M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Working Group for Chapter 16 – Taxation Bilateral screening: Chapter 16 PRESENTATION OF MONTENEGRO Brussels, April 2013

Working Group for Chapter 16 – Taxation Bilateral screening: Chapter 16 Presentation of Montenegro Brussels, 29 April 2013 TAXATION Chapter 16: M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 16: Taxation

M O N T E N E G R Negotiating Team for the Accession of Montenegro to the European Union CASE LAW OF MONTENEGRO IN THE FIELD OF TAXATION Lela Ivanović Independent Adviser, Ministry of Finance TAXATION Chapter 16: M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 16: Taxation

M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union LEGAL BASIS AND INSTITUTIONAL FRAMEWORK Legal protection: Constitution of Montenegro: Article 19 “Everyone shall have the right to equal protection of the rights and liberties thereof“ Article 20 “Everyone shall have the right to legal remedy against the decision ruling on the right or legally based interest thereof“. Legal protection in the tax proceeding is administrative and judicial: Administrative protection: Ministry of Finance – second instance authority deciding on appeals against tax Decisions of the Tax Administration. Judiciary protection: Administrative Court (Law on Administrative Dispute); Supreme Court (Law on Administrative Dispute and Law on Courts). TAXATION Chapter 16: M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 16: Taxation

M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union APPEAL IN THE TAX PROCEEDING Against a tax decision of the Tax Administration the appeal is lodged with the Ministry of Finance. Appeal is filed within 15 days as of the day of the delivery of the tax Decision. Appeal shall not stay the execution of the Decision. Appeal is directly submitted or sent by postal service to the first instance body that rendered the Decision. The appeal must detail the specific Decision that is challenged, the name of the body which rendered the Decision and the number and date thereof. Right on the appeal also exist in the situation when the first instance body does not render the Decision within the prescribed time limits. TAXATION Chapter 16: M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 16: Taxation

DECISION OF THE TAX ADMINISTRATION REGARDING THE APPEAL Tax Administration checks the content of the appeal. If the Tax Administration finds any formal deficiencies it will specify the time limit within which the plaintiff must eliminate them. After this, the Tax Administration checks if the appeal is admissible, if it is filed within the time limit and filed on behalf of an authorised person. In case the appeal is inadmissible, the time limit is exceeded or the appeal is lodged by an unauthorised person, the Tax Administration will reject the appeal and taxpayer has the right on a legal remedy regarding this Decision. If the Tax Administration finds that the appeal is with merits, it can decide in a different manner and render a new Decision which is substituting the Decision against which the appeal is lodged. Before rendering of the decision regarding the appeal, the Tax Administration has the possibility to asses if there is a need for a new inspection proceeding or it will deliver a new Decision without it, and in this situation it must adopt the claim in its entirety. Otherwise, the appeal, along with the case files, is sent to the Ministry of Finance. TAXATION Chapter 16: M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 16: Taxation

DECISION OF THE MINISTRY OF FINANCE REGARDING THE APPEAL Ministry of Finance checks if the appeal is permitted, lodged within the time limit and lodged on behalf of an authorised person. If it finds that the Tax Administration had to reject the appeal for this reasons, the Ministry of Finance will reject the appeal and on this Decision there is a possibility to lodge an appeal to the Administrative Court. If the Ministry of Finance does not reject the appeal it will render a Decision about the case. If the Ministry of Finance finds that there is no legal basis for the appeal it will reject the claim. Ministry of Finance can annul the Decision and send it to the Tax Administration for a repeated process, or annul the Decision and render its own Decision about the case, and it can change the first instance Decision in favour or against the plaintiff. TAXATION Chapter 16: M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 16: Taxation

DECISION OF THE MINISTRY OF FINANCE REGARDING THE APPEAL Ministry of Finance must render a Decision within the time limit of 30 days. If the Ministry of Finance finds that the appeal is incomplete, that the case files are incomplete, that the tax Decision is illegible or that the Decision is incomprehensible, that the tax Decision is not verified or signed, that any accompanying acts of the Tax Administration are missing, it will return all case files or request the act that is missing, depending on the facts of a specific case. Ministry of Finance has the authorization to decide about that appeal when there is an appeal against its Decision before the Administrative Court. If the Ministry of Finance adopts the claim it will annul or change its Decision. TAXATION Chapter 16: M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 16: Taxation

M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union EXTRAORDINARY LEGAL REMEDIES Final decision of the Ministry of Finance on which an appeal can not be lodged can be challenged with extraordinary legal remedies:  Retrial of procedure;  Annulment and cancellation based on official supervision;  Exceptional cancellation;  Declaring Decision null. TAXATION Chapter 16: M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 16: Taxation

M O N T E N E G R ONegotiating Team for the Accession of Montenegro to the European Union PROCEEDING BASED ON COMPLAINT Against the Decision of the second instance body the plaintiff has the right to appeal to the Administrative Court within 30 days from the delivery of the Decision. Administrative dispute is a court proceeding in which the legality of the Decision of the Tax Administration is assessed. The main characteristic of this dispute, as opposed to other court proceedings, is the fact that one party in the dispute is always some kind of public body, municipal body, institution or other legal persons that have public authorities. That means that one party in the dispute is always the state, and respectively its bodies or organisations that represent public authorities. Appellate proceeding in the administrative dispute is regulated under the Law on General Administrative Dispute of 5 November 2003 (Official Gazette of the Republic of Montenegro, No 60/03 and Official Gazette of Montenegro, No 32/11). Parties in the administrative dispute are always the plaintiff and the defendant, and the party in the dispute can be a person that has a legal interest if the annulment of the Decision will cause damages to such person. TAXATION Chapter 16: M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 16: Taxation

M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union DECISION BASED ON A COMPLAINT Legality of the contested administrative or other act is assessed by the Administrative Court within the scope of claims from the appeal, but it is not limited to the merits of the appeal. The Administrative Court decides on the appeal in the panel of three judges in the proceeding under the Law on Administrative Dispute. Administrative court renders a judgment which adopts or rejects the appeal. If the appeal is adopted, the tax Decision is annulled. According the Law on Administrative Dispute, the Administrative Court can render a Decision on the merits on the dispute. Law on Administrative Dispute specifies the cases when the Administrative Court renders the Decision in the form of a Resolution. The Administrative Court decides about the procedural matters by means of a Resolution. TAXATION Chapter 16: M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 16: Taxation

M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union PROCEEDING REGARDING EXTRAORDINARY LEGAL REMEDIES Against a final judicial Decision there are two extraordinary legal remedies: Request for an extraordinary reconsideration of a court Decision; Request for a repetition of the procedure. The Supreme Court decides about the request for extraordinary reconsideration. The request for exceptional reconsideration of the court Decision is to be lodged with the Supreme Court, within 30 days from the day of delivery of the Administrative Court Decision, The request for repetition of a procedure shall be decided by the court that passed the Decision against which the request is being lodged. TAXATION Chapter 16: M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 16: Taxation

STATISTICAL DATA FOR 2012 In 2012, the Ministry of Finance of Montenegro had 394 appeals against tax Decisions of the Tax Administration: 231 appeal regarding VAT, 83 regarding the corporate profit tax, and 80 regarding other taxes (personal income tax, tax on turnover of immovable property) From this number of appeals approximately 80% of decisions of the Tax Administration were annulled and the rest was rejected or the Ministry of Finance returned case files because they were incoplete. TAXATION Chapter 16: M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 16: Taxation

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