For FY 2007, 2008 and 2009, JV had deducted expenses consisting in the payment for services pursuant to invoices issued by BP Property s.r.o. and TOP ZONEVIEW. The services consisted in the provision and implementation of an advertising campaign. Following an audit the tax authorities adjusted JV’s taxable income by the difference found, since pursuant to Article 23(7)(b)(5) of the Income Tax Act, the prices agreed differed from the prices which would have been agreed between unrelated parties in normal commercial relations under the same or similar conditions. JV contested the decision of the tax authorities but the appeal was dismissed by the Regional Court. The Regional Court held that the applicant’s objection – that he did not know and could not have known about the chain because he had dealt only with the managing director of Property Praha or B.V. – was unfounded. Section 23(7)(b)(5) of the Income Tax Act does not require proof of active conduct of all the entities and unifying intent. It is sufficient that the defendant has proved and demonstrated, on the basis of the invoicing of the advertising campaign prices and the flow of funds, as well as the negotiation, provision, collection and payment of the amount in each tax period, that the applicant was involved in the chain and that there was a flow of funds in connection with the supply to the applicant. The applicant’s involvement in the chain of trade conferred an advantage on the applicant in that it reduced its tax base by substantially increasing its expenditure. The decision of the regional court was appealed by JV to the Supreme Administrative Court. Judgement of the Supreme Administrative Court. The Supreme Administrative Court dismissed the appeal of JC and decided in favor of the tax authorities. Excerpts “The Financial Office for the Central Bohemian Region, by letter dated 24 August 2015, asked the complainant to prove and document the difference between the price claimed in the tax costs and the price established by the tax administrator. In its statement of 31 August 2015, the complainant justified the difference in prices by the increase in the company’s turnover in subsequent tax periods and emphasised its choice of a corporate promotion strategy, the success of which can only be assessed ex post. The defendant did not consider the complainant’s allegations to be economically rational and proven and the reasons why the prices between otherwise related parties differed from the reference price to be substantiated… At the hearing before the Regional Court on 23 March 2018, the complainant only noted that ‘the advertisement had the desired effect’ (see Minutes of the hearing, sheet number 103 of the Court file). However, he did not explain in detail how this claim rationally justified the difference between the agreed price and the reference price and did not offer any evidence for his claims, although he could have done so…” “However, a null and void decision is not an ‘ordinary’ unlawful decision, but a ‘decision’ which, because of its defects, cannot be regarded as a decision of an administrative authority with public authority at all and which is not capable of producing public law effects. Whereas, in the case of ‘ordinary’ defects in administrative decisions, those decisions are regarded, in view of the application of the principle of the presumption of validity and correctness of administrative acts, as existing and capable of producing the relevant legal consequences and thus affecting the sphere of rights and obligations of their addressees, that principle does not apply in the case of void administrative decisions. The nature of the defects giving rise to the nullity also gives rise to the relevant legal consequences. The most serious defects are thus necessarily associated with the most serious consequences. Therefore, no one is obliged to respect and comply with a null and void administrative decision. It is regarded as if it did not exist at all and is therefore an irremediable legal nullity. Nullity cannot be cured even by the lapse of time.” (Judgment of the Enlarged Chamber of 13 May 2008, no. 8 Afs 78/2006 – 74). Pursuant to Article 109(4) of the Code of Civil Procedure, the Supreme Administrative Court is entitled to declare an administrative decision void of its own motion, i.e. even without an express cassation objection. However, it found that the contested decisions do not meet the characteristics described above, do not lack a legal basis or factual basis, do not lack jurisdiction or the most serious defects of jurisdiction, do not suffer from an absolute lack of form, do not contain an absolute mistake as to the addressee, do not contain a requirement of criminal or factually impossible performance, are not vague or meaningless, so that, according to the settled case-law of the Supreme Administrative Court, they cannot be considered null and void.” Click here for English Translation Click here for other translation ...