The tax authorities had issued an assessment concerning related party transactions of chrome ore, but without consulting or having approval from the Transfer Pricing Commission in the General Directorate of Taxes in the Ministry of Finance.
On that basis an appeal was filed by Albanian Chrome sh.pk.
Judgement of the High Court
The Court set aside the tax assessment and decided in favor of “Albanian Chrome sh.p.k.”
Excerpt
“The Civil College considers to point out that in terms of competence, form and procedure in the above case, they must find implementation and strictly respect the provisions of Articles 36 and 37 of Law no. 8438/1998 and those of the relevant instruction issued implementing his. Thus, in this Instruction, in the third paragraph of point 6, it is clearly and explicitly provided that:
“Any correction of the transfer pricing in the case of international transactions can be done only through the Transfer Pricing Commission in the General Directorate of Taxes in the Ministry of Finance. If a tax authority seeks to implement this provision, it must refer the matter to the above-mentioned commission. This Commission implements Article 36 by rigorously referring to the OECD Transfer Pricing Guidelines, published in 1995.
As the litigants claim and as the courts of fact acknowledge, there is no requirement and no position or decision-making from the aforementioned Transfer Pricing Commission. Only the report drafted by the control inspectors mentions the need for expression and decision-making of this Commission regarding the transfer price. While, although obligatory to be requested, without any decision by this Commission, the act of tax assessment notice has been issued, which seems to be motivated by the irregularity in the “transfer price”, an administrative act that has been confirmed by other defendants on the way to administrative appeal.
The Civil College considers that, based on the above reasoning, also due to irregular and illegal actions of the defendants in applying the form and procedure regarding the “transfer pricing”, the administrative act subject to trial (Tax Assessment Notice no. .4916 / 10 prot., Dated 16.11.2006) is an absolutely invalid act.
The nullity of the administrative act subject to trial comes because the above-mentioned legal and normative legal provisions require in an orderly manner that, regarding the determination of tax liability due to “transfer pricing”, should have been requested in advance and expressed by a decision of the Commission of Transfer Pricing to the General Directorate of Taxes in the Ministry of Finance, a competence and procedure that has been completely ignored by the defendants. Respect for the competence to exercise legal and administrative authority by state bodies is essential for the legality and validity of administrative acts issued by them.
Also, the nullity of the administrative act subject to trial comes because the defendants, the decisions issued by them, do not motivate or justify the application or not of the requirements of Article 36 of Law no. 8438/1998 and do not contain any procedural and material supporting references in the OECD Transfer Pricing Guidelines published in 1995.
For all the reasons set out above in this decision, as the court of first instance and the court of appeal have erred in applying the substantive law and the civil and administrative procedural law (including the tax law), regarding the very circumstances of the fact that they have The Civil College concludes that both court decisions should be reversed and the lawsuit accepted on its merits, since the administrative act under judicial review is absolutely invalid, as an act issued “Contrary to the form and procedure required by law” (letter “c” of Article 116 of the Code of Administrative Procedures).”
Click here for other translation
83_csh_00-2013-465