the fines for a violation of the tax legislation cannot be imposed on him/her. The term for the provision of the mentioned consultation is 25 calendar days, which can be prolonged for not more than 10 calendar days.
The Tax Department within the Ministry of Finance was formed in 2014 by combining the Inland Revenue Department, which administers direct taxation, and the VAT Service.
As with many government departments in Cyprus, routine procedures, such as final agreement of tax returns and issuing of assessments, can take time. However, the department responds efficiently and constructively to inquiries. Advance tax rulings are available and taxpayers may request an expedited ruling, guaranteeing a response within 21 working days provided all the necessary information is supplied, on payment of the prescribed fee (currently EUR2,000).
Her Majesty’s Revenue and Customs (HMRC or the Revenue) is the regulatory authority for tax matters. 2015/16 surveys show mixed outcomes, varying according to customer segment. Outcomes from large businesses are generally positive with 82% saying that they had a good experience overall with HMRC. Outcomes from agents acting for small businesses and individuals were less positive with 62% finding HMRC to be approachable and only 26% being satisfied with time taken by the Department.
The resolution of disputes with HMRC, particularly if leading to litigation, tends to be a relatively lengthy process. In 2012, HMRC published a commentary on its litigation and settlement strategy (LSS), the aim behind which was to provide a mechanism for HMRC to settle disputes in a non-confrontational and collaborative way. However, in practice, HMRC often approach disputes in a litigious and uncompromising manner, particularly in cases where the revenue exposure is high. This means that a large number of tax disputes still proceed all the way to courts and tribunals.
Servicio de Rentas Internas (“SRI”) is the regulatory authority. The tax administration works hard to help taxpayers comply with the tax law. Resources are available through the web, telephone or SRI offices. Taxpayers can easily obtain guidance from a SRI agent on questions related to day to day affairs. Other issues (formal consultation, tax refunds, or tax controversies) may take several months to be resolved.
Administration of Gibraltar’s tax assessment, collection and enforcement is undertaken by the Income Tax Office, through the figure of the Commissioner of Income Tax.
The ITA is the main regulatory authority with respect to taxes in Israel, consisting of two main units, income tax and VAT. The NII is the state institution responsible for the regulation and collection of social security payments in Israel.
Resolution of matters with the ITA generally depends on the complexity of the issues at stake, but can range from a few weeks to over a year, not including legal appeal procedures.
The relevant cantonal tax authorities as well as the Federal Tax Administration (‘FTA’) are the regulatory authorities for direct taxes (income tax, capital tax and wealth tax). The FTA is also competent for federal taxes such as the value-added tax (‘VAT’), the withholding tax and stamp duties. Moreover, the Federal Customs Administration is in charge of customs duties.
Taxpayers may request a tax ruling to clarify the tax consequences of a planned structure or transaction. While Swiss law does not refer to tax rulings, this possibility derives from the practice of the tax authorities.
The length of time needed to resolve tax issues varies greatly and depends on the complexity of the issues at stake. There is no standard amount of time that a tax dispute will take to resolve. While the vast majority of tax disputes are settled prior to litigation, disputes that go to litigation can sometimes take years to resolve.
The competent tax authorities are the following:
- Revenue Agency (Agenzia delle Entrate): the agency has jurisdiction on the administration (including collection) of all direct and indirect taxes (such as corporate and personal income taxes; regional tax on productive activities and registration tax and VAT respectively).
- Customs and Monopolies Agency (Agenzia delle Dogane e dei Monopoli): the agency provides customs services and administers customs and excises duties. The agency is also the regulatory body competent for gaming activities.
- Government Property Agency (Agenzia del Demanio): the agency is tasked with the administration of real estate properties owned by the State.
- Financial Police (Guardia di Finanza) has special powers to ensure tax compliance and may carry out tax audits.
Several procedures grant taxpayers the possibility to obtain clearance from the tax authorities before completing a transaction or entering into an arrangement. The main procedures are the following:
- General advance rulings. A ruling may be asked to the tax authorities in order to obtain (i) advance clearance on the interpretation or application of tax law in a specific case (interpretative and characterisation rulings); (ii) confirmation on whether, based on a certain set of evidences, certain regimes (such as CFC or sham companies legislation) shall be applied to a certain case; (iii) advance clearance on the application of the GAAR to a specific case; (iv) disapplication of a specific anti-abuse regime that would be otherwise applicable.
General advance rulings provides for an effective instrument to obtain advance clarification on the Italian tax ramifications associated with a specific situation. Indeed, the tax authorities must reply to the ruling application within 90 days (in the case of interpretative and characterisation rulings) or 120 days (in all other cases). A ruling is binding on the tax authorities, but only in respect of the requesting taxpayer. If no reply is given within 90 or 120 days, it is assumed that the tax authorities agree with the interpretation of the requesting taxpayer.
- International tax ruling. Multinational companies can request a ruling from a specific unit of the tax authorities on matters relevant to cross-border transactions (such as transfer pricing legislation or attribution of profits to permanent establishments). The international tax ruling is binding on both parties for five tax years. The Italian tax authorities send a copy of the ruling to the competent authorities in the relevant states of the taxpayers involved in the ruling for transparency purposes.
- Ruling for new investments. Taxpayers who wish to make new investments in Italy for a value exceeding EUR30 million, which have a positive impact on employment, can use this special ruling procedure. Under this procedure, Italian and foreign investors can obtain advance rulings on the following matters: Applicable tax regime; Transfer pricing; Absence of abuse; Other material tax issues of the proposed investment based on the investment business plan. The tax authorities must reply within 120 days. A reply is binding on the tax authorities, but only in respect of the requesting taxpayer. If no reply is given within 120 days, it is assumed that the tax authorities agree with the interpretation of the requesting taxpayer.
The key regulatory authority which handles tax issues is Autoridade Tributária e Aduaneira (Tax Authority). As a rule, any tax issue may be dealt before a tax office. Standard and simple tax issues are usually solved immediately or, if not, within weeks. It is important to note that very simple issues may be solved by phone or by internet through the Tax Authority website in a feature called e-balcao, which allow taxpayers to address any issue.
The Kenya Revenue Authority (KRA) is the agency of the Government of Kenya tasked with the collection and receipt of all taxes and the general administration of tax laws. The KRA usually undertakes routine tax audits every 2 – 3 years to assess the level of compliance with tax obligations. Tax audits usually take between 1 – 2 months to conclude. The KRA communicates the audit finding firstly through an audit report and if its findings are not satisfactorily addressed, through a tax assessment which sets out the areas of non-compliance with tax obligation and the amount of tax, penalties and late payment interest due.
Should a taxpayer disagree with the tax assessment raised by the KRA, a tax dispute is deemed to have arisen. The procedure for resolving tax disputes with the KRA is set out under the Tax Procedures Act, 2015. In summary, a taxpayer who is aggrieved by a tax assessment is required to file a notice of objection within 30 days of being notified of the tax decision. The KRA is required to issue a decision on the objection within 60 days of receipt of the notice of objection.
The first instance tax authority is usually (depending on the type of tax and other circumstances) the head of the tax office, the head of the customs-tax office, or the local tax authorities (such as, the president or mayor of a city).
Directors of tax chambers are second instance authorities for appeals against the decisions issued by the heads of the tax offices.
The higher tax authority is the Chief of the National Tax Administration, which can act, in certain cases, as a first instance authority (e.g. in the case of advance pricing agreements, individual tax rulings, or General Anti Avoidance Rules), and in other cases as a second instance authority.
The Minister of Finance has the authority to issue general interpretations of tax law provisions.
Proceedings before the tax authorities are very formalistic and require the exchange of written correspondence. The timing of the proceedings, in certain cases, is prescribed by law (e.g. three months for the issuance of a tax ruling), but certain other proceedings such as tax verifications or audits can take several months.
The Japanese regulatory authority responsible for the enforcement of tax laws is the National Tax Agency (NTA) of Japan. The actual day-to-day tax laws enforcement in front of the taxpayers is made by the regional taxation bureaus and the district tax offices, which are lower administrative bodies of the NTA. There are 12 reginal taxation bureaus over Japan (with the largest one being the Tokyo Regional Taxation Bureau) and numerous district tax offices. Generally, regional taxation bureaus are in charge of middle to large size of corporate taxpayers having stated capital of 100 million yen or more, while the rest is handled by district tax offices.
Dealing with these tax authorities involves two aspects: one is prior consultation and private advice that is typically sought before a transaction is undertaken, and the other is tax audit that is typically made after a tax return was filed. In the former case, it is generally easy to deal with the tax authority seeking its view, provided that its view is not binding and has no effect of estoppel. If the taxpayer wants a binding ruling, it must apply for an advance ruling in writing, however, this is not very common in practice as it generally takes substantial time (e.g., 6 months). As such, many taxpayers only undertake informal prior consultation even if it has no legally binding effect – practically this may suffice. So far as ‘standard’ issues are concerned, there are generally little difficulties in dealing with the tax authority. The process would generally take 1-2 months.
In the latter case of a tax audit, it is not uncommon that the position of the tax authority and that of the taxpayer are acutely different and extensive discussions are undertaken in the course of the audit, especially in cases involving alleged tax avoidance or in transfer pricing cases. Here, often ‘standard’ issues do not become a large issue because in many cases the outcome is clear without engaging in substantial debates. Rather, in tax audit, non-standard and unprecedented issues often become a key subject to be discussed. The length of tax audit varies from a case to case; routine tax audit on small taxpayers often finishes in less than a week, while transfer pricing audit on large corporate taxpayers often continues around two years.
The key regulatory authorities are the Dutch tax authorities which are led by the MoF. For day-to-day tax matters, the tax authorities can be contacted through a call centre. More complex matters will be forwarded to the local tax inspector for further analysis.
Tax rulings can be obtained from the local tax inspector or in cross-border situations from the so-called ruling team based in Rotterdam.
Most tax related matters are dealt with the Tax Administration Service. In recent years, stringent criterions relating even to ´standard´ issues have been adopted, making it hard for taxpayers to comply with the authorities’ interpretation of the applicable tax laws. In this sense, procedures such as tax devolutions (particularly concerning value added tax), or the annulment of tax liabilities determined by the authorities often require strenuous efforts and, considering the several stages of proceedings available both for authorities and taxpayers, such procedures could take several months.
In addition to the federal Tax Administration Service, other local taxes such as property taxes, payroll taxes or taxes on the acquisition of real estate ought to be dealt with local tax administrations or treasuries. In addition, other administrative authorities such as the Mexican Social Security Institute are also entitled to initiate audit procedures concerning employer contributions.
The Ministry of Finance is the regulatory authority. The Tax administration consists of the Directorate of Taxes in Oslo and local tax offices in five regions. There are also three national tax offices: the Central Office - Foreign Tax Affairs, the Central Tax Office for Large Enterprises and the Oil Taxation Office. Also, the Norwegian National Collection Agency is a part of the Tax Administration.
The length of time to resolve tax issues depends on the complexity. Standard issues can often be resolved by telephone or by e-mail exchange with the tax authorities. More complex disputes may take years to resolve.
The key regulatory authorities in Germany are the German Federal Ministry of Finance (Bundesfinanzministerium), the German Federal Central Tax Office (Bundeszentralamt für Steuern) and the Ministries of Finance of the 16 Federal States with their regional and local tax offices.
The German Federal Ministry of Finance is the main tax authority in terms of preparing draft tax bills and issuing (internal) guidelines for the interpretation of tax provisions and rules. It negotiates the German double taxation agreements and has wide ranging competences in international tax law matters.
The Federal Central Tax Office is the main tax authority dealing with international tax law matters under the control of the German Federal Ministry of Finance. For example, the refund of withholding tax on dividend payments or royalties by foreign entities is usually processed through the Federal Central Tax Office.
The Ministries of Finance of the German Federal States are the supervising authorities for the regional and local tax offices. The regional tax offices control and support the local tax offices in terms of general management and in certain tax law matters. The local tax offices are the main reference point for the day-to-day tax matters of the taxpayers like reviewing tax returns, issuing tax assessments and collecting taxes. Taxpayers may also apply for a binding tax ruling with respect to the tax consequences of a planned structure or transaction.
The time needed to resolve an issue with the local tax office depends on the scope and the complexity of the issue at hand. Regularly, standard issues can be directly resolved with the competent local tax office in a cooperative way. Many local tax offices have shown to follow a hands-on approach. However, more complex issues may require more extensive negotiations involving the regional tax offices and even the German Federal Ministry of Finance. Such negotiations may last several months.
The key regulatory authorities for federal taxes are the tax offices led by the Ministry of Finance.
The Ministry of Finance also prepares draft tax bills for Federal Tax Laws, issues guidelines for the interpretation of tax provisions, rules of Federal Tax Laws, negotiates the Austrian double taxation agreements and has wide ranging competences in international tax law matters. Informal rulings on tax questions on a rather generic level (so-called “Express-Answering-Service”) may be obtained from the Austrian Ministry of Finance.
The tax offices are the main reference point for the day-to-day tax matters of taxpayers. Some of the tax offices are specialized for certain tasks like the collection of stamp duties and transfer taxes or refund of withholding taxes to non-residents under a double taxation convention.
Taxpayers may also apply for binding advance rulings on matters concerning transfer pricing, reorganizations or group taxation with the tax office against the payment of a fee of up to EUR 20,000. In other areas informal rulings based on good faith may be obtained. The time needed to resolve an issue with the local tax office or the Ministry depends on the scope, the complexity of the issue and the availability.