The Supreme Administrative Court rendered the 109-Pan-374 Decision of July 9, 2020 (hereinafter, the “Decision”), holding that the purpose of offsetting refundable taxes against delinquent taxes is to replace compulsory enforcement, and a consistent principle should be preferably followed for offsetting refundable taxes against tax arrears and for enforcing tax arrears. Therefore, the tax arrears which should be enforced should be an object of the above tax offset.
According to the facts underlying this Decision, the Appellant (a business operator) filed its sales amount and tax return, and the Appellee assessed that the tax amount of NT$2,667,859 should be refunded. In addition, the Appellee detected that the Appellant should supplement a tax amount of NT$18,710,455 due to the Appellant’s delinquent business tax payment as well as administrative relief, penalty for overdue payment and interest on delinquent payment. As a result, the tax refund of NT$2,667,859 was offset against the business tax owed by the Appellant in accordance with the Tax Collection Law. Since the Appellant still owed NT$19,383,745, the Appellant was notified to fill out a tax refund offset notice and a tax refund offset certificate (hereinafter, the “Original Disposition”). Dissatisfied, the Appellant filed an administrative appeal. After the administrative appeal was rejected, the Appellant brought an administrative action to set aside the Original Disposition and the decision on the administrative appeal. The administrative action was subsequently dismissed by the decision of the original trial court (hereinafter, the “Original Decision”). Still dissatisfied, the Appellant appealed.
According to the Decision, Article 29 of the Tax Collection Law seeks to replace compulsory enforcement and specifically stipulates that if a taxpayer has any refundable tax, the tax agency shall first offset it against the outstanding tax by the sequence under Article 8, Paragraph 1 of the Enforcement Rules of the Tax Collection Law and notify the taxpayer after the offset is applied. In addition, the tax arrears owed by a taxpayer refer to those taxes which are legally payable by the taxpayer but are not paid within the required period of time. Pursuant to Article 39 of the Tax Collection Act, if a taxpayer’s taxable tax is not paid 30 days after the due date, the taxpayer shall be subject to compulsory enforcement unless an application for recheck has been filed pursuant to Article 35 of the same law, or half of the payable tax amount decided as a result of the recheck is paid and an administrative appeal has been filed pursuant to law, or it is indeed difficult for the taxpayer to pay half of the payable tax amount decided as a result of the recheck and a comparable bond is provided, subject to the approval of the tax agency. In addition, the purpose of a tax refund is to replace compulsory enforcement. Therefore, a consistent principle should be preferably followed for offsetting refundable taxes against tax arrears and for enforcing tax arrears. Therefore, tax arrears to be enforced, whether they are conclusive or not, are objects to be offset against tax arrears.
It was further indicated in the Decision that the Appellant’s assertion that since the business tax amount of NT$18,710,455, which should be supplemented, was set aside by the Original Decision and thus was not confirmed, the offset should not be made is certainly unacceptable.