I U 1042/2019-21

UPRS Judgment I U 1042/2019-21

The Court:	Administrative Court
Section:	Administrative Department
ECLI:	ECLI:SI:UPRS:2019:I.U.1042.2019.21
Registration number:	UP00028624
Date of the decision:	20.08.2019
Chamber, single judge:	Bojana Prezelj Trampuž (Chair), Adriana Hribar Milič (Rapporteur), mag. Mojca Muha
Scope:	TAXES
Institute:	corporation tax - transfer pricing - related parties - resident - resident of another country

Core

Pursuant to Article 74(7) ZDDPO-2, the facts of the present case must be properly established. The tax authority erred in considering that the owners obtained the economic benefit of lower prices than comparable market prices indirectly through the ownership of the related company, which is not apparent from the facts established in the present case. As a result of an error of substantive law, the tax authority did not make a finding of fact in that regard. However, if the substantive law is correctly applied, it will be necessary to establish whether the natural persons, the qualified owners (CC., D.D. and E.E.), had an actual economic advantage or whether they actually benefited from the advantages arising from the applicant's dealings with the related company A. at prices below the comparable market prices.

Expression

I. The action is partially allowed, the decision of the Financial Administration of the Republic of Slovenia DT 0610-4425/2013-24 of 13 August 2015 is annulled in points I.4, I.5, I.6, I.7 and II.2 of the operative part and remitted to that authority for further proceedings.

II. Orders the defendant to pay to the applicant the costs of the proceedings in the sum of EUR 2 027,64 within 15 days of notification of the present judgment, with interest at the statutory rate from the expiry of that period until payment.

Explanation

By the contested decision, the Financial Administration of the Republic of Slovenia (hereinafter referred to as the tax authority, also the first-instance authority) additionally assessed the applicant for: corporate income tax (hereinafter referred to as CIT) for the period from 1 January to 31 December 2013 in the amount of EUR 68 359,00 (point I.1 of the operative part of the judgment); the corresponding interest on the CIT for 2013 in the amount of EUR 550,66 (point I.2 of the operative part of the judgment).(point I.3); capital gains tax (disguised profit distribution) for the period from 1 January to 31 December 2012 in the amount of EUR 519 238,00 (point I.4); interest on the underpaid monthly advance payments of GST for the year 2014 in the amount of EUR 101,86 (point I.4).(point I.5 of the operative part); capital gains tax (disguised distribution of profits) for the period from 1.1. to 31.12.2013 in the amount of EUR 552 792,75 (point I.6); capital gains tax for the period from 1.1. to 31.12.2013 in the amount of EUR 552 792,75 (point I.6); capital gains tax for the period from 1.1. to 31.12.2013 (point I.6).The taxable amount for the 2012 CIT for the year 2012 is EUR 3 396 293,97 and not EUR 800 103,97 (point I.8 of the operative part of the operative part of the operative part of the operative part of the operative part of the judgment). The assessed and unpaid liabilities must be paid within 30 days of notification of this Decision. After the expiry of the 30-day period, default interest will be charged and tax execution proceedings will be initiated (point II.II of the operative part of the judgment). The Court dismisses the applicant's claim for reimbursement of costs. The costs of the proceedings incurred by the Tax Administration are to be borne by the Tax Administration (point III of the operative part of the judgment). The appeal does not stay the execution of the decision (point IV of the operative part of the judgment).

2. It is apparent from the statement of reasons that, in the course of a tax inspection of the applicant's business in 2012 and 2013, the tax authority established that the applicant's main activity was the production of leather car seat covers, the sale of which was carried out through the applicant's related party, the company A., ... (hereinafter referred to as A.). The register shows that the owners of the applicant, as well as of A., members of the B.B. family. Pursuant to Article 16 and Article 17 of the Corporate Income Tax Act (hereinafter 'CITA-2') and the Transfer Pricing Regulations (hereinafter 'the TC Regulations'), transfer prices established in accordance with the applicable legislation are to be taken into account for the purpose of determining income and expenditure in respect of transactions between related parties. The transfer pricing documentation to be provided by taxable persons pursuant to Article 18 of the TC TC Law is further specified in Article 382 of the Tax Procedure Act (hereinafter referred to as the "TPA"). As the applicant had undercharged its related party, Company A., for products at prices which were not in line with the arm's length principle, the tax authority made a primary adjustment. It additionally assessed the claimant for corporate income tax for 2013 in the amount of EUR 68 359,00 and the corresponding interest on the underpaid corporate income tax advances for 2014.

3. by selling products to related party A. at prices which were too low compared with arm's length prices, he allowed the undisclosed payment of profits totalling EUR 4 807 361,00 to natural persons C.C., D.D. and E.E., who were the owners of the claimant during the period in question, as well as of related party A., and who had an influence on the management and some of whom were also directors of the company. The owners of the company derived economic benefits through their ownership of the company. They are the majority owners, who held a shareholding of more than 25 % in the capital of the applicant during the period in question, the ownership structure of which is set out on page 90 of the grounds of the contested decision. In view of the relationship between the applicant and company A, the tax authority considered that the undisclosed profit payments were made to the natural persons, the owners of the applicant and of related person A, since their decisions influenced the prices between those related persons to be insufficiently high and not in accordance with arm's length principles. It relies on Article 74(7) of the ITA-2 and Articles 90 and 91 of the Income Tax Act ('ITA-2') as the basis for its characterisation.

4. The Appellate Body agrees with the First Appellate Body that the applicant's dealings with its related company A. were at prices below comparable market prices and dismisses the complaint in its entirety with regard to transfer pricing. It also agrees that the sale of products to a related company at prices below comparable market prices is considered to be a disguised payment of profits to the owners: C.C., D.D. and E.E. These are related parties, as defined in Article 16(1) of the ITA-2, which may influence transactions between related companies in such a way that they do not comply with the arm's length principle. It cites Article 74(7) ZDDPO-2 as a basis. These are qualified recipients of disguised profit distributions, as they are persons who have more than a 25% ownership interest and also influence decision-making. A company may make a disguised distribution of profits to a shareholder either directly, whereby only the company and the shareholder are involved in the actual situation of the disguised distribution, or indirectly, whereby the shareholder is not involved in the actual situation of the disguised distribution and the company makes the distribution to a third party. An indirect disguised distribution of profits shall be treated in the same way as a direct disguised distribution. In the case of the applicant's sale of products to related party A at undervalue, the appellate authority correctly held that the profits were paid by disguised means to the owners or partners, namely: C.C., D.D. and E.E., natural persons.

5. The applicant disagrees with the decision and challenges it on the grounds of a fundamental breach of procedural requirements, erroneous and incomplete findings of fact, errors of substantive law and breach of the Constitution of the Republic of Slovenia. The defendant erred in finding that the applicant had already taken into account the impact of costs (staff, materials) when adjusting the price and proposed a cost supplement of 3,10 % for 2012 and 1,74 % for 2013. The contested decision is vitiated by a failure to state reasons. The applicant specifically referred to specific points of the OECD Transfer Pricing Guidelines ('the OECD Transfer Pricing Guidelines') which were not taken into account and on which the tax authority did not take a position. In the course of the evidentiary procedure, he submitted evidence on several occasions, which was also not taken into account by the tax authority. Nor did it take due account of Article 9(1) of the TCR. The defendant has not provided evidence that the difference in the applicant's business conditions compared to the other companies in the sample is indeed eliminated by taking into account a value below the median. In its search for comparable companies, the complainant repeatedly provided an analysis of the costs incurred during the period in question, which it explains in more detail later in the application. The tax authority unjustifiably rejected the initial comparability analysis and thereby exceeded the limits of its jurisdiction. The applicant relies on Article 11(1)(9) of the Financial Administration Act and claims that there has been a breach of the principle of certainty laid down in Article 7 of the Tax Code. The tax authority did not act in accordance with the TC Rules and the OECD Guidelines. The applicant submitted documentation relating to transfer pricing which fully complied with the requirements of Article 382 of the Tax Procedure Act ('the Tax Procedure Act'). The tax authority did not adequately specify the reasons why the criteria applied by the applicant were unreasonable and illogical and why the combinations of criteria were illogical and non-exclusive. Nor did it specifically address the reasons for rejecting the benchmarking exercise in relation to the ownership criterion. The applicant has already insisted in its observations on the record that the appropriate methods were used in the preparation of the benchmarking exercise and that the final benchmarking sample produces relatively reliable results. The original comparability analysis was appropriate. He draws attention to points 3.32 and 3.33 of the OECD Guidelines on sample size, as it is the quality of the data that is important, not the quantity of data. The tax authority also does not provide any reasons why a new benchmarking exercise is not warranted.

On pages 8 to 16 of the application, the applicant sets out in more detail the individual functions performed and the functions performed by Company A. As regards the method of determining the arm's length price, it states that, in order to verify whether prices are indeed set in accordance with the arm's length principle, it is necessary to examine first the risk functions and the resources contributed to the transaction by the individual parties, as well as the market situation and other factors which may affect profits. Such a procedure is in line with the OECD Guidelines. The complainant has provided the tax authority with a detailed analysis of sub-optimal costs, which it explains below. The complainant has incurred sub-optimality costs, which it estimates at a total of EUR 2 220 000,00, which it also explains. The lower results in 2012 and 2013 were due, inter alia, to the structure of the management, the complexity of the products produced, higher rejection rates, higher labour costs, customer pressure on the products, the state of the industry and the financial crisis.

7. The tax authority's view that the adjustment to the company's profitability margin cannot be defined as the median minus the costs, since it is a cost of ordinary operations, and that the non-optimised costs of lower productivity and material utilisation do not automatically adjust the applicant's EBIT, is incorrect. These are ordinary costs and not extraordinary costs. It refers to point 1.13 of the OECD Guidelines. The Claimant was not given the opportunity to make the adjustment in such a way that the profit and loss account would be adjusted or normalised for these costs, in breach of Article 9 of the TC Rules. The sub-optimality costs should be deducted in the calculation of the net profit margin. It submits that a genuine finding of fact must be made in accordance with Article 8 of the General Administrative Procedure Act ('the GAPA'). The claimant insisted on an EBIT adjustment for costs as these costs deviate from the applicable companies and subsequently submitted a proposal for an adjustment of the tax base for transfer pricing on 13 August 2014. The claimant also referred to the analysis of non-optimal costs in its comments to the minutes, which were not addressed by the tax authority. The following shows the productivity and the external and internal quality as well as the material utilisation. In its explanatory memorandum to the proposal for adjustment of the transfer pricing tax base, the complainant states that, with a proposal of 3,10 % for 2012 and 1,74 % for 2013, there are sound business reasons why it considers that the use of the median is not appropriate for it. He cited material utilisation, poor quality and poor productivity as reasons. The tax authority stated that the applicant's proposal to adjust transfer prices eliminated the impact of differences in comparability as required by Article 9(1)(2) of the TCR, which the applicant disagrees with, and in the application it gives extensive reasons and emphasises that the differences have not been eliminated. The claimant also disagrees with the comparison of the data from 2012 and 2014. In this respect, the tax authority argues that the claimant should have demonstrated how the individual costs differ from those of comparable companies. It is not possible to make comparisons with independent companies. It cites 11 companies from the sample of the comparability analysis submitted to the tax authority on 16 June 2014, with which the tax authority fully agreed. The information provided in the application shows that the companies concerned are companies producing metal parts for the automotive industry. It also states that there were certain exceptional and non-recurring costs. This was due to the introduction of new material, which was required by the markets and new trends. New materials are much more sensitive. The complainant also implemented a new SOP programme which provided for better material yields and process optimisation and reorganisation. The introduction of new materials and a new programme also led to an increase in overheads. The tax authority should have taken into account the costs of the introduction of the new programme as special items of a non-recurring nature and excluded them from the calculation of the 2012 net profit margin. New projects were introduced in 2013. The introduction of each new programme for the manufacture of car seats has an additional impact on labour productivity. However, the companies producing metal elements, bumpers, pistons and bodywork are not comparable to the complainant.

8. The tax authority is not justified in taking the view that the updated functional analysis does not correspond to the factual situation and is not acceptable. The tax authority erred in taking into account the original comparative analysis derived from the 2012 Transfer Pricing Documentation and the proposal for adjustment of the transfer pricing tax base of 13.8.2014, which was indeed submitted by the applicant itself, but does not correspond to the actual situation. The Claimant does not agree that the initial adjustment was in line with the provisions of the TCR, nor does it agree with the Tax Authority's finding that the initial functional analysis does not correspond to the actual situation, for which the Claimant has already provided extensive reasoning and documentation in the DIN proceedings, which the Tax Authority has not taken into account and has not taken any position on.

9. The applicant itself carried out the first benchmarking exercise and subsequently supplemented it in order to illustrate the way in which the individual functions of the applicant and of the related party, A, were performed. With regard to the calculation of the comparable market price, the applicant points out that the sub-optimality costs of EUR 2 220 000,00 for 2012 have not been taken into account. The complainant had already referred in the proceedings to poor capacity utilisation, costs incurred at the end of the project, the costs of Project F, the reduction in production, the reduction in the number of employees on the project, the reduction in productivity, the increased potential for errors and the reduction in the efficiency of the employees. The tax authority also failed to take into account that the above costs in 2013 were disproportionately charged to the operating result in the first year of the project. With regard to the 2012 GST return, the applicant objects to the tax authority's failure to take into account the costs of non-optimality. For 2013, however, it submits that the assessment of the transfer pricing adjustment tax is inadmissible because the tax authority did not examine and comment on the 2013 Transfer Pricing Documentation. It is true that certain information was also provided for other periods, but the applicant did not provide any documents relating specifically to 2013. The 2013 Transfer Pricing Documentation does not contain any documents relating to 2013 and the contested decision is vitiated in that respect. The defendant misapplied the TC Rules and failed to verify the facts and circumstances of 2013.

10. As regards the disguised payment of profits, the applicant submits in its application that, in order to be subject to income tax, it is necessary to establish whether the income was received at all. In the present case, the partners, natural persons, did not receive any income from the transactions in question. The payment for the products was made to A. and not to the partners. The natural persons also did not receive any benefit, compensation or any kind of remuneration, nor did they receive any debt forgiveness. It cites Articles 16 and 17 and Article 74(7) ZDDPO-2 as grounds. The conditions laid down in the above provisions were not fulfilled in the actual case. The tax authority's interpretation of the cited provisions of the ITA-2 is incorrect. The applicant alleges infringement of the constitutional principles of equality before the law and legal certainty. The tax authority's assertion that natural persons have received financial or economic benefits in the form of an increase in the value of the company or a share in the profits is incorrect. The applicant points out that the latter is taxed on the disposal of the investment or, in the case of a profit participation in the form of dividends, on receipt of the income. However, the natural persons, the owners of the claimant or of company A., did not receive any benefit and did not receive any payment. The taxation of natural persons is unfounded and without legal basis.

11. In its application, the applicant submits, in conclusion, that it is necessary to evaluate the transactions on their economic substance. Despite the principle of substantive fairness, the tax authority unjustifiably rejected the comparability analysis in the form of the Transfer Pricing Documentation for 2012. It also disregarded the plaintiff's explanations regarding the unusual costs in 2012 which affected the company's profitability. Nor did it review the Transfer Pricing Documentation for 2013. The claimant did not make a disguised payment of profits to individuals as required by Article 74(7) of the ITA-2. It is for the tax authority to prove the facts which give rise to, increase or decrease the tax liability. It cites Decision U-I-20/92 of the Constitutional Court of the Republic of Slovenia of 12.11.1992. It relies on the principles of legality and proportionality and asks the Court to set aside the contested decision and order the defendant to reimburse the applicant in full, with interest for late payment, or, in the alternative, to set aside the contested decision and refer the case back to the defendant for a fresh decision and, in any event, to order the defendant to reimburse the applicant in respect of the costs of the proceedings, in default, with interest at the statutory rate for late payment.

12. The defendant, in its defence, and the applicant, in its preliminary application, further substantiate their arguments.

13. By judgment I U 632/2016-7 of 17 January 2017, the Administrative Court of the Republic of Slovenia dismissed the action brought by the applicant against the contested decision as unfounded.

14. By judgment and order X Ips 98/2017 of 22 May 2019 (hereinafter referred to as the judgment and order of the Supreme Court of the RS), the Supreme Court of the RS partially upheld the applicant's review and annulled the judgment of the Administrative Court of the RS I U 632/2016-7 of 17 January 2017 in so far as it relates to the dismissal of the action against points I.4, I.5, I.6, I.7 and II.2 of the operative part of the decision of the Financial Administration of the RS DT 0610-4425/2013-24 of 13 August 2015 and, in that part, remitted the case back to the Court of First Instance for a new trial; in the remaining part, it dismissed the appeal and reserved the decision on costs for a final decision. The Supreme Court of the Republic of Slovenia upheld the Court of First Instance in so far as it concerned the primary transfer pricing adjustment and the consequent assessment of corporation tax on the claimant. However, in so far as it relates to the disguised payment of profits (Article 74(7) ZDATP-2), the substantive law was incorrectly applied and, therefore, the factual situation in that respect was incompletely established, and the Supreme Court of the Republic of Slovenia therefore referred the case back to the Court of First Instance for a new trial.

On point I. of the operative part

15. The action is well founded in so far as it relates to points I.4, I.5, I.6, I.7 and II.2 of the operative part of the contested decision.

16. In the review proceedings, the Court of First Instance assessed the correctness and legality of the contested decision in so far as it relates to the disguised payment of profits in accordance with the guidance provided in the judgment and order of the CJEU.

17. It is apparent from the established facts that the plaintiff sold car seat covers to its related person A. at prices which were too low (prices which were not in line with the arm's length principle), and that the tax authority therefore increased the plaintiff's transfer pricing income for 2012 by EUR 2 596 190,00 and for 2013 by EUR 2 211 171,00, and levied corporate income tax on the higher tax base or granted a credit to cover the losses of the previous years. The tax authority classified the difference between the transfer prices and the market prices as a disguised payment of profits attributable to the claimant's owners (partners C.C., D.D. and E.E.) and taxed it in accordance with Article 90 and Article 132 of the Income Tax Code.

18. Both the claimant and the related person A. are controlled by members of the family B.B. 100% of the owners of A. are natural persons C.C., D.D. and E.E., who are residents of .... and are also 97.53% owners of the plaintiff. Pursuant to Article 16(1)(2) of the ITA, a resident or non-resident and a foreign legal person are deemed to be related persons if the foreign person directly or indirectly owns at least 25% of the capital, management or controlling interests or voting rights of the taxpayer. The ITA-2 establishes a legal presumption of related parties and defines as a condition the qualifying size of the shareholding (at least 25%). In the present case, the relationship between the plaintiff and company A. is established and they are related parties. In view of the link between the two entities, the tax authority considered that the difference between the transfer prices and the market prices, which it characterised as a disguised payment of profits, was paid to the plaintiff's owners, the natural persons C.C., D.D. and E.E., who influenced the plaintiff's business decisions in such a way that the arm's length principle was not respected in the pricing of the business with the related company A.. The tax authority also considered that the difference between the transfer prices and the market prices, which it characterised as a disguised payment of profits, was paid to the plaintiff's owners, the natural persons C.C., D.D. and E.E. According to Article 74(7) of the ITA-2, even where a shareholder or owner has a minor shareholding (less than 25%), he is nevertheless deemed to have exercised an influence so significant that he was able to establish a special relationship with the taxpayer which enabled the disguised payment of profits. Thus, a person who controls the payer in a way that differs from the relationship between unrelated persons is also considered to be a qualified owner or partner. A company may make a disguised distribution of profits to a shareholder either directly, whereby only the company and the shareholder are involved in the reality of the disguised distribution, or indirectly, whereby the shareholder is not involved in the reality of the disguised distribution and the company makes the distribution to a third party. An indirect disguised distribution of profits shall be treated in the same way as a direct disguised distribution. Thus, in the case of the plaintiff's sale of products to a related party, A., at prices which were too low compared with market prices, the tax authorities considered that the profits had been paid by disguised means to the partners, natural persons C.C., D.D. and E.E. The tax authorities considered that those natural persons had benefited economically from the corporation's entitlements (increase in profits and, indirectly, increase in the value of the related company, or participation in the profits).

Article 74(7) of the ITA-2 defines a disguised distribution of profits as dividend-like income. According to the quoted provision of the ITA-2, it is a consideration provided by the payer to a person who directly or indirectly owns at least 25% of the value or number of shares in the capital, management or control of the payer or controls the payer by virtue of a contract or in a manner different from the relationship between unrelated persons. The provision of funds without consideration or at a price lower than the comparable market price referred to in Articles 16 and 17 of this Law shall also be deemed to be a disguised payment of profits. However, the word 'indirectly' refers only to ownership (see judgment and order of the CJEU, paragraph 16). The Companies Act (hereinafter referred to as the Companies Act-1) defines the disguised payment of profits in Article 227(3) and expressly prohibits the disguised payment of profits to shareholders.

20. As regards the disguised payment of profits, the applicant submits that the payment to the related company A. does not constitute an economic and financial benefit for the owners, natural persons (C.C., D.D. and E.E.), since they did not receive any money or other assets, nor any cancellation of debt, nor any economic benefit in the form of an increase in the value of the company, and that the tax authorities therefore erred in substantive law, with which the Court agrees. The tax authority erred in finding that the owners obtained the economic benefit of lower prices than the comparable market prices indirectly through the ownership of the related company, which is not apparent from the facts established. The fact that natural persons C.C., D.D. and E.E. exercised capital control over the company A., with which the plaintiff dealt at prices below the comparable market prices, is not legally decisive in the light of Article 74(7) ZDDPO-2, unless it is also established that the plaintiff actually provided compensation or profit (through the dealings with the related person A. at prices below the comparable market prices) to the shareholders. It follows from the first sentence of Article 74(7) of the ITA-2 that a disguised payment of profits must be made to a qualified shareholder who owns more than 25% and is therefore the sole recipient of the compensation or benefit (see judgment and order of the CJEU, paragraph 17). However, it does not follow from the facts established in the present case that there was a disguised payment of profits to natural persons who were members of the family of B.B. (C.C., D.D. and E.E.) as qualified owners of the applicant, or that they actually benefited from the applicant's dealings with the related company A. at prices below the comparable market prices.

21. In accordance with the interpretation of the substantive law (Article 74(7) ZDDPO-2) referred to above, it is necessary to establish the facts of the present case accordingly. The tax authority erred in considering that the owners obtained the economic benefit of lower prices than the comparable market prices indirectly through the ownership of a related company, which is not apparent from the facts established in the present case. As a result of an error of substantive law, the tax authority did not make a finding of fact in that regard. However, if the substantive law is correctly applied, it will be necessary to establish whether the natural persons, the qualified owners (C.C., D.D. and E.E.), have actually benefited economically, or have in fact benefited, from the applicant's dealings with the related company A. at prices below the comparable market prices.

22. In the light of the foregoing, the interpretation of the substantive law (Article 74(7) ZDDPO-2) in the present case was erroneous and, consequently, the relevant factual situation was incorrectly and incompletely established. The contested decision is therefore unlawful in so far as it relates to points I.4, I.5, I.6, I.7 and II.2 of the operative part of the judgment. The Court therefore, pursuant to Article 64(4) and (2)(1) of the Administrative Disputes Act ('the ACL-1'), upheld the action and annulled the contested decision in points I.4, I.5, I.6, I.7 and II.2 of the operative part of the judgment and, to that extent, remitted the case back to the tax authority for a retrial, in accordance with Article 64(4) and (5) of the Administrative Disputes Act ('the ACL-1'). In the light of the judgment and the order of the CJEU and the Court's views in the present judgment, the tax authority will have to decide the case afresh in the new proceedings. In doing so, it will have to complete the fact-finding procedure and fully establish the factual situation in the light of the correct interpretation of the substantive law (Article 74(7) ZDDPO-2). It is only when substantive law is correctly applied that the tax authority has a basis for establishing the legally decisive facts. In the light of the correct interpretation of the substantive law, the tax authority will have to establish the relevant facts in the particular case, taking into account all the rules of tax procedure. It is only after such a supplementary determination procedure, in which the tax authority establishes the relevant facts, that it will be in a position to take a correct decision in the present case, in the light of the views of the Court in the present judgment and in the light of the correct application of the substantive law. Since the relevant factual situation must be established in the administrative procedure, as well as in accordance with the principle of the economy of proceedings, the Court did not rule in the case in a dispute of plenary jurisdiction pursuant to Article 65 of the Law on Administrative Proceedings, since there was no basis for such a ruling in the present case.

23. The Court of First Instance decided without a main hearing on the basis of the first indent of the second paragraph of Article 59 of the Causes of Action Act, since it was already apparent from the application, the contested decision and the administrative file that the application should be upheld.

On point II. of the operative part

24. Since the Court upheld the action, the applicant is entitled, pursuant to Article 25(3) of the Causes of Action Act, to reimbursement of the costs of the proceedings in a lump sum in accordance with the Rules on the reimbursement of costs to the applicant in administrative litigation ('the Rules'). Since the case was settled at a hearing and the applicant was represented in the proceedings by an agent who is a lawyer, he is awarded costs of EUR 285,00 (Article 3(2) of the Rules), increased by 22 % VAT, i.e. EUR 62,70, for a total of EUR 347,70.

25. The costs of the review proceedings were assessed by the Court on the basis of Article 154 and Article 163 of the CPC in conjunction with Article 22(1) of the CLA-1 and taking into account the Lawyer's Tariff. In assessing the costs, the Court took into account the value of the subject-matter of the dispute, which amounts to EUR 1 084 342,17. The applicant is awarded 3 000 points under tariff heading 30/5 (XIII. Administrative disputes). Taking into account the value of a point (EUR 0,459), the costs of the review amount to EUR 1 377,00. The amount of EUR 1 377,00 is increased by 22 % VAT, i.e. by EUR 302,94, making a total of EUR 1 679,94.

26. Orders the defendant to pay the applicant's costs of EUR 2 027,64. Statutory default interest on the costs shall run from the expiry of the time-limit for their voluntary payment. Pursuant to Article 37 of the Court Fees Act, the court fees paid shall be refunded to the successful party without any separate decision being taken as to whether they should be refunded.