Judgment — ECLI:EU:C:2021:786
Date: 2021-09-30
Language of the case: Slovak
Court formation: Tenth Chamber
Subject matter: Taxation;Value added tax
Procedure: Reference for a preliminary ruling
Origin: Slovakia

Summary C-186/20 — 1 
Case C-186/20 
Summary of a request for a preliminary ruling pursuant to Article 98(1) of 
the Rules of Procedure of the Court of Justice 
Date lodged: 
29 April 2020 
Referring court: 
Najvyšší súd Slovenskej republiky (Supreme Court of the Slovak 
Republic, Slovak Republic) 
Date the decision to refer: 
5 March 2020 
Appellant: 
HYDINA SK s.r.o. 
Respondent: 
Finančné riaditeľstvo Slovenskej republiky (Financial Directorate of 
the Slovak Republic) 
  
Subject matter of the proceedings 
Appeal on a point of law brought by the company HYDINA SK s.r.o. (‘the 
appellant’) regarding a review of the lawfulness of the decision of the tax 
authority refusing the claim for a refund of excess input value added tax (‘VAT’) 
and assessing the tax. 
Subject matter and legal basis of the request for a preliminary ruling  
The Najvyšší súd Slovenskej republiky (Supreme Court of the Slovak Republic) 
submits questions for a preliminary ruling under Article 267 TFEU concerning the 
nature of the time limits for the provision of information within the framework of 
the international exchange of information under Regulation No 904/2010 in the 
context of a tax audit, the legal consequences of a failure to comply with those 
time limits in connection with the lawfulness of the suspension of a tax audit and 
EN 
SUMMARY OF THE REQUEST FOR A PRELIMINARY RULING OF 5. 3. 2020 — CASE C-186/20 
 
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whether failure to comply with those time limits constitutes unlawful interference 
in the rights of a taxable person. 
Questions referred 
– Must recital 25 of Council Regulation (EU) No 904/2010 of 7 October 
2010 on administrative cooperation and combating fraud in the field of 
value added tax, which states that ‘the time limits laid down in this 
Regulation for the provision of information are to be understood as 
maximum periods not to be exceeded’, be interpreted as meaning that 
those time limits cannot be exceeded and that exceeding them results 
in the suspension of a tax audit being unlawful? 
– Does failure to comply with the time limits for implementing the 
international exchange of information provided for in Council 
Regulation (EU) No 904/2010 of 7 October 2010 on administrative 
cooperation and combating fraud in the field of value added tax result 
in consequences for (sanctions against) the requested authority and the 
requesting authority? 
– Can international exchange of information that does not comply with 
the time limits laid down in Council Regulation (EU) No 904/2010 of 
7 October 2010 on administrative cooperation and combating fraud in 
the field of value added tax be regarded as unlawful interference in the 
rights of a taxable person? 
Provisions of EU law cited 
Treaty on the Functioning of the European Union, Article 288 
Council Regulation (EU) No 904/2010 of 7 October 2010 on administrative 
cooperation and combating fraud in the field of value added tax (‘Regulation 
No 904/2010’), recital 25, Articles 10, 11 and 12 
Provisions of national law cited 
Ústava Slovenskej republiky (Constitution of the Slovak Republic), Articles 2(2) 
and 7(2) 
Zákon č. 563/2009 Z. z. o správe daní (daňový poriadok) a o zmene a doplnení 
niektorých zákonov (Law No 563/2009 on tax proceedings (the tax code) and 
amending and supplementing certain acts, ‘the Tax Code’) 
Second sentence of Paragraph 3(2) 
HYDINA SK 
 
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The tax authority shall be required to deal with each case that is the subject of tax 
proceedings, examine it promptly and without undue delay and use the most 
appropriate means in order to correctly determine and assess the tax. 
Paragraph 46(10)  
The time limit for conducting a tax audit may not exceed one year from the date of 
its commencement. Paragraph 61 shall apply mutatis mutandis to the suspension 
of a tax audit. 
Paragraph 61(1)(b)  
The tax authority may suspend tax proceedings if proceedings have been initiated 
regarding another circumstance essential to the decision or if information must be 
obtained under a special provision. 21a) 
Paragraph 61(5)  
If tax proceedings have been suspended, the time limits provided for in this Law 
shall not run. 
Footnote 21a) to Paragraph 61(1)(b) refers to zákon č. 442/2012 Z. z. o 
medzinárodnej pomoci a spolupráci pri správe daní (Law No 442/2012 on 
international assistance and cooperation in tax proceedings) and to Regulation 
No 904/2010. 
Judgment of the Supreme Court of the Slovak Republic, Ref. No 3Sžf/46/2015 of 
27 July 2016. 
Resolution of the Ústavný súd Slovenskej republiky (Constitutional Court of the 
Slovak Republic, Slovakia), Ref. No IV. ÚS 116/2013-11 of 28 February 2013. 
Brief outline of the facts and procedure 
1 In the December 2013 tax period, the appellant exercised its right to deduct VAT 
on meat purchases from Argus Plus spol. s r.o. (‘the supplier’) for a total amount 
of EUR 1 048 195.99, including VAT of EUR 174 699.33.  
2 On 21 March 2014, Daňový úrad Prešov (the Prešov Tax Office, ‘the tax 
authority’) initiated a tax audit of the appellant in order to establish the legitimacy 
of its claim for a refund of excess tax or part thereof for the December 2013 tax 
period. During that audit, extensive evidence was taken in order to verify the 
relationship between the appellant and its supplier or its sub-suppliers (foreign 
companies) and thus to establish whether the taxable transactions declared by the 
appellant had actually taken place. 
3 As the supplier had purchased the goods in Poland, the tax authority requested, in 
the course of taking evidence, an international exchange of information in order to 
SUMMARY OF THE REQUEST FOR A PRELIMINARY RULING OF 5. 3. 2020 — CASE C-186/20 
 
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verify the purchase of goods from another Member State. As a result, the tax 
authority suspended the tax audit inspection as of 26 August 2014. The final reply 
to the request for an international exchange of information was delivered to the 
tax authority on 11 March 2015, and thus the condition for continuing the tax 
audit was satisfied. On 10 April 2015, the tax authority issued a decision on 
another suspension of the tax audit as of 20 April 2015. In support of that 
decision, the tax authority indicated that the supplier’s manager was permanently 
resident in Hungary, and therefore it requested an international exchange of 
information. Once the reasons for suspending the audit had ceased to exist, the tax 
audit continued as of 1 July 2015. The tax audit report was drawn up on 
16 November 2015, and on 7 December 2015 the tax audit ended when the 
appellant received the report, which was accompanied by a request for a response.  
4 On the basis of the findings of the tax audit, the tax authority came to the 
conclusion that the supplier had not engaged in actual business activity during the 
tax period subject to the audit, had not in fact acquired the right to dispose of the 
goods as the owner and no tax liability had arisen on its part for the supply of 
goods within the meaning of the VAT law, and therefore the appellant had not 
satisfied the conditions for deducting the tax on the purchase in question.  
5 In view of the above, the tax authority issued a decision on 30 May 2016 in which 
it determined in respect of the appellant a VAT difference for the December 2013 
tax period amounting to EUR 174 699.33, that is to say, it rejected the claim for a 
tax refund of EUR 4 780.97 and assessed the tax in the amount of 
EUR 169 918.36. 
6 The appellant appealed against that decision to the Finančné riaditeľstvo 
Slovenskej republiky (Financial Directorate of the Slovak Republic), which, by its 
decision of 17 October 2016, upheld the decision of the tax authority. 
7 The appellant lodged an administrative complaint against the decision of the 
Financial Directorate of the Slovak Republic with the Krajský súd v Prešove 
(Regional Court in Prešov, Slovakia, ‘the regional court’), seeking that the 
contested decisions of the tax authorities be annulled and that the case be referred 
back to them for further consideration. By its judgment of 18 January 2018, the 
regional court dismissed the appellant’s complaint. 
8 The appellant brought an appeal on a point of law against that judgment of the 
regional court to the Najvyšší súd Slovenskej republiky (Supreme Court of the 
Slovak Republic, Slovak Republic) (‘the court of cassation’), seeking that the 
contested judgment be set aside and that the case be referred back to the regional 
court for further consideration or, alternatively, that the contested judgment be 
amended, the decisions of the tax authorities be annulled and the case be referred 
back to those authorities for further consideration. 
HYDINA SK 
 
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Principal arguments of the parties to the main proceedings 
9 In its appeal on a point of law, the appellant pleaded, inter alia, infringement of 
the principle of proportionality and the unlawfulness of the decisions. It submitted 
that the requirement for a tax audit to be conducted in an appropriate manner (the 
principle of proportionality in tax law) was laid down by the legislature precisely 
by establishing time limits on tax audits.  
10 As regards the alleged infringement of the principle of proportionality, the 
appellant relied on Paragraph 46(10) of the Tax Code in conjunction with 
Article 10 of Regulation No 904/2010. The appellant did not agree with the 
arguments of the regional court that the time limits did not run after the 
suspension of the tax audit, since the provisions of Regulation No 904/2010, 
which governs, inter alia, international exchange of information, are provisions of 
EU law that take precedence in the Slovak Republic. In order to assess whether 
the maximum duration of the tax audit has been complied with, it is necessary to 
determine its start date and subsequently its end date, since that duration is at the 
same time the limit that determines whether the tax audit is lawful. The appellant 
submitted that, in the tax audit in question, the time limits laid down in Regulation 
No 904/2010 for the fulfilment by the Member States of their obligation to 
provide information within the framework of international assistance and 
cooperation in tax proceedings were not complied with. In that regard, the 
appellant stressed that pursuant to recital 25 of the regulation, those time limits 
were to be understood as maximum periods not to be exceeded, and pursuant to 
Article 10 of the regulation, the information in question was to be provided as 
quickly as possible, that is, no later than three months after the date of receipt of 
the request. However, where the requested authority was already in possession of 
that information, the time limit was reduced to a maximum period of one month.  
11 In the present case, the tax audit lasted a total of 626 days, including 202 days 
when it was suspended. The tax authority therefore completed the tax audit after 
the expiry of the statutory time limit of one year from its start date, including a 
maximum three-month period of suspension in accordance with Regulation 
No 904/2010.  
12 In that regard, the appellant also relied on recital 12 in conjunction with Article 7 
of Council Directive 2011/16/EU of 15 February 2011 on administrative 
cooperation in the field of taxation and repealing Directive 77/799/EEC, 
according to which time limits for the provision of information under that 
Directive should be laid down in order to ensure that the information exchange is 
timely and thus effective. In that context, it pointed out that the phrase ‘reasons for 
the suspension of proceedings have ceased’ in Paragraph 61(4) of the Tax Code 
must be read in the context of Directive 2011/16/EU, and thus the cessation of the 
reasons for the suspension of the tax audit is limited by the maximum length of 
the time limits laid down in the directive for the provision of the information 
requested. 
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13 The appellant also petitioned the court of cassation to refer a question to the Court 
of Justice of the European Union in connection with the interpretation of the time 
limits laid down in EU law for the provision of information (within the framework 
of international assistance and cooperation in tax proceedings) and to ask for an 
assessment of the consequences of non-compliance with those time limits for the 
lawfulness of a tax audit suspension, including due to a possible infringement of 
the appellant’s rights as a taxable person. 
Brief statement of the grounds for the reference 
14 The court of cassation points out that under the constitutional principle of the 
legality of state power as enshrined in Article 2(2) of the Ústava Slovenskej 
republiky (Constitution of the Slovak Republic), state authorities are bound by the 
Constitution and by statute. The tax authority may therefore act in tax proceedings 
only on the basis and within the limits of the Constitution and within the scope 
and under the rules set forth in statute. In the legal order of the Slovak Republic, a 
tax audit is a process provided for in statute that serves primarily to obtain and 
collect the evidence necessary for a tax authority to issue a decision in 
proceedings concerning the assessment or determination of tax. One of the 
conditions affecting the lawfulness of the evidence gathered and ultimately also 
the lawfulness of the tax authority’s decision is strict compliance with the 
statutory time limit set for the tax audit. A tax audit that lasts for a longer time 
than that permitted by statute yields results of legal significance that are not 
compliant with statute, not on account of formal non-compliance, but rather 
because the intensity of the tax audit amounts to material interference in the 
individual sphere of the taxable person subject to audit, which sphere consists of 
that person’s fundamental rights and freedoms. Pursuant to the legal rules in force 
in the Slovak Republic, the tax authority has a limited time to conduct a tax audit 
within the statutory period of one year. One of the exceptions is the suspension of 
a tax audit due to a request for an international exchange of information, which is 
not covered by the statutory time limit for conducting a tax audit, since, under 
Paragraph 61(5) of the Tax Code, the time limits provided for in the Code are not 
to run if tax proceedings are suspended. It should also be noted that in the practice 
of the tax authorities, it cannot be ruled out that it is precisely through the 
suspension of a tax audit or, more precisely, through the unnecessary and 
inappropriate suspension of a tax audit in order to establish facts through an 
international exchange of information that are of crucial relevance for the correct 
determination of tax, that the statutory period for conducting a tax audit can be in 
fact extended/bypassed. That would result in legislation being circumvented, since 
to accept the practice would mean that the duration of a tax audit could be 
unlimited or at least unreasonably long, extending beyond the timeframe set by 
statute. The practice described above would also undermine legal certainty for 
taxable persons. It is therefore necessary to assess whether the tax authority acted 
in an appropriate manner when requesting information from abroad and 
suspending the tax audit, observing the principle of proportionality. 
HYDINA SK 
 
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15 The tax authority is obliged to complete the tax audit within a maximum of one 
year from its start date, with the proviso that if there is a need to obtain 
information pursuant to Regulation No 904/2010, the tax authority may suspend 
the tax audit. In accordance with Regulation No 904/2010, the information — the 
requesting of which constitutes the reason for suspending the tax audit — should 
be provided within a maximum period of three months. It should be noted that the 
provisions of Regulation No 904/2010 are directly applicable provisions of EU 
law, since EU law takes precedence over national legislation in the Slovak 
Republic. When requesting information within the framework of an administrative 
inquiry, the administrative (and therefore also the financial) authorities of each 
Member State are obliged to comply with the time limits laid down in Regulation 
No 904/2010. Given the direct applicability of that Regulation and the fact that the 
financial authorities are bound by the time limits laid down therein, it is clear that 
the provision of information, that is to say, the international exchange of 
information, should take place within the time limits laid down in Regulation 
No 904/2010, despite the fact that the Tax Code neither expressly provides for the 
time limit nor refers to it in any way.  
16 When conducting a tax audit, the tax authority should first ensure the application 
of the regulation, and only in the second place ensure the application of the Tax 
Code. Paragraph 61(1)(b) of the Tax Code contains footnote 21a), which refers to 
Law No 442/2012 on International Assistance and Cooperation in Tax 
Proceedings or to Regulation No 904/2010. In that regard, the court of cassation 
presumes that the reference in footnote 21a) to the regulation cannot be arbitrarily 
interpreted in a restrictive manner, only treating the regulation as legitimising the 
suspension of proceedings, since the footnote refers to the regulation as a whole, 
that is to say, including the conditions for the international exchange of 
information and the time limit for implementing that exchange. It is therefore 
doubtful whether the authority can derive from the regulation a valid reason for 
suspending the proceedings on the one hand, while disregarding its other 
provisions, namely Article 10, on the other. An interpretation of the 
aforementioned provisions that is compliant with EU law supports the conclusion 
that the suspension of a tax audit within the meaning of the Tax Code is lawful 
only during the period provided for in Regulation No 904/2010 for the 
implementation of the international exchange of information in connection with 
which the tax audit has been suspended. Accepting that interpretation would mean 
that the suspension of a tax audit for a period exceeding three months, that is, the 
maximum period permitted by the regulation, cannot have the consequences 
provided for in statute, namely, such a suspension cannot stop the time limits laid 
down in the Tax Code from running, and it is ultimately also contrary to the 
requirements of proportionality and legal certainty of the taxable person subject to 
the audit. 
17 In the present case, the tax audit was suspended (twice) precisely because of a 
request for an international exchange of information under Article 7 of Regulation 
No 904/2010. In the first instance, the reply from the foreign authority was clearly 
delivered after the expiry of the three-month time limit provided for in that 
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Regulation, and non-compliance with the time limit was not remedied by 
proceedings under Articles 11 and 12 of Regulation No 904/2010, which allow the 
period for the provision of the information requested to be extended. As the matter 
in question was the provision of information which, after it had been provided to 
the tax authority, served as the basis for assessing the legitimacy of the appellant’s 
claim to deduct VAT, the court of cassation takes the view that the issue of 
interpretation of the nature of the time limits laid down in Regulation 
No 904/2010 is of fundamental importance for assessing the lawfulness of the tax 
authorities’ decisions (from the point of view of the duration of the tax audit in 
connection with its suspension).  
18 While the expiry of the statutory time limit for conducting a tax audit results in the 
report drawn up after its completion being unlawful or inadmissible as a basis for 
assessing tax, in the case of the direct application of Regulation No 904/2010, the 
nature of the resulting time limits and the manner in which an administrative court 
should conduct a judicial review of the lawfulness of the duration of the tax audit 
must be determined. Therefore, the court of cassation, which is aware of the 
importance of the time limits set in Regulation No 904/2010 (facilitating and 
expediting cooperation in the exchange of information between the Member States 
of the European Union in the field of taxation), is faced with the question whether, 
in the context of national legislation that provides for a time limit for conducting a 
tax audit, and in connection with the suspension of a tax audit because of a request 
for an international exchange of information, the time limits laid down in that 
Regulation for financial authorities in connection with a request for an 
international exchange of information must be understood as time limits that, if 
not complied with, result in consequences for the tax authority or constitute an 
unlawful interference in the rights of the taxable person subject to the audit, and 
also what are the consequences/sanctions under EU law for failure to comply with 
those time limits. 
19 The court of cassation has therefore concluded that in the present case, a request 
for a preliminary ruling must be made to the Court of Justice of the European 
Union in order to obtain the interpretation of the provisions of EU law at issue.