NULLITY OF ACTS OF THE TAX ADMINISTRATION, DUE TO VIOLATION OF TAXPAYER RIGHTS

When the Tax Administration issues an administrative act without observing the legally established procedure or in excess of the powers conferred upon it, the taxpayer may request a declaration of absolute nullity.

A. Nullity by operation of law

Absolute nullity is the sanction imposed on a flawed administrative act; unlike relative nullities that can be remedied, acts affected by absolute nullity do not produce legal effects from their origin.

Article 298 of the Tax Procedure Code establishes that the acts of the Tax Administration incur defects of absolute nullity when:

• They contravene the Political Constitution or the laws.
• They have been issued without regard for the legally established procedure, provided that this implies a violation of due process.
• They have been issued by authorities lacking jurisdiction.
• When they impose a tax, sentence, or sanction for a national tax, a charge, or a cause other than those brought against the interested party in the first instance.
• When their content is impossible or constitutes a crime.
• When they result from automatic approval or positive administrative silence by which powers or rights contrary to the legal system are acquired, or when they do not comply with the requirements, documentation or essential procedures for their acquisition.

This nullity can be declared even when the act has become final through administrative channels, which broadens the taxpayer’s defenses.

 

B. Who can request the annulment and before whom?

It may be requested by the taxpayer or liable party, or declared ex officio by the competent authority, within a period not exceeding one year. The competent body to hear and resolve these incidents is the Tax Administrative Tribunal (TAT).

Paragraph “7” of Article 324 of the Tax Procedure Code grants the TAT the power to hear, in a single administrative instance, claims for violations of the rights of the taxpayer or liable party. Its decisions exhaust all administrative remedies, and the taxpayer may appeal to the contentious-administrative jurisdiction of the Supreme Court of Justice.

 

C. Taxpayer rights

Article 381 of the Tax Procedure Code establishes the rights of taxpayers:

“Article 381. Rights of taxpayers. The following constitute the rights of taxpayers: 

1. To be treated with due respect and consideration by all officials of the Tax Administration, tax administrative judges, and magistrates of the Tax Administrative Court.
2. To have the actions of the Tax Administration, tax judges, and magistrates of the Tax Administrative Court carried out in a manner that is least burdensome and detrimental to the taxpayer’s normal business operations, without affecting the authority of the Directorate General of Revenue to conduct audits and guarantee the collection of any resulting taxes, if applicable.
3. Not to be required to submit documents or provide information that is already in the possession or custody of the Tax Administration. 
4. The right to have the information provided to the Directorate General of Revenue, tax judges, or the Tax Administrative Court kept confidential and used only for the application of taxes or resources or for the application of penalties, without being transferred or disclosed to third parties, except in the cases provided for by law.
5. The right to be assisted by their trusted advisors from the beginning of any tax audit, review, or inspection procedure initiated by the Tax Authority and to appoint up to two observers throughout its duration, including the stage of preparing the respective evidence.
6. To be informed that they are being reviewed, audited, or otherwise inspected by the Tax Administration, and to know the nature and scope of the investigation. They also have the right to know the identity of the officials in charge, regardless of the name of the procedure or process, as well as the identity of their immediate superiors, and to have the audit procedures carried out within reasonable timeframes. Consequently, there will be no secret audit or review processes.
7. To have access to the reports and actions taken in the file of the review or audit to which the taxpayer is subject, and to obtain certified copies, at their own expense, of the documents that comprise any process against the taxpayer within a period of no more than five business days, counted from the date of the request.
8. The right not to be reviewed or audited twice for the same tax for the same periods examined, and the right to correct tax returns.
9. The right not to have computer equipment or parts of computer equipment seized during the review or audit process, when it is possible to provide the Directorate General of Revenue with the necessary information. The Tax Administration may only copy electronic documentation relevant to tax matters. It must be guaranteed that the copied electronic information will not be altered or modified subsequently.
10. To ensure that tax rights and credits accrued over time are not subject to retroactive review or audit beyond the applicable statute of limitations.
11. To demand the refund of amounts unduly or excessively paid, plus late payment interest, and to be reimbursed for costs and expenses incurred in satisfying payment guarantees when the Tax Administration’s claims are declared inadmissible or time-barred by a resolution.
12. That computer or manual solutions be implemented to remedy the deficiencies in digital forms or in computing methods that transgress or exceed legal standards in the shortest possible time.
13. The following procedural rights:

• To be presumed a compliant taxpayer.
• The right to due process and the right to defense.
• To file actions, appeals, motions, incidents, and any other means of challenging decisions established by law, and to obtain an express ruling from the relevant authority.
• To file a complaint for omission or delay in resolving tax procedures or for any other breach of the rules established in this Code.
• To have access to the case file and to know its status.
• To have the evidence and other acts and documents with tax relevance recorded in the proceedings carried out in the tax procedures and duly paginated.
• To present the evidence and any documentation they deem appropriate for the resolution of the tax procedure and to have it itemized.
• To have the documentation submitted that has been duly requested by the taxpayer incorporated into the body of evidence of the file, without the file being able to be decided on its merits until the aforementioned incorporation has been completed.
• To present arguments.
• To request clarification of the decision.
• To have the file processed and decided within the time limits established by law.

The rights established in this article are without prejudice to other rights recognized to taxpayers by current legislation.

The violation of these rights constitutes a specific ground for the annulment of any act that disregards them. The tax administration must not make arbitrary decisions to assess taxpayers; rather, such decisions must be duly substantiated, as this would cause economic harm to taxpayers.

The Tax Procedure Code presumes that is a compliant taxpayer. The Tax Administration has the obligation to recognize this good faith and cannot issue resolutions based on subjective assessments that disregard the rights and obligations derived from the law or from validly executed contracts.

Adjustments proposed by the Tax Administration:

Article 208 of the Tax Procedure Code requires that any adjustment made by the Tax Administration be duly substantiated and must contain the following elements:

• Precise statement of the facts giving rise to the adjustment.
• Supporting evidence and supporting documentation.
• Complete (not partial) legal basis for the proposed adjustments.
• Auditor’s report and working papers.
• Exact and detailed statement supporting the prior determination of the tax base.

Omission of any of these elements could lead to the annulment of the action, as it prevents the taxpayer from understanding the charges, exercising their right to defense, and effectively presenting arguments and evidence.

CONCLUSION

The declaration of nullity by operation of law is a high-impact legal tool available to taxpayers; and its proper use requires precisely identifying the grounds that support it, acting within the legal timeframe, and appearing before the Tax Administrative Court with a solid strategy.

At EVANS GROUP, we reaffirm our commitment to defending our clients’ rights with the specialized knowledge and dedication that each case deserves.