SOLUTION

№ 5756

Sofia, 19.05.2020

IN THE NAME OF THE PEOPLE

The Supreme Administrative Court of the Republic of Bulgaria - Eighth Division, in a session held on the twenty-second day of April in the year two thousand and twenty, composed of:

THEODORA NIKOLOVA, PRESIDENT

MEMBERS: DIMITAR IVANOV

EMILIA IVANOVA

acting as Registrar Galina Uzunova, with the participation of

the public prosecutor Iliana Stoykova heard the reported

by Judge EMILIA IVANOVA

in administrative case No 14311/2019.

The proceedings are conducted in accordance with Article 208 et seq. of the Administrative Procedure Code in conjunction with Article 160, paragraph 6 of the Administrative Procedure Code.

By decision No 279/18.02.2019 rendered in administrative case No 680 of the Administrative Court of Varna for the year 2018 was cancelled the revision act No P-03001816004663-091-001 of 13.07.2017 issued by the revenue authorities at the Tax Department of the National Revenue Agency - Varna, confirmed by decision No 349/05. 02.2018 of the Director of the Directorate "Appeals and tax-insurance practice" - Varna at the Central Directorate of the National Revenue Agency, in the part by which additional corporate tax liabilities under the Corporate Income Tax Act for the year 2013 were determined for "Beltart" Ltd. in the amount of BGN 11,669.93 principal and interest in the amount of BGN 4,528.40 and for the tax year 2014 in the amount exceeding BGN 256,008.29 up to BGN 321,103.82 principal and corresponding interest.

For the rest, the appeal of Beltart Ltd is dismissed.

Appeals against the judgment have been filed by both parties to the proceedings. In the course of their administration, by order of 15.05.2019, the President of the Eighth Division of the Supreme Administrative Court found an inaccuracy in the operative part of the judgment and returned it to the Supreme Administrative Court of Varna. In compliance with the instructions given by Decision No. 1219 of 18.06.2019, a correction of an obvious factual error was made in Decision No. 279/18.02.2019 rendered in Administrative Case No. 680/2018, The text of the operative part has been amended as follows: "Annuls the revision act No. P-03001816004663-091-001 of 13.07.2017 issued by the revenue authority at the Tax Department of the National Revenue Agency Varna, confirmed by the decision No. 349/05.02.2018 of the Director of the Directorate of the ETRD-Varna at the Central Directorate of the National Revenue Agency, in the part by which additional corporate tax liabilities under the Corporate Income Tax Act for the tax period 2013 were determined for "Beltart" EOOD, in the amount of BGN 11 669.93 and interest in the amount of BGN 4 528.40, for corporate tax under the Corporate Income Tax Act for the tax period 2014 in the amount of BGN 65 095.53 principal and BGN 18 646.41 interest.

Dismisses the appeal of Beltart Ltd. in respect of corporation tax under the Income Tax Act for the tax year 2014 in the principal amount of BGN 256 008.29 and interest in the amount of BGN 73 332.75'.

By request No. 10905/08.07.2019 the Director of the Directorate "ODOP" - Varna has requested to correct under Article 175, paragraph 1 of the APC an obvious factual error in the decision No. 1219/18.06.2019, in the part of the determined amount of interest. The request was granted and by decision No. 1951/21.10.2019 the correction of an obvious factual error in the operative part of decision No. 1219/18.06.2019 was admitted. The final operative part of the judgment reads as follows. 117623469, with registered office and management address, for corporate tax under the Corporate Income Tax Act for the tax period 2014 in the amount of BGN 65 095.93 principal and BGN 15 111.07 interest.

Dismisses the appeal of "Beltart" EOOD, UIC 117623469, with registered office and management address: village of Golyamo Vranovo, municipality of Slivo Pole, region of Ruse, against the Revision Act No. P-03001816004663-091-001 of 13.07.2017 issued by the revenue authority at the Regional Directorate of National Revenue Varna, confirmed by decision No. 349/05. 02.2018 of the Director of the Directorate "Appeals and tax-insurance practice" - Varna at the Central Directorate of the National Revenue Agency, in the part for corporate tax under the Tax Code for the tax period 2014 in the amount of 256 008.29 BGN principal and 76 868.09 BGN interest."

The Director of the Directorate for Appeals and Tax and Social Security Practice appealed against the judgment in the annulled part concerning the corporate tax liabilities under the Tax Code for 2013 in the amount of BGN 11 669.93 in principal and BGN 4 528.40 in interest and for the tax period 2014 in the amount exceeding BGN 256 008.29 up to BGN 321103.82 in principal, together with the corresponding interest. It is submitted that the judgment is incorrect on account of infringement of procedural and substantive law. It is objected to the conclusions of the court concerning the incorrect application of Regulation No H-9 of 14 August 2006 on the determination of the market price of the 'tolling' service and the related accounting and tax revenue, which led to the incorrect determination of the market price of the services.

According to the cassation appeal, the incorrectness and unreasonableness of the court's reasoning, in that part, is determined by the Board of Appeal's failings in the allocation of the burden of proof and its refusal to examine the evidence annexed to the administrative file, testifying to tax evasion, including the indications of transfer pricing. Detailed arguments are set out in the decision concerning the incorrect approach of the revenue authorities with regard to the methods for determining the market price of the service, but there is a lack of reasoning and no assessment has been made as to tax evasion, given that it is undisputed that transactions between related parties have been established at a value of BGN 0.00, which does not correspond to the normal price of the same services between the same parties.

Last but not least, it should be pointed out that the Board of Appeal completely ignored all the evidence annexed to the administrative file. They establish that the value of the service invoiced to the related party cannot be justified by a change in the contractual and economic conditions, since they have not changed drastically. Moreover, the company itself, which has the burden of proof, has not produced any evidence in that regard, either in the course of the audit proceedings or in the course of the court proceedings.

The evidence adduced in the case and that adduced in the course of the judicial appeal has not been properly discussed in the light of Article 116(4) of the Code of Civil Procedure.

It is apparent from the conclusion of the SSEE that there is no market analogue for other uncontrolled transactions in the same time range, and therefore the court's conclusion that the market value of the service was incorrectly established is unjustified. The court also failed to take into account the provisions of Article 116(1) and (1)(6) of the Tax Code.

It is also objected to the findings of the ruling panel that the RA incorrectly, on the basis of Article 26(2) of the VAT Act, did not recognise for tax purposes the accounting discounts made by the company to its customers when they paid the value of the goods in advance. It is incorrectly held that the dispute concerns whether or not the service was performed. The revenue authorities carried out a detailed analysis of each credit note issued by Beltart Ltd, finding that they were formally regular, but that the discounts referred to in them were in breach of the terms agreed in the invoices as to the payment terms and the type and amount of the discounts. The payment discounts recorded in the accounts were in breach of the basic principles of the Accounting Act.

The court was wrong to ignore the fact that there was no evidence of cash flow to the Bulgarian company and therefore no payment was established. The bank statements submitted by the German company have numerous deletions and corrections and, moreover, the two companies are related parties, circumstances which were not taken into account in the judgment.

On the basis of the foregoing grounds, it is submitted that the judgment under appeal should be set aside and that another judgment should be given on the substance of the dispute, dismissing the company's appeal in that respect also. Costs are claimed at each instance, irrespective of the outcome of the dispute.

An appeal No 10904/08.07.2019 has been filed by the Director of the Directorate of Administrative Offences - Varna against the rectification decision No 1219 of 18.06.2019. The claim is that the rectification of the main decision incorrectly determined the amount of interest payable under Article 89 of the Corporate Income Tax Act and the interest liabilities for corporate tax for 2014.

The Director of the Directorate "ODOP"-Varna, as the defendant, in a request dated 21.04.2020, filed in the case, does not object to the adjournment of the case, contesting the cassation appeal filed by the audited entity. It finds the appeal unfounded.

"Beltart EOOD, with registered office and registered address at Golyamo Vranovo, Slivo Pole municipality, Ruse region, by its lawyer Pavlov, appeals against the judgment in so far as it dismissed the company's appeal against the revision act in question.

According to the appellant, the decision is incorrect on all grounds under Article 209(3) of the Code of Civil Procedure, therefore its annulment is sought. The arguments and facts put forward by the auditee were not considered in the decision. In the first place, the allegations referred to in paragraph 4 of the appeal lodged before the AC-Varna concerning the increase of the accounting financial result under Article 46(1) and (2) of the Income Tax Act were not discussed. It is impossible and contrary to the law to apply both subparagraphs of the cited provision at the same time. The hypotheses are different and paragraph 2 explicitly indicates that it applies outside the cases referred to in paragraph 1. There is no discussion at all as to when the obligation became due in order to be able to analyse the application of the specific provision. The RA makes no findings at all on the circumstances referred to in Article 46(1)(1) to (6) of the Income Tax Act. The expert's conclusions on questions 7, 8 and 9 are not discussed either, and it is not clear why they did not find a place in the reasoning of the judgment.

All the company's documentation for 2013 and 2014 has been seized by the revenue authorities and therefore the court's statement that no clarity was provided by the RL for the invoices under Protocol No 16/31.12.2014 is not true. From the documents on which the revenue authorities and subsequently the court have worked, those included in the minutes can be easily traced.

It is also objected to the findings of the court in paragraph 5 of the judgment regarding the excess of the annual corporate tax over the advance payments and interest assessed for 2013 and 2014. The judgment in this part is vacuous as the provisions of Sections 83, 84 and 89 of the Income Tax Act have not been applied and discussed.

The judgment is also incorrect with regard to the interest determined under Article 175(1) of the Tax Code, as the tax bases on which the interest is charged are incorrectly determined.

The tax base for 2014 was incorrectly calculated. The court failed to reduce the company's liabilities by the recognised tax loss of BGN 316 976.57 from the previous year. In recognising this tax loss, the liability should be determined on a tax base of BGN 2 243 106.32, with the tax determined in accordance with Article 19 of the Income Tax Act (CCPA) amounting to BGN 224 310.06.

On the basis of the above, it is requested that the judgment be set aside and another judgment be rendered upholding the appeal of the audited entity in this part as well. Alternatively, it is submitted that the case should be remitted to a different formation of the same court.

The applicant claims an award of costs in accordance with the schedule annexed hereto.

The Supreme Administrative Prosecutor's Office, acting through the public prosecutor who participated in the case, finds both appeals admissible. On the merits, the applicant submits the following opinion: The allegations of the Director of the 'ODOP Directorate' - Varna that there are substantial breaches of the rules of court procedure in the annulment of the judgment are well-founded. The objection of the applicant that the evidence submitted was credited unilaterally by the court and was not discussed in totality with all the other evidence available in the case is also considered as justified. It is reasonably submitted that the provision of Article 116(4) of the Code of Civil Procedure has not been complied with. The market price was correctly determined by the revenue authorities in this case, whereas the conclusions to the contrary of the AC-Varna are incorrect and unlawful.

In the part rejecting the appeal, the judgment under appeal was correctly rendered in compliance with the rules of court procedure and in correct application of the substantive law. For that reason, the cassation appeal lodged by Beltart Ltd is unfounded and the judgment in that part must be upheld.

The Supreme Administrative Court, Eighth Division, having examined the evidence in the case, taken into account the arguments and objections of the parties, discussed the grounds of cassation raised and those under Article 218(2) of the Code of Civil Procedure, finds that, in fact and in law, the following has been established:

The two cassation appeals are procedurally admissible, as they were lodged within the time-limit laid down in Article 211(1) of the Code of Civil Procedure, by a duly qualified party, a party to the proceedings at first instance having the right and the interest in the contestation and against an appealable act, and therefore they must be examined on their merits.

The subject matter of the review before the Administrative Court of Varna was the RA No. P-03001816004663-091-001 of 13.07.2018 issued by the revenue authorities at the Regional Directorate of NRA Varna, confirmed by decision No. 349/05.02.2018. for the tax period 2013 in the amount of BGN 11 669.93 principal and interest in the amount of BGN 4 528.40 and for the tax period 2014 in the amount of BGN 321 103.82 principal and interest in the amount of BGN 91 979.16.

When carrying out the obligatory ex officio verification of the decision under Article 160(2) of the Administrative Procedure Code, the court finds that the audit was ordered by a competent authority and was completed within the time limit set by it. The audit act was issued by a competent authority and determines tax liabilities for the period for which the audit was assigned, and therefore does not suffer from any defects leading to its nullity. The form and content requirements of Article 120(1) of the Code of Civil Procedure have been complied with.

In order to verify the compliance of the RA with the substantive law, the court of first instance determined the disputed issues between the parties as follows:

1. Whether the tax authorities have correctly increased the financial result of the company and determined the tax base for corporate tax for 2013 and 2014. whether the tax authorities correctly determined the value of the 'tolling' service.

2. are the credit notes for trade discount/concordance in accordance with tax legislation

3. whether the accounting charges under Article 26(6) of the Income Tax Act for 2013 relate to fines, forfeitures, including under Article 307a of the Criminal Code, and other penalties for breach of regulations

4. whether the tax authorities have rightly increased the company's accounting financial result for 2014 by the amount of BGN 2 582 367.74 on the basis of Article 46(1) and (2) of the CCC Law.

5. whether the interest under Article 89(1) and (5) of the Income Tax Act is justified

6. whether the interest under Article 175 of the Tax Code is justified. With regard to the questions thus formulated, the court, after assessing the evidence in the case and the facts established on the basis of that evidence, held as follows:

In the audit proceedings, the revenue authorities undertook actions for determination of the "market price" of the service "manufacture of clothing accessories - trouser belts". The prices of the services for the audited period were compared with the average prices of the same services for 2011 and 2012, which Beltart Ltd. invoiced to its related parties - Beltart GmHb/Germany/ and Beltart SLR/Romania/. According to the revision act and the decision of the Director of the "ODOP" - Varna, the method of comparable uncontrolled prices and the increased value method were used in determining the prices of the services. These statements of the examiners are not shared by the court, it is accepted that there is no information that the revenue authority has analyzed the economic situation for the period 2011 and 2012, and then for 2013 and 2014, and has given reasons whether there is a change in demand, supply, production and other factors that affect the price of sewing belts and making belt parts, in order to assume that the company's profits were correctly determined. Since the revenue authority has compared the prices of the services for a period different from the period under audit, it cannot be held that the same are identical for both the periods.

The fact that there is no comparative material makes it impossible to verify whether the terms of the transaction correspond to the terms of a comparable transaction between unrelated parties, thus excluding the application of Articles 15 and 16 of the Tax Code, since in the absence of a basis of comparison, there is no way to justify a deviation in the terms of the transaction, respectively a deviation from taxation.

Referring to the SSCE heard in the case, the deciding panel held that the "market price" was not determined in accordance with the provisions of Ordinance No H-9 of 14 August 2006 on the procedure and methods for the application of methods for determining market values. It is only a formal statement in the RA that they determined the market prices by the comparable and uncontrolled prices method and the incremental value method. On this basis, the company's financial result for 2013 was incorrectly increased by the amount of BGN 295 000.34 and for 2014 by the amount of BGN 533 889.19.

On the basis of Article 26(2) of the Income Tax Act, the revenue authority did not recognise for tax purposes the accounting discounts made by the company to its customers - ZARAH MODEN S.R.L; MEYER HOSEN AG; MAGEE CLOTING Ltd and BRUHL GmbH Sc Co.KG - in cases where they paid the value of the goods in advance. According to the AC-Varna, once it is accepted that there are actual quantities of belts and their parts manufactured, invoiced and paid for in advance, it should be assumed that the discounts have been granted. The decision does not contain any reasoning, there are no allegations that the revenue authority did not recognise the manufacture, respectively the delivery and invoicing of the belts and parts or part of them and therefore it was wrongly held that the relevant discount was not availed of.

The expert's report in the case established that the company had charged discounts in excess of the agreed amount, which did not alter the intention of the parties to apply a discount when payment was made in advance. In view of the above, the Court finds that the conclusion of the revenue authorities regarding the application of Article 26(2) of the Income Tax Act is incorrect.

However, the provision of Article 26(6) of the Income Tax Act concerning the increase of the company's financial result by the amounts for fines, forfeitures, including under Article 307a of the Criminal Code, and other penalties for violation of regulations was correctly applied. No evidence has been provided as to the correct posting of the amounts of BGN 50.41 in account 609.08 - Fines, penalties, interest, arrears and the amount of BGN 1040. The findings of the revenue authorities have been made on the basis of the accounting entries submitted by the audited entity, and it would therefore have been normal for the audited entity to be able to provide the basis on which the amounts in question were thus accounted for. No such evidence has been provided.

As regards the increase of the company's accounting financial result in accordance with Article 46(1) and (2) of the Income Tax Act, the court gave the following reasons: the tax authorities correctly increased the company's financial result by the amount of BGN 2 582 376.74. /the lev equivalent of the amount of EUR 1 349 343.66/, subject to set-off under Protocol No. 16/31.12.2014. According to the expert appointed in the case, no primary documents have been established on the basis of which the obligations of "VeltArt GmbH" to "Beltart" Ltd. have arisen. The court held that in this part the RA was lawful and the financial result of the company was correctly increased in accordance with Article 46, paragraph 2 of the Tax Code.

The finding of the auditing authorities that the established excess of the annual corporate income tax over the determined advance contributions and the determined interest for 2013 and 2014 was correctly applied the norm of Article 89 of the Corporate Income Tax Act. In the event of a financial year ending with a loss, no corporation tax is payable and no advance contributions for the year are collected, even though they were due, until the final result of the company for the year is determined.

With regard to the interest charged in accordance with Article 175(1) of the Internal Revenue Code, it was held that since the company had made a loss for 2013 and there was no tax base for the determination of corporate tax, no interest was due. In this part, the RA was cancelled. For the year 2014, a financial profit of BGN 2 560 082.89 was established, i.e. there is a basis for the determination of corporate tax and the same is in the amount of BGN 256 008.29, and interest is due on this amount, but the RA should be cancelled for the additionally established amounts of interest for the amount exceeding BGN 256 008.29.

Pursuant to Article 218(2) of the Code of Civil Procedure, in the cassation review of the contested first instance decision the court shall ex officio monitor the validity, admissibility and compliance of the decision with the substantive law. Having regard to this obligation, the present Cassation Chamber assesses the decision of the Court of Appeal of Varna as valid and admissible. The conclusions of the Court are correct in that the revision act was issued by competent revenue authorities and after an audit, during which no material breaches of the administrative procedural rules were committed. As regards the assessment of the substantive lawfulness of the inspection act, the Court of Cassation finds the following:

The cassation appeal lodged by the Director of the Directorate "ODOP" - Varna against the decision No 1219/18.06.2019 for correction of the main decision is inadmissible. After the issuance of additional decision No. 1219/18.06.2019 by the administrative body, a request for its correction was made under Article 175 of the Code of Civil Procedure and simultaneously filed the above-mentioned cassation appeal. The application for rectification was considered by the AC-Varna and was granted. The established interest liabilities were corrected as requested.

The subject matter of the cassation review before the Supreme Administrative Court is Decision No. 279 of 18.02.2019, corrected by Decision No. 1219 of 18.06.2019, corrected by Decision No. 1951 of 21.10.2019. The correction decisions have become an integral part of the main judgment and cannot be the subject of an independent appeal. Further, the intended result of the appeal has already been achieved as the rectification of the judgment has been carried out as contended by the appellant.

For those reasons, the proceedings should be brought to an end.

It is rightly submitted by both appellants that, in delivering the judgment under appeal, the Court of First Instance committed errors of procedure which are of a serious nature.

The argument put forward in the cassation appeal of the Director of the Directorate 'ODOP'-Varna that although arguments have been put forward concerning the incorrect approach of the revenue authorities in determining the 'market price' of the service, the existence of a tax evasion has not been discussed. The Court merely held that there was no possibility of comparing prices in the same audited period, which gave it grounds to annul the audit act. It merely stated that since there was no basis of comparison of prices of the same service provision in the same period, it could not be held that there was a tax evasion.

As per Section 160(1) of the IPC, the court decided the case on merits. In the present case, the AC - Varna has held that there is no basis for comparison of prices for the service of "making of belts", therefore, no tax evasion can be established. The absence of a market analogue to determine the 'market price' cannot be the sole ground for annulment of the revision act. The Board of Appeal, as a court of substance, has to assess whether the company's financial result has been correctly increased. That assessment also relates to the determination of the 'market price' of the service and the existence of a deviation therefrom. Ordinance No. H-9 of 14 August 2006 on the procedure and methods for the application of methods for determining market prices provides for several methods for determining the "market price" within the meaning of § 1, item 8 of the State Tax Code. Since in the present case, according to the first instance Chamber, the "market price" was incorrectly determined by the method of comparable uncontrolled prices and the method of increased value by the revenue authorities, the market value of the service should have been determined in the judicial phase of the proceedings in order to make an assessment as to the absence or not of tax evasion.

The expert evidence heard is incomplete in that it shows that the market price of the service in the course of the audit proceedings was not actually determined by the comparable uncontrolled prices method and the incremental value method as alleged by the revenue authorities. However, the expert also did not determine the market price according to any of the methods of Regulation No H-9/2006. In the course of the court proceedings, no "market price" of the invoiced services within the meaning of §1, item 8 of the RA of the Tax Code was established. It was the court's duty to determine the market price and to assess whether, in view of that price, an evasion of taxation under Article 15 and Article 16 of the Income Tax Act had been established which justified the increase in the company's financial accounting result. This has not been done and in paragraph 1 of the decision it is formally held that in the absence of a basis for comparison the RA is unlawful.

The decision is also incorrect in respect of paragraphs 5 and 6 concerning the interest assessed. The interest liabilities are ancillary liabilities. This means that they are subject to the legal regime applicable to the principal obligation, they arise and their amount is determined in the light of the existence and amount of the principal obligation. The Court departed from that rule in ruling on the interest fixed by the recovery order.

The cassation appeal of the audited entity under paragraph 5 of the judgment is well-founded, in relation to the obligations established under Article 89 of the VAT Act. The court ruled jointly for the two years at issue. It was held that, where the financial year ended with a loss, no corporation tax was payable and no advance contributions assessed for the year elapsed were recoverable, even though they were payable until the company's final result for the year was determined.

It is expressly held in the grounds of the judgment that the company has made a financial loss for the year 2013 and there is no reason to assess corporation tax on it. Interest cannot be charged on a missing liability, for these reasons, to the extent that the company is assessed interest under section 89 of the Income Tax Act on advance payments for 2013 is incorrect and contrary to the nature of the interest liability.

Interest under Article 175(1) of the Internal Revenue Code is payable in cases where public dues are not paid on time. The amount of such interest is determined by the amount of the principal debt. As stated above, part of the court's reasoning as to whether the company's financial result for 2013 and 2014 was lawfully restated is not shared by this instance. This leads to the conclusion that the decision on the determination of interest should be annulled, since the interest was determined on a tax base which was incorrectly formed.

It is also submitted that, in its ruling, the court, although it expressly accepted that the audited entity made a loss for 2013, did not take that loss into account in determining the tax base for the following year. That failure of the court resulted in an incorrect determination of the tax base for 2014 and, accordingly, the corporation tax due.

The conclusions of the Court of First Instance in paragraphs 2 and 3 of the judgment are shared by this Court.

It was correctly held that the formation of discounts between a supplier and its customer depended solely on the will of the parties to the transaction. The discounts were correctly accounted for, as a credit note was issued with each invoice and this fact was not disputed by the revenue authorities. The value of the discounts is reflected in the invoices, credit notes have been issued for the discounts and the expert has established a link between them. The contradictions in the primary accounting documents are not specified by the revenue authorities and are vague. The fact that the discounts are not contractually and explicitly specified is no reason to assume that they were not used by the customers. It is clear from the content of the accounting documents that discounts were charged and used in view of the period in which the debts were paid.

As regards the application of the provision of Article 46(1) and (2) of the TCGA, the present Chamber finds the following: in the reasoning of the revenue authorities and subsequently of the court, it is stated that no set-off was carried out, and therefore the liabilities described in Protocol No 16/31.12.2014 were incorrectly written off. It is rightly submitted in the appeal on cassation of the audited company that the court of first instance did not state any reasons for the application of Article 46 of the Income Tax Act. It is true that, since Protocol No. 16/31.12.2014 was rightly disallowed, the receivable in question was not extinguished, and therefore, on the basis of paragraph 2 of Article 46, paragraph 1 of the same legal text is applicable. However, there is no consideration in the first instance judgment as to which of the six grounds for increasing the result under Article 46(1) of the Income Tax Act is the legal basis for changing the result in this case. The absence of such reasons prevents an effective cassation review of the judgment in that part and also infringes essential procedural rules.

The reasons given by the court concerning the increase in the company's financial result under Article 26(6) of the Income Tax Act are shared. There are no specific complaints concerning paragraph 3 of the judgment in the auditee's cassation appeal, but since no evidence is adduced that the sums were paid for other purposes, the increase in the accounting result is correct.

Although part of the reasoning of the judgment is correct, the judgment must be set aside in its entirety on the basis of the substantive breaches of the rules of court. The restatement of the company's financial result relates to the determination of the taxable amount for 2013 and 2014, which must be carried out on the retrial of the case, taking into account all the prerequisites for the increase in the SFR set out in the audit certificate. In order to correctly establish the tax base on which to determine the corporate tax liabilities of the audited entity for 2013 and 2014, the court should clarify the issues of the "market price" of the service provided, determine whether there is an evasion of taxation within the meaning of Articles 15 and 16 of the Income Tax Act; assess whether for any of the years the company is making a loss and, accordingly, determine the amount of advance payments for the period and any interest thereon under Article 89 of the Income Tax Act. Lastly, having determined the tax base, it should, after hearing an expert opinion, determine the interest payable on the unpaid public debts under Article 175(1) of the Tax Code.

In view of the outcome of the dispute, the judgment under appeal should also be set aside as regards costs. Pursuant to Article 226(3) of the Code of Civil Procedure, the Court of Cassation should not rule on the parties' claims for the award of costs, and when the case is re-examined, the court of first instance should also rule on the costs of the proceedings before the Supreme Administrative Court.

The Chamber of the Supreme Administrative Court, Eighth Division, is thus

HAS DECIDED:

DISMISSES the cassation appeal No 10904 of 08.07.2019, filed by the Director of the Directorate for Appeals and Tax and Social Security Practice - Varna, against decision No 1219 of 18.06.2019, which corrected an obvious factual error in decision No 279 of 18.02.2019, rendered in administrative case No 680/2018 of the AC - Varna.

DISCONTINUES the proceedings in administrative case No 14311/2019 of the Supreme Administrative Court in this part.

REJECTS the decision No 279 of 18.02.2019 rendered in administrative case No 680 of the Administrative Court of Varna for 2018.

REMANDS the case for a new ruling by another panel of the court.

The judgment, in the part terminating the proceedings in the case, shall be of the nature of a ruling and shall be subject to appeal within seven days of its notification before a five-member panel of the Supreme Administrative Court, the rest being final and not subject to appeal.