A few days ago, Minister of the Interior, Aleš Hojs, ordered a revision of some of the concluded criminal investigations, and an avalanche of accusations followed. In a tweet, the former Prime Minister Marjan Šarec wrote that this is a complete abuse of power for Hojs’ own purposes. According to the SD party, this is a gross and inadmissible encroachment on the independence of the police and the state prosecutor’s office, and the party’s vice-president, Matjaž Nemec, wrote that the SDS party was trying to subjugate the law enforcement and the state’s repressive apparatus. I must admit that the above-mentioned posts by the leading politicians surprised me. For years and years, we have been witnessing the inadmissible encroachments on the rights of the taxpayers and cases of abuse of the taxpayers, but none of these politicians have ever responded before. And what’s more, these things were happening when they were running the country. Below, I will present to you the tax process that lasted from February 2012 to June 2020. The aforementioned politicians should check to see who ruled at the time, and what they did to prevent such things from happening. Maybe even then, an audit of tax procedures would not hurt.
In tax procedures, we sometimes witness the severe arbitrariness of some of the “independent” tax – financial inspectors, who deliberately, due to ignorance, or due to their own malice, hurt or destroy the taxpayers. Because of this, a review of the tax procedures in the tax area would also be required. In particular, I am thinking of the procedures which, after many years, have been shown to be illegal, and in such cases, appropriate proceedings should be instituted against the financial inspectors who have made illegal decisions. I am intentionally using the term “illegal,” as it is impossible to use the word “incorrect.”
Tax procedures are conducted by senior financial inspectors or councillor inspectors, who have sufficient knowledge and experience. Therefore, we cannot claim that they made a mistake, especially when it comes to cases where it is obvious that they made illegal decisions. Such financial inspectors should be thanked for their cooperation and then notified of the termination of their employment.
The case which I will present to you is one of many that take place in the Financial Administration of the Republic of Slovenia (Finančna Uprava Republike Slovenije – hereinafter referred to as FURS), and which are not the result of the decisions of the FURS management, but the arbitrariness of some financial inspectors, who think that being independent in their work actually means that they can do whatever they want, that they can make the tac decisions they want, and that they can file criminal charges against whomever they want.
In the hands of such tax inspectors, the taxpayers become merely a means of proving their power, of taking revenge on selected individuals, or perhaps, a means of treating their frustrations. I have written about such cases many times before, I have also submitted requests for internal control and requests for disciplinary proceedings against such financial inspectors to FURS, but nothing has ever happened. The financial inspectors are protected. Thus, on the one hand, we have the destroyed taxpayers who go bankrupt, fall ill, and end up with destroyed families, due to illegal tax procedures. On the other hand, we have some financial inspectors who, in their arbitrariness, and with the power given to them by their service card, continue with their illegal actions. They hide all of this under the notion of non-payment of taxes. The citizens are appalled by tax evasion, even though there is actually no tax evasion happening.
Certain financial inspectors even go as far as to abuse their powers, impose a levy and recover the taxes for periods that are already obsolete, withhold and do not refund input VAT, due to made-up reasons, do not recognize any personal proof of possession in personal tax audits, impose a 70 percent tax on the statistical cost of living, inspect and issue decisions for periods that are already obsolete (2005-2014), and so on. And worst of all, the taxpayers are often unable to pay such high amounts of taxes, but they are afraid to appeal, so many of them end up in personal bankruptcy, and with their actions, the Financial Administration only continues to increase the tax debt.
I would like to emphasize that this is only true for some financial inspectors, who are aware of their power and the fact that no one can do anything to them, and politics has allowed this to go on for all these years. When I talk to financial inspectors who act legally and respect the rights of the taxpayers, they are amazed and cannot believe this is happening, because they know that no tax regulation actually allows them to do such things. When I present these arbitrary cases to them, they are left speechless. And precisely because of this, a review of the tax procedures should be carried out at FURS, especially when it comes to the procedures for which it has been established in court that the financial inspectors’ actions were illegal, and then these financial inspectors should be held accountable.
The case I will present to you lasted from February 2012 to June 2020, so almost seven and a half years. It was related to the sale of real estate and the right to deduct input VAT on the purchase of such real estate. This was hundreds of thousands of euros in tax. Some time ago, the procedure ended with a Supreme Court ruling, the tax was refunded to the taxpayer, and then FURS, or the individuals at FURS, who did not want to accept the fact that the taxpayer received the VAT refund, reopened the same tax procedure.
In July 2017, a criminal complaint was filed
It should be noted that the main matter of this case was a claim for a refund of VAT, which was paid at the time of purchase of the real estate. So this was not about unpaid taxes, but rather, it was a claim for a refund of tax, already paid by the seller, and the buyer demanded a VAT refund. Financial inspectors tried to prevent the refund of the already-paid VAT in every way possible; moreover, they even filed a criminal complaint against the director of the buyer and the buyer of the real estate, for allegedly committing the crime of tax evasion under the first paragraph of Article 249 of the Criminal Code (KZ-1, Official list RS, number 50/12 – consolidated text, 54/15, 6/16 – amended, 38/16, 27/17, 23/20 and 91/20), for which the legal entity (buyer) is responsible, according to the provisions of the Liability of Legal Persons for Criminal Offenses Act (ZOPOKD, Official Gazette of the Republic of Slovenia, No. 98/04 – official consolidated text, 65/08 and 57/12).
The criminal complaint, filed by the Financial Administration of the Republic of Slovenia, the General Financial Office and, of course, the Ljubljana Police Administration, Criminal Police Directorate, on July 7th, 2017, was rejected by the prosecutor’s office less than three months later, as the prosecution was well-aware of the fact that this was not a crime.
Can you imagine demanding a refund of the VAT that belongs to you, the tax authority then not wanting to refund this VAT, inventing various reasons for it, and in the end, filing a criminal complaint against you, which means that a detective comes to your office and interrogates you as the biggest criminal, although you did nothing wrong? In the end, it was concluded that FURS had acted illegally.
This is how things work if certain financial inspectors come after you.
Who is behind all of this?
In the presented case, the following three financial inspectors were involved, whose sole aim all of these years, was not to reimburse the VAT that had been charged and paid:
- Majda Kerec, Inspector Councillor, employed at the General Financial Office,
- Vito Rijavec, Senior Financial Inspector, employed at the Financial Office Nova Gorica,
- Roman Štih, Senior Financial Inspector, employed at the Financial Office Kranj,
and supposedly, the whole matter was orchestrated by someone from the General Financial Office, with his or her own instructions and requirements.
I expect that the police will react, based on this article, investigate the case and initiate criminal proceedings against the aforementioned, as it is more than obvious and, of course, proven by the final decision of the Court of Appeal, that their actions were illegal and that, with the intent to harm the taxpayer, they formed an organized association and, through their negligent work in the service, caused damage to the taxpayer. Thus, Article 258 of the Criminal Code (negligent work in the service) provides:
“An official or a public servant who knowingly violates laws or other regulations, relinquishes his or her supervision or otherwise acts manifestly negligently in the service, even though he or she foresees or should and could have foreseen that this may result in a serious violation of another’s rights or damage to public property or property damage, and if then indeed a violation or major damage occurs, that is punishable by a fine or imprisonment for up to three years. “
All three should also be banned from practicing the profession, as Article 71 of the Criminal Code provides:
“(1) The court may prohibit the perpetrator of a criminal offense from performing a profession, independent activity or any duty, if he has abused his profession, position, activity or duty for a criminal offense and if the court has reasonably concluded that it would be dangerous to continue engaging in such an activity.
(2) The court shall determine how long the measure, referred to in the preceding paragraph, shall last; it may not last less than one year and not more than five years, from the date on which the decision becomes final, and the time spent in prison or at a medical institution for treatment and care, shall not be included in the duration of this measure.
(3) When imposing a conditional sentence, the court may determine that this sentence will be revoked if the perpetrator violates the prohibition of practicing the profession.
(4) The court may decide to terminate this security measure if two years have elapsed since its implementation. The court shall decide on this at the request of the convicted person if it finds that the reasons for imposing this measure have ceased to exist. “
When conducting the criminal proceedings, it should also be taken into account and checked whether it is possible to apply the provisions of Articles 36a to 41 of the Criminal Code (KZ-1), which regulate:
- Article 36 a – participant,
- Article 37 – instigation,
- Article 38 – assistance,
- Article 39 – punishment of the instigator and assistant for the attempt,
- Article 40 – limits of criminality of perpetrators and participants,
- Article 41 – responsibility of members and leaders of a criminal association.
2012 – Commencement of the tax procedure
The tax procedure began in February 2012. The subject of the inspection was a single invoice, by which the seller sold the property to the buyer (taxpayer). In the presented case, there were ten building plots of land intended for construction. The taxable person claimed a refund of the paid VAT. The tax procedure was led by the financial inspector Majda Kerec, who decided not to return this VAT to the taxpayer. Thus, at the end of March 2012, she issued a report in which she invented a number of reasons for not refunding the paid VAT. These are some of the things she wrote in her report:
- that a number of one of the plots of land is incorrect,
- that in one case, there is a building on the land and that this is not undeveloped building land, but a building land with a building, although there was no building on this land (plot) of more than 2700 m2, but only the foundations, the size of 83.00 m2,
- that all other land is undeveloped building land, but not construction plots, because according to the regulations (detailed municipal spatial plan), the construction of facilities on these plots is not allowed, so it is not subject to VAT, which is not true, as it was written in the municipal spatial plan, that this is land on which construction is planned.
Therefore, she claimed that no VAT was charged on the sale of that land, but that the sale was subject to real estate transfer tax, which meant that no VAT should be charged on the sale of that land. It should be pointed out that a tax inspection of the seller was also carried out, in which the financial inspector established that VAT was correctly charged on the sale of these properties. However, Majda Kerec did not want to take this into account, as she decided not to return the paid VAT to the taxpayer – the buyer.
What was even worse was that the financial inspector clearly did not understand or did not want to understand the operating of the VAT system. Thus, during the tax procedure, she repeatedly told me that she could not approve the VAT refund because in this way the state would lose VAT, despite my remark that the same VAT had already been paid by the buyer of the land when he paid the seller’s bill, and the seller paid this VAT to the budget of the Republic of Slovenia. Now the buyer only wants a refund of the paid VAT. I explained to her that this is how the VAT system works. Financial inspector Majda Kerec’s only answer to me was: “You can’t look at it like that!”
She did all of this, despite the clear and unambiguous provision of point 8 of Article 44 of ZDDV-1, which stipulates:
“The following transactions are also exempt from VAT:
- supply of land, except building land. “
This means that VAT is charged and paid on transactions with building land.
The right to deduct VAT arises when the obligation to account for VAT arises. Point a) of paragraph 1 of Article 63 of ZDDV-1 stipulates:
“A taxable person has the right to deduct from the VAT which he is obliged to pay, the VAT which he is obliged to pay or has paid in the purchase of goods or services if he has used these goods or services or will use them for the purposes of his taxed transactions.«
The taxpayer already told the financial inspector at their very first meeting that all of the purchased real estate will be used for resale or for the construction of real estate that will be used to carry out the company’s activities.
Financial Administration’s decision in 2012
A decision was issued in May 2012, in which the financial inspector claimed that the said land was not building land but agricultural land, that there was a building on the land, and that there was no final decision, authorizing construction on the said land.
This, of course, was not true, as there was no building on the land, which was also evident from the data of the Surveying and Mapping Authority of the Republic of Slovenia, and the land was earmarked for construction by a municipal ordinance (OPN). Just in case, the financial inspector added another lie at the end of the decision, which is that the taxpayer did not explain what the land would be used for, although this was explained to her several times.
An appeal was lodged against the decision, as well as five amendments to the appeals, as after the appeal was lodged, a conceptual plan for the construction of the building was prepared, which the taxpayer attached to one of the amendments to the appeals.
Thus, in the fourth amendment to the appeal, the taxpayer summarized the financial inspector’s decision, where she wrote:
»… That Article 63 of ZDDV-1 stipulates that a taxable person has the right to deduct from the VAT which he is obliged to pay, the VAT which he is obliged to pay or has paid in the purchase of goods or services if he has used these goods or services or will use them for the purposes of his taxed transactions. The tax authority has checked whether the taxpayer is already performing or will perform taxed transactions. It was established that the taxpayer failed to explain or prove with documents that he was engaged in a taxed activity and that he would use the real estate in question for the purposes of the taxed transactions.”
In the fourth supplement to the appeal filed on April 9th, 2014, the taxpayer wrote that although he had already claimed and proved during the inspection that he had bought the said property for the purpose of resale, the tax authority did not allow him to deduct the input VAT. The fact is that when the taxable person bought the said property on December 1st, 2011, he submitted an appeal for the VAT return, in which he requested a refund on January 5th, 2012, and that the tax authority started the tax inspection procedure on February 14th, 2012, so only five days after the ownership right on the purchased land (parcels) was entered in the land register, following a court decision. In view of all the above and given the fact that only five days have passed since the registration of the property right in the land register and until the start of the tax inspection, it is not logical to expect that the taxpayer will have already started carrying out the taxed activity. As a result, the taxpayer believed that the decision of the tax authority was premature.
The taxpayer carried out activities with the intention of selling the purchased real estate at all times, from the beginning of the tax inspection control, and also at the time of filing the legal claims. Thus, he conducted several interviews with potential buyers, and at that time (2013 and 2014), two versions of the conceptual design of the future office building, which will stand on the purchased land (plots), were made. The time frame in which the taxpayer carried out all the activities mentioned above was perfectly normal; one might even say faster than usual in such purchases and preparations for resale.
Furthermore, the taxpayer wrote that his activities in performing the taxed activity are also evident from the fact that the taxpayer has been leasing all real estate (land) that he owns, from December 1st, 2012 onwards, for parking purposes, which, however, is subject to VAT, which means that he is already engaged in taxable activity with this land.
The decision to appeal
In March 2014, the second-instance body decided that in this case, the land was actually building land, which means that VAT is charged, but because, according to the second-instance body, the taxpayer did not prove what the purpose of his purchase was, the appeal was rejected.
A new tax review followed immediately
In the aforementioned fourth supplement to the appeal, which I filed on April 9th, 2014, I wrote that the taxable person has the right to deduct input VAT because he leases the land for parking and charges VAT on this turnover.
Wanting to prevent this, the financial inspector Majda Kerec – I find it most likely it was her, as I see no reason for anyone else to do so – initiated the introduction of a new tax audit. With this new tax audit, they wanted to prevent the charging of VAT from renting out the land for parking. Thus, at the end of May 2014, more precisely on May 28th, 2014, so only 49 days after the filing of the fourth amendment to the appeal, tax inspection control was introduced, the subject of which was VAT in the period from March 1st, 2014, to March 31st, 2014. I believe that they most likely chose this particular period to be the subject of a tax audit for two reasons, namely:
- because in the fourth supplement to the complaint, I wrote that the taxable person is renting out the land for parking, which means that he charges VAT and has the right to deduct input VAT, and
- because in this tax period (March 2014), the taxable person claimed a deduction of input VAT on two invoices for the preparation of a preliminary design for the construction of an office building on the purchased land and demanded a refund of the excess VAT.
This amounted to 1,563.63 euros of input VAT and 352.00 euros of output VAT, which means that this was an overpayment or a request for a VAT refund in the amount of 1,211.63 euros. FURS or the financial inspector’s intention was to show her power, how no one can do anything to her, and that she can do what she wants because she is independent in her work. However, if someone orders an audit of tax procedures, politics will start shouting and screaming that this is an encroachment on the independence of state officials.
There was clearly only one purpose for this new tax procedure. To issue a decision to the taxpayer, which will establish that no VAT is charged on the lease of the land for parking, and thus he has no right to the deduction or refund of the excess input VAT, and thus the decision to refund the main amount of VAT from 2012 remains in place.
I published an article about this tax procedure in the 463rd issue of the magazine Denar (money), which was published on August 20th, 2016, called A Miserable Tax Review for 1,211.63 euros.
Another important thing to note here is that the VAT return for March 2014 was submitted in electronic form on April 9th, 2014, the same day as the fourth supplement to the appeal, and on May 28th, 2014 a decision was issued for a tax inspection control of the justification of the VAT refund request, in the aforementioned amount of 1,211.63. The client received the said decision on the introduction of the tax audit on the next day, so on May 29th, 2014, which means that it was drawn up, signed, and sent to the taxpayer within one day. The Ljubljana Financial Office was in charge of the taxpayer’s case, but since apparently no one at the Ljubljana Financial Office was able to deal with such an insignificant matter, so with a surplus of 1,211.63 euros of VAT, they found a suitable financial inspector (Vito Rijavec) in the Financial Office in Nova Gorica.
I must admit that I have never before been involved in such a miserable tax process. For FURS, this was obviously a very important matter that could have a significant impact on the Slovenian budget, so the taxpayer had to provide insurance in the form of a cash deposit in order to receive a refund of 1,211.63 euros of the input VAT. Thus, the taxable person secured the refund of this VAT by a cash transfer of 1,212.00 euros. So the cash insurance exceeded the request for the VAT refund by 0.37 euros, which means that the Republic of Slovenia had adequate insurance, and the budget was not endangered.
The entire procedure of the tax inspection lasted from the day when I was served the decision, so from May 29th, 2014, to January 21st, 2015 – until the day when the appeal was transferred to the second-instance body. That means seven months and 23 days. At the second-instance body, the procedure began on January 21st, 2015, and lasted until July 18th, 2016, when the court’s decision was issued, revoking the decision of the VAT specialist from the Nova Gorica Financial Office. The case was thus remanded for retrial. This means that an additional year, 6 months, and 28 days were spent, which means that the whole procedure (tax and appeal) has, by that point, already lasted for a total of two years, two months, and 20 days. All for the 1,211.63 euros.
To summarize, many government officials have worked on the refund of 1,211.63 euros of input VAT for several years, which was obviously a very important item in the Slovenian budget at the time. The officials have certainly spent at least five times more doing all of this, than the amount of the VAT refund claim. I would like to emphasize that the issuer of both invoices paid the output VAT to the budget, which means that the budget was enriched.
In this specific case, the taxpayer leased the land that the tenant used for a parking space for his customers or guests. The text from the second paragraph of Article 44 of ZDDV-1 was used in the lease agreement, so the lease of parking spaces. In addition, in the study of the traffic regulation in this municipality, it was and still is stated that in this area or these lands represent parking lots, which are also drawn in this study. There also were, and still are, signposts, showing that these are parking lots.
Despite all of this, the financial inspector from the Nova Gorica Financial Office, Vito Rijavec, decided that the taxpayer who was paying the VAT from the leasing of these lots, as is required by law, does not have the right to deduct the input VAT, claiming:
- that the areas that have been leased are actually land, are therefore not car parks and therefore exempt from VAT,
- that this means that the taxable person is pursuing only an exempt activity, and
- that the invoices received from which he wishes to deduct the input VAT, relate to services which the taxable person will use for the taxed activity.
This means that the decision was made at the request of the financial inspector Majda Kerec, because if the taxable the deduction of the input VAT.
The taxpayer did not agree with the decision of the Nova Gorica Financial Office and filed an appeal against the decision. At the same time, one cannot shake the feeling that this was an organized campaign of some of the financial inspectors who simply chose their target.
The second-instance body, so the Ministry of Finance, namely, the second-instance tax procedure department, ruled that the appeal was well-founded. It quashed the decision of the Nova Gorica Financial Office and returned the case to the same financial office and the same financial inspector, Vito Rijavec, for retrial. In the explanatory memorandum to the decision, the second-instance authority summarized the taxpayer’s statements. Among other things, he stated:
“The complainant refers to the fact that there are also signposts on these lands, showing that this is a parking lot, and attaches photographs in this regard, which the first-instance body did not comment on. The first-instance body also did not comment on the study of the traffic regulation, according to which parking lots are also planned in the said area.”
At the end, he also wrote:
“In view of the above, the remaining factual situation has been incompletely established, which is a well-founded reason for an appeal under Article 237 of the ZUP. Pursuant to Article 251 of the ZUP, the appeal must therefore be upheld, so that the impugned decision is annulled and the case is returned to the first-instance body for retrial, in which the first-instance body will take into account all of the above, and determine whether these lands in constitute an area where parking is permitted, or not. If this is actually (in nature) land where parking is allowed or the area for parking vehicles, then, in this case, that is taxed traffic.”
In the retrial, the financial inspector Vito Rijavec decided that VAT will be charged on the lease of the land for parking and that the taxable person has the right to deduct the input VAT and to the refund of the excess input VAT. I don’t know how a financial inspector must feel in a moment like that, when he first writes that VAT is not being charged and that something is a VAT-exempt transaction, and then after a while, in the same case, he writes that it is actually a taxable transaction.
The interim tax procedure, the purpose of which was to bring down the taxpayer, was completely unnecessary. Its only purpose was to prevent the taxable person from getting the VAT refund, and preventing refund of the originally high amount of VAT and delay the tax procedure.
Rulings of the Administrative and Supreme Court
In the meantime, the original proceedings still took place or continued. Thus, on May 19th, 2014, the taxpayer filed a lawsuit with the Administrative Court, and on October 14th, 2014, a ruling by the Administrative Court was issued, with which the Administrative Court rejected the taxpayer’s lawsuit, as he did not prove that he would use the real estate to perform the activities, although this was not true.
The taxpayer then filed an appeal on December 8th, 2014, with the Supreme Court, which ruled to reject the appeal in its ruling from June 4th, 2015. The explanatory memorandum stated that the audit was rejected because the taxable person had not filed any proof at the time of deciding on the application for a refund of input VAT, that all real estate was intended for its VAT-taxable transactions.
The VAT refund
Since the taxable person ordered the production of a conceptual plan for the construction of the building after the purchase of the real estate, the taxable person thought that the requirement of proof was met by the production of a conceptual plan for the construction. Therefore, after receiving the Supreme Court’s ruling on June 23rd, 2015, the taxpayer filed a claim for a VAT refund and subsequently received it refunded in full. With that, the matter was settled.
Another procedure at the Kranj Financial Office
Apparently, financial inspector Majda Kerec could not come to terms with the fact that the taxpayer had received the VAT refund. As a result, she was looking for a way to reopen this tax procedure and take back the already refunded VAT from the taxpayer.
Apparently, she came up with the idea to challenge the VAT refund, which was made after receiving the Supreme Court’s ruling, so based on the May 2015 report. It introduced a tax audit and re-checked the correctness of VAT calculation and payment or the justification of exercising the right to deduct input VAT from the purchase of real estate purchased in December 2011 and for which the taxpayer received a VAT refund based on a June 2015 Supreme Court ruling. The task of continuing to harass the taxpayer was taken over by the Kranj Financial Office and its financial inspector Roman Štih. It introduced a tax audit and re-checked the correctness of the VAT calculation and payment or the justification of exercising the right to deduct the input VAT from the purchase of real estate purchased in December 2011, for which the taxpayer received a VAT refund, based on a June 2015 Supreme Court ruling.
Like the inspectors mentioned above, this inspector also fabricated a series of things, in order to justify his decision that the VAT refund was unjustified.
Thus, on May 22nd, 2018, Financial Inspector Roman Štih issued the following illegal decision. With this decision, he again challenged the refund of VAT, which had already been refunded to the taxpayer, and in addition, he registered a mortgage on the real estate, as insurance for the VAT refund.
Regarding the taxpayer’s remark that this will once again be a decision related to the same matter, so the VAT refund from December 2011, which has already been decided on by the Supreme Court, and VAT had already been refunded after the monthly report for May 2015, the tax inspector wrote in the decision that this decision is not on the same matter, as he is deciding on the VAT refund of May 2015, when VAT was refunded on the basis of a Supreme Court judgment relating to the application for a VAT refund in the December 2011 invoice and that he did not decide on the VAT refund based on the accounts for December 2011.
In response to the taxpayer’s extensive comments, the financial inspector Roman Štih wrote in his decision that in this new and independent procedure he took into account all facts and circumstances and that it was established that the seller of the real estate charged VAT to the taxpayer in December 2011, which should not have been charged. He wrote all this down, although he had previously said that he did not make a decision based on the December 2011 settlement. In addition, we cannot ignore the decision of another financial inspector, who confirmed, when inspecting the seller, that VAT was correctly calculated on the sale of the real estate in question.
So, dear readers, this is what it looks like when you are being inspected by several different financial inspectors – everyone makes different decisions, everyone is right, and you continue to pay. I don’t think we need a Financial Administration with financial inspectors like these.
In the continuation of the decision, the financial inspector Romana Štih also dealt with whether VAT had to be charged on the sale of real estate in December 2011 or not, whether the real estate was building land or not, and the like. Although VAT was refunded to the taxable person in 2015, and although the financial inspector who inspected the invoice confirmed to the seller that VAT was charged on this sale, financial inspector Roman Štih claims in his decision that in May 2015, construction on this land was not admissible, and therefore, the taxpayer was not entitled to a VAT refund. This was followed by:
– he cites point 8 of Article 44 of ZDDV-1, which stipulates that VAT transactions are exempt from land supply transactions, except for building land, and
– Article 77 of the Rules of the ZDDV, which stipulates that the building plots referred to in point 8 of Article 44 of the ZDDV-1 are considered to be land plots intended for the construction of facilities by the municipal spatial plan (OPN).
What is most interesting is that the financial inspector comes into conflict with himself. He states that construction on the land was not permissible, while the acts of the municipality (OPN) state that construction is permissible. He then develops a theory of built-up, and built-up building land, which is irrelevant in this tax procedure, as all land is building land, which is a legal condition for VAT to be charged.
I prepared an appeal against the said decision, which was filed in June 2018, and in January 2020, the second-instance body decided to annul the decision of the Kranj Financial Office and financial inspector Roman Štih and return the case to the first-instance body for retrial. What the second-instance body wrote in its provision is a disgrace to all three financial inspectors who participated in the harassment of the taxpayer, namely Majda Kerec, Vito Rijavec, and Roman Štih.
The second-instance body ruled that the appeal was well-founded, and it did not agree with the financial inspector’s finding that VAT on the sale of land on the December 2011 invoice had been shown to be unfounded.
Furthermore, the appellate body states that the financial inspector relied on an incorrect judgment of the European Court of Justice when he wanted to prove that the foundations, left in the ground, constituted an object, as in the case of a judgment of the European Court of Justice, referred to by the financial inspector, it was an old building that was still in use, as the shopping passage was still accessible to the public. In the case of the taxpayer, however, it was the foundations that remained in the ground. So, dear readers, even when financial inspectors refer to the judgments of the European Court of Justice, check all the facts, because we have financial inspectors who do it wrong, unprofessionally and illegally, just to tax you. If at all possible, however, avoid the three financial inspectors listed.
Furthermore, the appellate authority states that it is clear that at the time when the taxpayer purchased the land, there was no building on any land, as claimed and recorded by the financial inspector.
Stage two – in 2011, everything was fine
The record of the second-instance body, which states that the conclusion of the financial inspector Roman Štih that the supply of land in 2011 was exempt from VAT is unfounded, is the most important. According to the second-instance body, building land, within the meaning of ZDDV-1, which is generally subject to VAT, are not only the lands on which construction is regulated by detailed spatial plans and building plans, but it is already enough for the land to be defined as building land which is intended for construction in the municipal spatial acts. The second-instance body further notes that the taxpayer already had all these documents in 2011 and 2012, which means that all these lands were already intended for construction in 2011, and it cannot be claimed that they were not intended for construction, as claimed by the financial inspectors.
In addition, the second-instance body adds that any additional conditions for the taxation of building land, like what the financial inspectors demanded – that unbuilt building land is a “building plot” or that a detailed spatial plan and building plan have been adopted, are not determined by ZDDV-1 and EU Directive.
The second-instance body concludes its decision by stating that in the specific case, the land was already considered building land in December 2011, the turnover of which is subject to VAT and, therefore, the second-instance body does not agree with the position of the first-instance body, so both financial inspectors – Majda Kerec and Roman Štih, who claim that on the received real estate invoices, VAT was unfounded because it was a VAT-exempt transaction. Therefore, the conclusion is that the VAT on the invoice received in December 2011, was shown in accordance with the law, which is also confirmed by the judgment of the Supreme Court.
After more than seven years, I received the confirmation that my decision in December 2011 was the right one. These were seven years of harassment and ill-treatment by three financial inspectors and perhaps some other people from behind the scenes, of a taxpayer and me as a tax advisor. I will not describe what all of this meant for my work, how much energy was wasted unnecessarily, just because a group of financial inspectors was harassing the taxpayer.
Imagine everything else that can probably happen to the other taxpayers, who then constantly live in fear and under the threats from some financial inspectors, who openly tell them that they will further expand the tax audit if they complain. Unfortunately, these matters place us far from actually being a country with the rule of law.
Conclusion
This is just one of the illegal tax procedures, arbitrarily conducted and carried out by certain financial inspectors and employees of FURS. So far, I have presented quite a few cases like this, but the financial inspectors have always gone unpunished, as they are protected by law, protected by the government officials, and the taxpayers are left at the mercy of these individuals. Therefore, immediate accountability of these financial inspectors should be introduced if they are found to have acted illegally. This means that financial inspectors in all the lost proceedings would have to pay the taxpayer’s costs and, of course, the default interest that the state has to pay as a result of their illegal decisions. Mortgages on the property of the financial inspectors who made the illegal decisions would be insured to secure these payments.
However, if one of their superiors ordered them to act illegally, this should also be established, and then the superiors should also be held accountable.
We, the tax advisers, are in a very bad position in such cases, as we have to convince the clients that we are right, that we have acted correctly and legally, and that we have to wait until a final decision is made. This, however, takes too long, and often, the taxpayers do not want to wait that long.
Sometimes some taxpayers lose their temper, which was also the case when the taxpayer wanted to physically settle the score with me because, judging by FURS’ decisions, I acted incorrectly and caused him harm, even though it has been proven after seven years that I did nothing wrong, and it was actually FURS’ financial inspectors whose conduct was illegal.
What if the taxpayer actually finished the attack on me? What if he hurt me more severely in this physical attack, and what if that bore lasting consequences? Who would be held responsible, and who would bear the consequences? The financial inspector, or no one, because the state protects the financial inspectors, even the corrupt ones. I would just be another system error. Therefore, this system needs to be changed and regulated.
Financial inspectors Majda Kerec, Vito Rijavec, and Roman Štih, and of course those who ordered them to do what they did, must be held accountable. The least that needs to happen is that all four are left without a job in the state administration, as they no longer deserve to work in the state administration, and in addition, they pose a danger to the legal decision-making, and their actions are tarnishing FURS’ reputation. In any case, they will have to be criminally charged. For this reason, I also sent this issue of Denar magazine to the police and the prosecutor’s office, with the remark that I am sending them information, on which my suspicion that a crime has been committed by three financial inspectors is based, and that I expect their action.
Ivan Simič, M.Sc.