In May 2023, the Commissioner for Revenue (CfR) confirmed that €800 million in taxes were yet to be collected. The CfR further confirmed that the “tax department sent out 4,800 letters to people to remind them they have tax arrears and sent out 51 per cent more demand notices” for the repayment of tax.

The CfR has also announced the implementation of a new system using artificial intelligence for the purposes of combating tax evasion. Furthermore, compliance and enforcement is one of the three main pillars outlined by the Tax & Customs Administration in its strategic plan for 2023-2025.

Clearly, this all points to enhanced enforcement in the ambit of tax collection, which in turn is likely to result in a surge of tax disputes which are often potentially highly complex in nature. In fact, there has been an increase in the number of audits and assessments issued by the CfR. Thus, it is essential for taxpayers to be fully aware of the modes of contestation available to them.

Generally, once a taxpayer is faced with an assessment, there are three main elements which they need to consider:

1. Proper compliance with fiscal obligations;

2. The right to object to an assessment; and

3. The right to appeal should the objection be rejected.

The issuing of an assessment

As part of its enforcement function, the CfR has the power to raise an assessment against any taxpayer by means of a written notice. The law requires that this notice contains a statement informing the taxpayer of their right to object thereto within the prescribed time.

When confronted with an assessment, the taxpayer must ensure that they are up to date with their compliance obligations as otherwise this could prejudice their right of contestation. Accordingly, the taxpayer must ensure they have filed a return for the relative year of assessment before filing an objection.

Furthermore, taxpayers must settle any tax which is not being contested in that year of assessment, subject to certain exceptions. Should the taxpayer be in default of any of these requirements, the validity of the objection will be impugned, as the Income Tax Management Act, chapter 372 of the Laws of Malta (ITMA) provides that no objection may be filed unless these conditions are satisfied.

The objection stage

Taxpayers who wish to contest an assessment issued by the CfR must do so within 30 days from the date of service of the assessment. Any such contestation must be made by means of a written notice of objection to the CfR.

The taxpayer must ensure they have filed a return for the relative year of assessment before filing an objection

By virtue of this procedure, taxpayers have the possibility of defending their reporting position by demanding a revision or cancellation of the relative assessment. This 30-day period is peremptory in nature, thus it cannot be suspended or interrupted. Therefore, it is crucial that one does not miss this filing deadline. However, the CfR has the power to extend this time limit should there be a reasonable cause for such extension.

Essentially, the objection provides an opportunity for the taxpayer and the CfR to engage in discussions with the hope of reaching a settlement.

During the objection stage, the CfR may request additional information. In this regard, should the taxpayer fail to abide by any such request for information, they will not be able to present such information as evidence before the Administrative Review Tribunal (ART) should the dispute escalate further.

Where the parties manage to reach a settlement, the CfR will subsequently amend the original assessment and issue a notice of the revised tax payable. This notice constitutes an executive title which has the same effect as a final judgement and can therefore be enforced by means of executive warrants if payment does not ensue.

Where no settlement is reached during the objection stage, the CfR will confirm the original assessment and issue a notice of refusal.

The appeal stage

Where a notice of refusal is issued, the taxpayer has a further right of redress to the ART. The taxpayer has a 30-day peremptory time limit to file an appeal before the ART from the date of service of the notice of refusal. In the ambit of an appeal procedure, the ART has the power to confirm, reduce, increase or annul the assessment or make such order thereon as it may see fit.

Should the taxpayer feel aggrieved by the decision of the ART, they may file a further appeal to the courts albeit limitedly on a point of law, as follows:

a. To the Court of Appeal in its superior jurisdiction, where the total amount of tax, additional tax, fines and interest in dispute at the time when the appeal is lodged before the ART is €1,165,000 or more; or

b. To the Court of Appeal in its inferior jurisdiction, where the total amount of tax, additional tax, fines and interest in dispute at the time when the appeal is lodged before the ART is less than €1,165,000.

Concluding remarks

In view of the above, once notified with an assessment, a taxpayer who feels aggrieved by such an assessment should seek immediate assistance. In doing so, this should ensure proper consideration of the relative legal rights and obligations at play and should also provide sufficient time for the taxpayer to regularise their position with the CfR prior to the filing of any objection and any subsequent appeal, should this be required.

Jake Desira is an associate at Fenech & Fenech Advocates and works within the Corporate and Commercial Department.