Tax litigation is the legal process of objecting to the amount of tax determined by the Iranian National Tax Administration (INTA). Legally, the tax determination process is such that business owners, legal entities and individuals must submit their tax returns to INTA by the specified deadlines. The mentioned tax return is reviewed by the tax inspectors and may be rejected or approved. The next step is the issuance of the tax assessment notice to the taxpayer. This notice will have special and important effects for the taxpayer. Among other things, the taxpayer must object to this notice within a specific deadline, or pay the tax if no objection is made. This objection and payment requires receiving the tax assessment notice, and all of these steps, i.e. receiving, objecting and paying the tax assessment notice, have a specific system and can only be carried out according to the method determined by the tax authority.

 

Sometimes, after receiving the tax assessment notice, the taxpayer objects to the tax amount stated in this notice and is not willing to pay it. This case has been considered by the legislator in the Direct Tax Law, and in order to prevent the violation of taxpayers’ rights, it has foreseen the process of objecting to the tax assessment notice.

 

The method of objecting to the tax assessment notice is possible for taxpayers in two ways: in-person visit to the relevant tax office and electronic entry into the system. The deadline for objecting to the tax assessment notice is specified in Article 238 of the Direct Tax Law, according to which the taxpayer has 30 days from the date of notification to object to the determined tax in person or through an attorney.

 

First Stage of Tax Litigation: Tax Office

 

The first stage of tax litigation is, in fact, the consideration of the taxpayer’s complaint by the tax office. At this stage, a negotiation takes place between the taxpayer and the tax office. According to Article 238 of the Direct Tax Law, each taxpayer has 30 days from the date of notification to submit documents to the tax office, during which they can request an adjustment in their tax. After that, the tax office also has 30 days to review the taxpayer’s complaint. Most small cases are resolved at this stage. The tax office records the matter on the assessment notice and it is signed by the head of the tax office. If the tax office does not find the objection valid or does not reach an agreement with the taxpayer, the taxpayer’s request is recorded on the tax assessment notice and referred to the Tax Disputes Resolution Board.

 

Second Stage: Initial Tax Disputes Resolution Boards

 

The next cycle in tax litigation is the Tax Disputes Resolution Board. According to Article 170 of the Direct Tax Law, it is stipulated: The body for resolving any dispute arising between the tax office and the taxpayer in determining the tax under this law is the Tax Disputes Resolution Board, unless another body for consideration is specified in other articles of this law.

 

These boards take action in two cases:

1- If the taxpayer objects in writing to the income tax assessment notice within 30 days or to the value-added tax assessment notice within 20 days from the date of notification.

2- If the tax assessment notice has been legally notified based on the provisions of Note 1 of Article 203 and Article 208 of the Direct Tax Law, but the taxpayer has not taken any action to pay the tax or has not objected to the tax officer.

 

According to clause 14 of the Tax Litigation Instruction, after referring the case to the Initial Tax Disputes Resolution Board, a hearing date is notified for the presence of the taxpayer or their representative or the dispatch of a representative from the tax office, so that the interval between the notification and the date of the board meeting should not be less than 10 days. After the session is held, the Initial Board, considering the documents and hearing the statements of the parties, issues a ruling (whether a judgment or an order).

 

The ruling of the Initial Tax Disputes Resolution Board can be objected to the Tax Appellate Board within 20 days from the date of notification.

 

Third Stage: Tax Appellate Disputes Resolution Board

 

According to Article 247 of the Direct Tax Law, the Tax Appellate Disputes Resolution Board is foreseen, which is legally authorized to consider objections to the rulings issued by the Initial Tax Disputes Resolution Boards within 20 days from the date of notification of the ruling of the Initial Board.

 

An important point is that the authority of the Tax Appellate Disputes Resolution Board is not limited to the matters that taxpayers have raised in their complaints to the Initial Boards, but taxpayers can also file complaints with the Tax Appellate Board regarding new matters that were not previously objected to in the Initial Board.

 

The ruling of the Tax Appellate Board is final and enforceable. On this basis, INTA must issue a final assessment notice in accordance with the issued ruling.

 

The ruling of the Tax Appellate Disputes Resolution Board can be objected to in the Supreme Tax Council, the Board under Article 257 of the Direct Tax Law, and the Administrative Court of Justice in terms of form (violation of laws and regulations or claim of defective proceedings).

 

The only cases in which the enforcement of the final ruling of the Initial or Appellate Tax Disputes Resolution Board is suspended are the suspension of the enforcement of the ruling by depositing cash or a bank guarantee or real estate collateral or a credible guarantor with the tax office, the revocation by a branch of the Supreme Tax Council, or the issuance of a temporary order by the Administrative Court of Justice.

 

Fourth Stage: Supreme Tax Council

 

Thirty days after notification, if the taxpayer objects to the ruling issued in the previous stage, the case is referred to the Supreme Tax Council. The Supreme Tax Council is the highest internal supervisory body in INTA, which, in addition to having the authority to formally review tax disputes, has the authority to issue rulings on conflicting rulings of Tax Disputes Resolution Boards and provide advisory opinions.

 

The main authority of the chambers of the Supreme Tax Council is to formally (not substantively) review complaints against all final rulings of the Tax Disputes Resolution Boards in terms of violation of laws and regulations or claims of defective proceedings.

 

It should be noted that formal review means expressing an opinion, meaning that after determining a violation of laws or a defect in the proceedings by the chambers of the Disputes Resolution Boards, the tax case will be referred back to a peer Tax Disputes Resolution Board to issue a (final) ruling while observing the opinion expressed by the Supreme Tax Council.

 

According to Note 4 of Article 247 of the Direct Tax Law, in cases where the ruling of the Initial Tax Disputes Resolution Board becomes final due to the lack of objection by the taxpayer or tax officer, it is not possible to file a complaint with the chambers of the Supreme Tax Council.

 

Also, based on Article 251 repeated of the Direct Tax Law, the taxpayer can register their complaint against the issued ruling with a three-member board appointed by the Ministry of Economy within 30 days after the announcement of this ruling. In this board, three members appointed by the Minister of Economic Affairs and Finance are present. If the taxpayer objects to the ruling issued at this stage, the ruling is referred to the Administrative Court of Justice, which is the last stage of litigation.

 

 

Fifth Stage: Administrative Court of Justice

 

The system governing the Administrative Court of Justice is in accordance with the regulations and laws of the judicial system, and the functioning of this system is somewhat different from the tax system. At this stage, the taxpayer must file their complaint against INTA by filing a petition with the Administrative Court of Justice.

 

According to Note 3 added to Article 16 of the Administrative Court of Justice Law, the period for objecting to a final tax ruling in the Administrative Court of Justice is six months for residents inside the country and one year from the date of notification of the final issued ruling or decision for residents outside the country. Subsequently, the initial ruling issued is also subject to appeal in the Administrative Court of Justice within 20 days for Iranian residents and within 2 months from the date of notification for residents outside the country. If the ruling is revoked, the case will be referred back to the peer board that issued the final ruling for reconsideration.

 

Filing Complaints in the Judiciary Courts

 

In some cases, litigation related to tax matters is also carried out in the (Judiciary Courts). For example, dealing with tax offenses is within the jurisdiction of criminal courts, or considering objections from entities such as (government companies, institutions affiliated with municipalities, the Social Security Organization, and revolutionary institutions and bodies) regarding tax matters is within the jurisdiction of civil courts, since the chambers of the Administrative Court of Justice do not have the authority to deal with such complaints.