Budapest Administrative and Labour Court

16.K.33.691/2019/18.

Budapest Administrative and Labour Court

as court of first instance

Case number: 16.K.33.691/2019/18.

Applicant: Name of applicant

(address )

Legal representative of the applicant: Zamecsnik Pósfai & Partners Law Office

acting as lawyer: Dr. represented by 2

(address )

Defendant: National Tax and Customs Board of Appeal

(address )

Representative of the defendant: László Illés, Bar Counsel

Subject-matter of the proceedings: administrative dispute - 2234875516 - concerning a tax case

T E C T I O N

The Court annuls the defendant's decision No 2234875516 of 27 July 2019, including the decision of the first instance, and orders the tax authority of the first instance to initiate new proceedings.

The State shall pay the fee.

Orders the defendant to pay to the applicant the sum of HUF 1,000,000 (one million) in costs of the proceedings within 15 days of service of the judgment.

The judgment is not subject to appeal.

I N D O C O L A S

Main proceedings

[1] On 28 February 2008, the applicant entered into a loan agreement with its affiliated company Kft. 1, domiciled at ... (hereinafter 'the affiliated company'). According to the terms of the contract, the loan amounted to 53,174,516 currency, the maturity date of the loan was 31 January 2013 and the interest was paid semi-annually at the rate of 100 % of the semi-annual CDI rate fixed in the contract plus 200 basis points per annum. In the years 2009-2011, the related company paid 15 % of the interest income as inland tax, as income from abroad, so that the applicant received 85 % of the interest. In its books, it entered 100 % of the interest as income, while the 15 % withholding tax was recorded as other expenses. According to the applicant's transfer pricing records, the normal market interest rate range was 8,703 % to 10,821 % in the financial year 2009, 10,704 % to 12,598 % in the financial year 2010 and 10,704 % to 12,598 % in the financial year 2001, and the interest rates applied in the loan transaction were 10,701 % to 12,529 %, 12,517 % to 14,600 % and 12,517 % to 14,600 % in the same years. In other words, according to the records, the interest rates applied to the transaction were partly within and partly above the normal market price range.

[2] The Tax Directorate for Special Taxpayers of the NAV, Audit Department I, Audit Division 4, carried out an audit of the applicant by means of the letter of appointment No 15/44/350029/782, in order to carry out a post-clearance audit of the returns for all tax and budget aid for the financial years 2009, 2010 and 2011.

[3] In this context, it examined whether the interest rate spreads applied to the above transaction complied with the arm's length requirement. It noted that the applicant had used the method of comparative independent prices to determine the transfer price in its transfer pricing records, taking into account external and internal comparables. As an external comparison, it used a so-called risk premium model based on the rating of the debtor party and the terms and conditions of the loan, taking into account publicly available data. For the credit rating of the related company, it used the risk model of the name, on the basis of which it classified the company between A1 and A3. It defined the range of interest rates to be applied in the loan terms and conditions, then the default rate and the rate of return, and finally, by substituting these data into the risk premium model formula, it defined the risk premium rates for each risk rating. In doing so, it used subordinated bonds. The benchmark interest rate range was defined as the sum of the risk-free rate and the risk premium. As an internal comparison, the applicant requested quotations from various commercial banks, as independent parties, before granting the loan, as to the amount of profit it could expect to obtain if it deposited its money with them (Bank1, Bank2). In the view of the tax authority at first instance, the method of comparison of prices, although appropriate for determining the arm's length price, was not the method used by the applicant. It argues that the rating of a debtor using public rating models may differ greatly from the rating carried out by the rating agency which created the model, which results in a high degree of uncertainty as to the method used by the applicant. A further problem is that the applicant has based its record on a rate for subordinated bonds, whereas a bank loan and a bond are two different financial instruments and cannot be compared. In this context, it was stated that the transaction under examination was a loan contract and not a bond issue. In response to the applicant's comments, it explained that the unit operating costs are the lowest in the banking market and that it had not been demonstrated that the cost of the applicant's lending was lower than that of a bank loan. It also stated that the mere existence of information through a relationship does not imply a lower risk exposure. In relation to the internal comparables, it stressed that the loan granted by the applicant could not be classified as a deposit transaction and that the comparison with the deposit rate was therefore incorrect.

[4] According to the tax authority of first instance, for the purposes of determining the normal market price, the ... banking market best reflects the conditions under which the related undertaking would obtain a loan under market conditions, and therefore the so-called "prime rate" interest rate statistics calculated by the Central Bank of the country in question are the most appropriate for its calculation. This statistic shows the average interest rate at which commercial banks lend to their best customers. Accordingly, the tax authority at first instance took this rate as the basis for determining the difference between the interest rate applied to the transaction at issue and the normal market rate. As a result, the applicant's corporate tax base was increased by HUF 233,135,000.00 in the financial year 2009, HUF 198,638,000.00 in the financial year 2010 and HUF 208,017,000.00 in the financial year 2011, pursuant to Article 18(1) of Act LXXXI of 1996 on Corporate Tax and Dividend Tax ('Tao Law'). As a result of the audit, the tax authority made further findings in addition to the above (accounting for event organisation costs and exchange losses, determination of withheld tax, accounting for research and experimental development costs related to salary costs). On the basis of all the above, in its decision No 2411938806 of 6 November 2015, the tax authority assessed a tax loss of HUF 73,670,000.00, which constitutes a tax deficit in its entirety. It imposed a tax penalty of HUF 36,835,000.00 on the amount of the tax deficit, calculated at a rate of 50%, and a late payment penalty of HUF 15,322,000.00.

[5] By decision No 206126979 of 21 March 2016, the defendant, acting on the applicant's appeal, altered the decision of the first instance in part, but upheld it with regard to the transfer pricing assessment. It accepted the facts as established by the tax authority at first instance as controlling. Its legal position was as follows. The tax authority at first instance correctly applied the prime rate published by the Central Bank of the country in order to determine the arm's length price. The data in question is public and available to all and, although it is true that it does not allow the credit risk characteristics of individual transactions to be traced, it was advantageous for the related undertaking to use it because it is the best interest rate for the most creditworthy customers. Moreover, it complies with the requirements of Article 7(d) of PM Decree No 22/2009 (X. 16.) on the obligation to keep records in connection with the determination of the normal market price (hereinafter 'PM Decree'). It stated that the prime tare statistics can be considered both as an industry indicator and as a market analysis, as they provide information specific to the banking sector. It is an average of interest rates that is calculated from rates that are better and worse than the average and from which the affiliated firm is likely to have deviated downwards, based on its credit rating as below average. It pointed out that the applicant did not in its appeal support the transfer pricing method in the transfer pricing register, but presented a new method which it was not legally entitled to use. However, the calculation carried out using that method did not show that the mark-up applied to the transaction corresponded to the arm's length price. It argued that the search period used in the calculation was incorrect, that the industry narrowing was incorrect and that the failure to define relevant aspects such as the amount of the loan, the currency, the maturity, the reference interest rate, the method of interest (fixed, constant) in the search criteria was a further error. Only a fraction of the transactions thus obtained corresponded to the loan transaction granted by the applicant or to one of its conditions, so that the calculation would have required further adjustment, which was not done. In relation to the calculation of the transfer price difference, the defendant stated that the tax authority at first instance had acted correctly in increasing the applicant's corporate tax base by the amount of the transfer price adjustment, pursuant to Paragraph 18(1)(b) of the Tao Law. On the other hand, the applicant relied on Paragraph 28(4) of the Tao Law without any basis in law. It also stated that the set-off method was not applicable in the present case pursuant to Article 28(2)(b) of the Tao Law. However, it found that the applicant's appeal on the issue of the offsetting of the withheld tax reducing the special tax liability for 2009 was well founded and, in that regard, it altered the decision of the first instance, cancelling the tax difference of HUF 18,619,000, the tax penalty of HUF 9,310,000 and the late payment penalty of HUF 5,801,000.

[6] The plaintiff filed an action against the decision, in which it primarily requested that the contested decision be altered so that the court did not assess the tax overpayment, tax deficiency, tax penalty and default interest, and in the alternative requested that the defendant's decision be annulled and that the defendant be ordered to commence new proceedings. He also sought an order that costs be awarded. In its view, the tax authority had infringed the provisions of Act CXL of 2004 on the General Rules of Administrative Procedure and Services. (hereinafter referred to as the 'Ket.'), Article 44(1a) of the Act on Administrative Procedure and Service (hereinafter referred to as the 'Act') and Articles 1(2), (6), 2(1), 97(4) and (6) of the Art. It contested the applicability of the prime rate statistics in the context of the determination of the normal market price, stating that, in the case of the indicator in question, it is not possible to identify and verify the interest rates of the individual transactions included in it and the characteristics of each transaction, such as the risk classification of the borrowers, the maturity, the collateral (etc.). The tax authority breached its duty of fact-finding by applying a quasi-estimation procedure, limiting the investigation to a single internet dataset. The method used does not comply with points 1.33, 1.35 and 2.14 of the OECD Transfer Pricing Guidelines for Multinational Enterprises and the Tax Administration (hereinafter 'the OECD Transfer Pricing Guidelines'), nor does it comply with Article 7(d) of the PM Regulation. It stressed that the comparative credit analysis submitted with its appeal, based on individual data with a credit risk rating, provides additional information compared with interest rate statistics based on an average of individual data, which allows a more reliable and accurate determination of the arm's length price of the transaction under investigation. In the context of the tax authority's view that a new comparative analysis could not be submitted for the original transfer pricing records, it stated that the purpose of the procedure was not to decide whether the transfer pricing records were adequate but to determine the arm's length price range for the credit transaction. It pointed out that the comparative analysis was carried out on the basis of data from the Bloomberg Professional database, taking into account credit transactions between unrelated parties with the most similar characteristics to the loan under consideration. It pointed out that the interest rate spread applied in the context of the credit transaction at issue in the case fell partly within and partly above the normal market price range resulting from the comparison. It claimed that the tax authority had erroneously increased the tax base by the amount of the transfer price adjustment, thereby creating a double taxation situation in breach of Article 28(3) to (4) of the Tao Law. In support of its position, the applicant attached to its application a private expert's report. The private legal expert stated that the prime rate statistics used by the tax authorities did not take precedence over the price range definition used by the applicant. Those interest rate statistics are an aggregate figure behind which the details of individual transactions cannot be known and cannot therefore be regarded as a market price determined by the comparative price method. The applicant applied for the appointment of a forensic expert in the proceedings and accepted the findings of the forensic expert obtained on that basis.

[7] In its rejoinder, the defendant sought the dismissal of the action on the grounds that the contested decision was correctly reasoned. It submits that the analysis used by the expert, based on the Bloomberg database, does not constitute a more reliable method of price determination than the interest rate statistics used by the tax authorities. It disputed that the price established by the expert corresponded to the normal market price. It referred to the fact that, although the expert had stated that reliable comparative data were available in the Bloomberg database, he had ultimately concluded in his expert opinion that his search had not produced a sufficient number of comparative credit transactions. He then included in the comparison data that differed from the transaction at issue (debt rating, currency). It did not take into account the borrower's country risk in the credit risk, incorrectly determined the borrower's debt rating and failed to give reasons for the facts which would have qualified the borrower as a strategically important company within the applicant group. It used multiple averages and data adjusted by statistical operations. It criticised the fact that, although the expert repeatedly referred to various professional standards, he did not indicate the professional source which would justify the validity of his expert opinion. It also pointed out that during the period under investigation interest rate ranges had become more volatile and had become more dependent on the circumstances of specific agreements, which are not always reflected in the databases (e.g. contractual terms reached in confidential negotiations). By contrast, the prime rate is the most favourable interest rate available on a loan in the same currency as the one in the loan transaction under consideration in the money market, and the best rate at which the borrower could not have obtained a loan in ... real currency in the country. Moreover, this indicator is also correlated with the sovereign debt rating of the country.

[8] By judgment No 30 of 20 April 2018 in proceedings No 14.K.32.030/2016, following the applicant's application, the Court of First Instance annulled the defendant's decision No 2061216979 of 21 March 2016 in so far as it related to the decision of the first instance, in so far as it concerned the determination of the arm's length price and the calculation of the transfer price, and ordered the first instance authority to initiate new proceedings in that regard.

[9] .On the applicant's application, the court appointed a forensic expert, who prepared an expert opinion, which was supplemented at the request of the court.

[10] In the grounds of its judgment, the court stated that, in the new proceedings, the tax authority must determine whether the pricing of the loan at issue in the case was in line with the arm's length price, taking into account the OECD Transfer Pricing Guidelines and the expert's opinion in this context. In making this determination, it may not use the prime rate statistics produced by the country's central bank. In addition, in the grounds of its judgment, the court also stated that, overall, it follows from the judgment that the methods used by the parties to determine the arm's length price did not comply with the requirements of the OECD Transfer Pricing Guidelines, partly for methodological reasons and partly for other reasons, leaving open the question of whether the interest mark-up applied in the loan transaction complied with the arm's length price requirement.

Tax proceedings ordered by judgment 14.K.32.030/2016/30

[11] In the new proceedings ordered by the court, the NAV North Budapest Tax and Customs Directorate, Control Department of Special Taxpayers and Associated Enterprises, Control Department of Special Taxpayers and Associated Enterprises 1. - A post-clearance audit of returns for the period 31 August 2012 in the partnership tax and special tax on partnerships was carried out, with a view to conducting a repeat procedure by reviewing the findings in the new procedure in accordance with a court order. The findings of the audit were recorded in a report dated 25 February 2019, file number 2301139192, against which the applicant submitted observations, and subsequently, by decision No 2301144419 of 29 April 2019, the tax authority of first instance established a tax overpayment of HUF 143,833,000, which was considered to be a tax shortfall in its entirety, and a tax overpayment of HUF 10,402,000 in its favour. It also ordered the applicant to pay a tax penalty of HUF 71,916,000 and a late payment penalty of HUF 36,143,000. In the grounds of its decision, the Court set out in detail the findings for the applicant's entire tax assessment period and also justified its decision by reference to legal provisions. Among other things, it found that the applicant had accounted for the accrued but unpaid bonus and bonus and contributions as expenses for the 2011 financial year, and therefore the audit increased its pre-tax profit for 2011 by HUF 27,516,000 on the basis of Article 15(2) and (3) and (7) of Act C of 2000 on Accounting.

[12] In the findings made against the applicant in the tax categories personal income tax, percentage health care contribution and general sales tax, it was recorded that the tax differences identified in the 2011 tax year could be charged as expenses pursuant to Section 79 (3) and (4) of the Tax Act, thus the applicant's pre-tax profit for the 2011 tax year decreased by HUF 1,636,000. In the corporate tax base, it was recorded that the findings of the review of the findings of the main proceedings 14.K.32 .030/2016/30. of the court of first instance contains findings, based on the opinion of the expert appointed in the court proceedings, the determination of the arm's length price was not appropriate either by the plaintiff or the tax authority, so the tax authority of first instance in the repeated proceedings re-determined the arm's length price, described its method and, as a result of the impact of the determination, the tax authority of first instance applied the tax law of the Republic of Hungary. Based on Section 18 (1) (b) of the Act, it increased the corporate tax base by HUF 115,433,000 in the 2009 financial year and by HUF 84,657,000 in the 2010 financial year. As a result of the assessment on the amount of interest from the loan agreement previously written, the corporate tax base was increased by HUF 24,404,000 in the 2009 financial year, HUF 60,750,000 in the 2010 financial year and HUF 12,284,000 in the 2011 financial year, with reference to Section 24 of the Tao Act.

[13] With regard to the accounts of the applicant in respect of the salary costs for research and experimental development, the audit found that the amount of corporate tax for the 2009 financial year increased by HUF 216,000 and the amount of corporate tax for the 2011 financial year decreased by HUF 3,035,000, thus resulting in findings in favour of the applicant. He also made findings with regard to the special tax on partnerships and justified his decision by reference to the legal provisions, including the tax penalty and the late payment penalty.

[14] The applicant appealed against the decision of the first instance, contesting in detail the findings of the first instance tax authority, in particular that, in its view, the report was issued after the expiry of the audit deadline by a significant amount of time, thus infringing the provisions of the Air.

[15] As a result of the appeal, the defendant upheld the decision of the first instance by decision No 2234875516 of 27 June 2019. In the grounds of its decision, it held, in addition to the applicable legal references, on the basis of the appeal and the documents produced in the main proceedings and the retrial, that the first instance authority had acted lawfully and reasonably in its assessment of the applicant's liability. In detailing the grounds of the appeal, it found that the tax authority of first instance had also taken a lawful decision in the matter of the tax penalty. The first instance authority had acted correctly in determining the tax liabilities of the applicant in the light of the provisions of the Tao Law and the Art. It also justified its decision by further detailed findings of fact and by reference to legal provisions.

The applicant's application and the defendant's defence

[16] The plaintiff, through the defendant, filed a statement of claim against the above decisions with the court on 18 October 2019. In his application, he requested a review of the defendant's decision and the decision of the first instance and, on the grounds of a number of unlawful acts, the annulment of the decision of the Court of First Instance of the Hungarian Republic of 22 September 2009. 38(1)(a) of the First Instance Act, in such a way that the court should disregard the part of the assessment of the tax overpayment, the tax penalty and the default interest challenged in the defendant's decision, and to claim legal costs. He also sought a declaration that part of the defendant's findings were time-barred. 38(1)(a) of the Court of First Instance to annul the defendant's decision, including the decision at first instance, and to order the tax authority to conduct legal proceedings and to issue a decision. In its view, the defendant's decision is wholly unlawful in the contested part. By its principal claim, it sought an order that the tax differential, the tax penalty and the default interest not be imposed and, by its alternative claim, it sought a full clarification of the facts and a decision in accordance with the law. In its view, the limitation period had expired under Article 164 of the old Law in respect of the 2009 financial year, which expired on 20 June 2009, and the assessment for that period was therefore also unlawful for that reason. The findings of the tax authorities are unfounded and undocumented, and the tax authorities have also infringed the procedural time-limit and the principle of fair procedure. In its view, the judgment of the court in the main proceedings is not in accordance with the decision of the tax authority in the repeated procedure. In addition, the defendant should have taken into account in its decision that, in view of the procedural irregularity, the sanctions imposed were, for that reason too, unlawful, and the defendant was therefore not entitled to apply a tax penalty in accordance with the principle of fair procedure, in view of the observations of the Curia in its judgment in Case No BH.2015.115.

[17] In its view, the tax authorities at first and second instance also committed a serious procedural irregularity by carrying out an investigation that went beyond the findings of the experts in the judgment and the judicial proceedings, thus going beyond the grounds of the judgment and including amounts subject to tax which could not be legally taxed in the new proceedings ordered by the judgment.

[18] In his defence, the defendant sought the dismissal of the applicant's action and claimed costs. The applicant submits that the procedural principles and rules relied on by the defendant are unfounded in so far as they are such as to render the decision unlawful and that its objections to those rules are unfounded. In the main proceedings, the tax authority at second instance did not exceed the time-limit for taking a decision, and in the decision at first instance, the tax authority did not use evidence obtained beyond the time-limit for verification. Any overrunning of the time-limit in the main proceedings cannot have such an effect on the review procedure as to affect the legality of the decisions taken in the review procedure. The findings and penalties in the new procedure were also assessed by the tax authority independently of the main procedure, so that the procedural acts on which the new decision is based must be considered as the relevant ones for the purposes of imposing the tax penalty. The applicant's right to a fair administrative procedure was not infringed. The assessments for the 2009 financial year are not time-barred and the applicant's objections concerning the imputation of foreign income are unfounded. In the main proceedings, the Administrative and Labour Court of Budapest annulled the decision of the court of second instance and the findings of that court are not binding on the new proceedings. In the decisions contested in the present proceedings, the tax authority has provided a detailed and comprehensible explanation, supported by legal provisions, for the deviation from the findings of the main proceedings. In the case of foreign source income, the opinion of the tax expert did not in any way bind the tax authority conducting the new procedure. The dispute about the level of the tax penalty is also unfounded, the NAV guidelines cited by the applicant refer to the most detrimental conduct to the bad faith budget in the context of a 200% tax penalty, but in the proceedings a general tax penalty of 50% was imposed.

Decision of the court and reasons

[19] The applicant's action is well founded, as set out below.

[20] The above facts were established by the court on the basis of the statements of the parties to the lawsuit, the administrative documents of the defendant and the documents attached by the parties, as well as the information from the main proceedings pending before the Administrative and Labour Court of Budapest in the case no. 14.K.32.030/2016.

[21] The court shall adjudicate the administrative dispute - in accordance with the provisions of § 2 (4), § 85 (1)-(2) and § 86 (1)-(2) of Act I of 2017 on the Administrative Procedure Code (hereinafter: the Administrative Procedure Code) - on the basis of the facts existing at the time of the implementation of the administrative action, within the framework of the applications and declarations of rights submitted by the parties, and shall decide in its judgment on all the claims asserted in the action. The Kp. Pursuant to Article 78(2) of the Civil Procedure Act, the court shall evaluate the evidence individually and as a whole, in comparison with the facts established in the previous proceedings.

[22] In accordance with Art. Pursuant to Art. Pursuant to Article 265 (1) of the Civil Code, which is applicable pursuant to Article 78 (1) of the Civil Code, the party who has an interest in the court accepting them as true must prove the facts material to the dispute and bears the consequences of the failure or inability to prove them.

[23] The applicant challenged the defendant's decision on five distinct grounds: first, a plea alleging that the limitation period had expired; second, breach of procedural time-limits; third, a declaration that the judgment of the Metropolitan and Administrative and Labour Court had been disregarded; fourth, a plea concerning the calculation of foreign income; and fifth, a plea concerning the application and amount of the tax penalty. The Court held that the applicant's plea that the defendant had failed to comply properly with the provisions of the judgment of the Administrative and Labour Court of Budapest, which could be regarded as a precedent for the defendant's decisions in the proceedings, was well founded, as follows.

[24] Under Section 129(3) of the Air Act, the tax authority may, in new proceedings ordered by a superior authority or a court, examine the circumstances giving rise to the order for new proceedings and the elements of fact relating thereto. Pursuant to paragraph (4), the tax authority is bound by the operative part of the decision of the superior authority and the court's decision and the reasons for the decision, and shall act accordingly in the new proceedings and in the decision. As the Curia has stated in several guiding decisions, in its decisions of principle published under BH.2015.314 and BH.2016.155, in the case of new proceedings ordered by the court, the authority may only examine the circumstances that gave rise to the new proceedings, and no further elements of fact may be examined. In the new procedure, the tax authority is bound by the terms of the judgment of the court ordering the new procedure and can only examine the facts in accordance with the guidelines contained therein.

[25] In this context, the court held that the new procedure, which was a prelude to the decisions sought to be reviewed in the proceedings, had to be conducted on the basis of the judgment of the Metropolitan Administrative and Labour Court of Budapest dated 20 April 2018, No. 14.K.32.030/2016/30. In that judgment, the Court analysed in detail, as part of the legal reasoning, the expert opinion submitted by the expert appointed in the case, and found that it was logical, reasoned, complete and free of contradictions. At the same time, the tax authority was required to determine whether the pricing of the loan at issue in the lawsuit was arm's length, taking into account the OECD Transfer Pricing Guidelines and the expert opinion set out in that opinion as a guide. It was only in this area that the judgment of the Court of First Instance gave the tax authority the opportunity to depart from the previous decision and required it to make such a decision. The provisions of the court in that judgment are clear, the judgment itself explaining that the question of the arm's length price was the first issue examined by the court in the prior proceedings, in which it took as a guide the opinion of the forensic expert appointed in the proceedings, in which the expert pointed out that, under the OECD transfer pricing guidelines, the arm's length price must be determined by comparing the related transaction with independent transactions.

[26] In the main proceedings, the assigned expert in the case distinguished and examined three pieces of evidence in relation to the determination of the arm's length price in the case, in respect of which he concluded that the plaintiff's evidence, the defendant's counter-evidence and the plaintiff's counter-evidence did not lead to a conclusive decision on the issue. On the basis of the expert's opinion, the court found that neither the method used by the plaintiff nor the defendant was suitable for determining the arm's length price. The plaintiff accepted the expert's opinion, while the defendant contested the expert's opinion, claiming that the method and the result of the determination of the arm's length price, or at least the method used by the expert, did not provide any more realistic data than the method used by the tax authority. In this regard, the judgment of the Administrative and Labour Court of Budapest No. 14.K.32.030/2016/30 records that the court defined the subject matter of the lawsuit as the determination of whether the method used by the plaintiff or the defendant to determine the arm's length price was correct, and therefore the price determined by the plaintiff or the defendant is the arm's length price. It also stated that if, however, the method or price used by one of the parties was not correct, the court had to take into account the Court of First Instance's decision of principle EBH.2015.K.37, published by the Curia, according to which it is not for the court to determine the margin of profit, but for the tax authority to quantify it in the new proceedings, and then in the reasoning of the decision of principle, the Curia confirmed that it is for the defendant to determine the arm's length price in the new proceedings. As a consequence, the objections raised by the defendant against the expert's price determination in the proceedings pending under 14.K.32.030/2016 were not legally relevant.

[27] In the course of the defendant's argument that the database used by the expert did not contain all the characteristics of the transaction, whereas the interest statistics used by the tax authority eliminated that error, the court, as a result of its examination, recorded that, contrary to the defendant's argument, the court accepted the expert's position in the light of that argument, that the OECD Transfer Pricing Guidelines set out as a fundamental condition for the determination of the arm's length price for the comparative independent pricing method that the comparison between independent and controlled transactions must be based on the unique identifiability and adjustability of the data being compared. In its previous judgment, the court also stated that, overall, it follows from the judgment that the methods used by the parties to determine the arm's length price do not comply with the requirements of the OECD Transfer Pricing Directive, partly for methodological reasons and partly for other reasons, leaving open the question of whether the interest rate spread applied in the loan transaction at issue complies with the arm's length price requirement. It was also described in the judgment that the expert himself had taken evidence, but in the light of the Curia's decision of principle, the court decided that since it was not his task to determine the price in question, it did not take a position on that issue. Therefore, there was no arm's length price or deviation from it, and the question of accounting for the transfer price difference did not arise, and in the absence of such a price, it was not possible to rule on the question of how the amount of income from abroad should be determined in the case of a transfer price under Section 28 (3) and (4) of the Tao Act. Although the expert himself had put forward the relevant evidence, in the course of which he had determined the arm's length price, the court could not rule on this issue. Since there was no arm's length price or deviation from it, the question of the accounting of the transfer price difference does not arise and, in the absence of such an accounting, the court could not rule on the question of how the amount of foreign source income should be determined in the case of a transfer pricing under Section 28(3) and (4) of the Tao Act and whether a set-off could be applied to non-exempt income.

[28] The court held that this ruling does not mean that the tax authority had a fresh opportunity to investigate the question of offsetting foreign tax paid on foreign source income. The detailed reasoning of the judgment merely provided the tax authority with the opportunity in the retrial to reconcile, on an arithmetical basis, the court's guidance as to whether, as a result of the OEDC transfer pricing guidelines and the expert opinion in this case, the mutual pricing at issue in the case was arm's length. The possibility of reexamining the different part of the judgment was not allowed by this provision of the judgment. If the tax authority disagreed with the guidance in this regard for any reason in the new procedure, it can no longer be challenged in the present proceedings in the absence of an application for review of the judgment.

[29] The tax authority was only legally able to implement the judgment of the court in the retrial ordered by the court. The subject-matter of the action was the finding of the tax authority as a result of the audit carried out by the tax authority in respect of the applicant for the tax years 2009-2011, in respect of which the tax authority had the lawful opportunity, in the repeated procedure, to determine the tax liability of the applicant by applying the guidance of the court. In the original control procedure, the tax authority did not make a full finding on the crediting of the tax paid abroad on income from abroad, only the taking into account of the adjustment of the transfer price for interest received from abroad in the crediting was the subject of an administrative dispute between the parties to the litigation, and the court could not therefore examine the issues of crediting in general. In relation to this set-off, the court judgment did not create a legal basis for the defendant to re-examine it.

[30] The judgment only provided for a new procedure in relation to the determination of the arm's length price and the accounting of the transfer price. The operative part of the judgment and the reasoning of the judgment only obliged and empowered the tax authority to decide on the new procedure in the scope of the determination of the arm's length price and the inclusion of the transfer price in the set-off of foreign income. If the tax authority had disagreed with this guidance of the judgment 14.K.32.030/2016/30 for any reason, it would have had the right to file a petition for review before the Curia, but the content of this guidance, the judicial guidance for a new procedure, can no longer be examined in the present case, in the present case the court had only to examine whether the tax authority had complied with this guidance, whether it had gone beyond it.

[31] The court held that the defendant's action and the resulting decision, which went beyond the guidelines, were not lawful. Under Section 132(1) of the Air Act, the decision of the tax authority must be annulled or revoked and, if necessary, new proceedings must be initiated if its content is contrary to a final decision of the administrative court in the case in question or if, in the course of its adoption, a serious procedural violation classified by law as a ground for annulment was committed. In view of the above, the court found that no new evidence on the merits had emerged in the tax authority's repeated proceedings prior to the issuance of the defendant's decision in the lawsuit, but that the tax authority had made findings in relation to foreign income without the authority to issue a ruling, and that they were therefore not in accordance with the guidelines for a ruling, and the court therefore set aside the defendant's decision for this reason, including the decision of the first instance, and ordered the tax authority of the first instance to conduct new proceedings, in which new proceedings the tax authority may not go beyond the scope of the 14.K.32 .030/2016/30. In the original audit, the tax authority did not make any finding on the set-off of income from abroad, tax paid abroad, so in general, the inclusion of the transfer pricing adjustment in the set-off of interest received from abroad was the subject of the dispute, and thus outside the scope of the investigation of the court's previous proceedings, but this does not entitle the tax authority to extend its repeated proceedings to this issue in the absence of the authority of the judgment.

[32] In the new proceedings, the tax authority at first instance may continue the new proceedings in accordance with the grounds and operative part of the judgment in the main proceedings, in so far as they relate to the determination of the arm's length price and the inclusion of the transfer price in the foreign income credit.

[33] Having ruled that the plaintiff's claim was well founded in the context of the claim to be examined in the first instance, the court based its decision on that finding.

[34] The plaintiff also raised a limitation objection, which, in the light of the limitation objection, the court held that the date of limitation for the assessments for the 2009 financial year had not occurred at the time of the decision of the court of second instance on the merits of the case, since, in the case of the applicable rules of Art. and Air. on limitation, the limitation period for the 2009 financial year had expired on 10 July 2019. The decision of the court of appeal was received by the applicant on 16 July 2019 and was therefore served within the limitation period. In its examination of the limitation period, the court considered the defendant's calculation to be lawful, as the main proceedings had been dormant from the notification of the decision of the court of appeal on 1 April 2016 until the court decision became final, and the defendant's calculation was therefore lawful in determining the date on which the limitation period began to run.

[35] The applicant also relied on a breach of the procedural time-limit, in the light of which the Court found that the procedural time-limit had not been exceeded in the adoption of the decision sought to be reviewed in the present action in such a way as to lead to the annulment of the decisions, which would have an impact on the substance of the case. The fact that a procedural time-limit was exceeded in the main proceedings should have been examined by the court in the judgment in the main proceedings.

[36] In the light of its decision in the main proceedings, the Court did not rule on the applicant's objections to the calculation of foreign income, including those relating to the application and amount of the tax penalty, since they were also disposed of by the judgment.

Concluding part

[37] The defendant in the present case is the defendant in the case of the application of the judgment of the Court of First Instance of the European Communities of 17 December 2004. 35 of Act CXXX of 2016 on the Code of Civil Procedure (hereinafter referred to as the "Code"), applicable pursuant to § 82 (1) to (2) and § 83 (1), the court shall pay the plaintiff's costs of the proceedings, the amount of which shall be determined by the court in the decision of the court of 31/2017 (XII. ) and on the basis of Article 3(3) of IM Regulation No 32/2003 (VIII/22), which provided for a reduction of the amount indicated in the costs list on account of the complexity of the case, the duration of the hearing and the fact that a decision was reached in one hearing.

[38] By virtue of the defendant's personal exemption from duty, the duty not levied under the right to record the duty in question is borne by the State in the amount prescribed in Article 39(1) and Article 42(1)(a) of Act XCIII of 1990 on Fees, since the defendant is entitled to full personal exemption from duty under Article 5(1)(c) of the Act.

[39] The possibility to appeal against the judgment is provided for in the Kp. § 99 (1) of the judgment is excluded.

, 13 February 2020.

. name s. k.

Judge