When Do Interests in Tax Refund Claims Start Accruing?

III.    The Case 

The taxpayer, Astillero Naval Federico Contessi SACIFAN, filed a claim for tax refund against the Argentine Tax Authority regarding amounts arising from the application of the inflation adjustment mechanism for income tax for the fiscal year 2002. Following the Argentine Tax Authority’s denial, in 2012, the taxpayer filed a contentious lawsuit before the Federal Court of the City of Mar del Plata.

It is important to recall that, in case of a tax refund claim denial, the taxpayer may choose to: 

(i)    file a reconsideration appeal,
(ii)    appeal before the Federal Tax Court,
(iii)    file an administrative lawsuit. 

The latter was the path Astillero Naval Federico Contessi chose.

Once the tax refund was admitted, the dispute arose during the settlement phase. Both the First Instance Court and the Court of Appeals approved the settlement carried out by the taxpayer, based on article 142 of the Law 11683. This article regulates the monetary update of credits in favor of taxpayers in cases of tax refund from the date on which the amount claimed was paid.

In this regard, both the first and second instances had dismissed applying article 179 of law 11683, which establishes that in cases of tax refund claim, interests begin to accrue from the moment the administrative claim is filed. To reach this conclusion, they referred to the placement of this rule within law 11683, particularly in the title and chapter that address actions and resources before the Federal Tax Court, which was not the path this taxpayer followed.

IV.    The Supreme Court of Justice’s Ruling

In its ruling, the Supreme Court refers to the opinion of the Argentine Attorney General, the main points of which are:

•    Regarding the monetary update in Law 11683 article 142, its application must be dismissed. The Attorney General quoted the precedent “Massolo” (Supreme Court of Justice, case 333:447), in which the Court upheld the prohibition of indexing established in Laws 23928 and 25561.
•    Regarding the moment as of which interests are computed in tax refund claims, Law 11683 article 179 is an exception to the general rule established in article 509 of the Civil Code (applicable during the analyzed periods), justified by the need of the Tax Authority—which had allegedly collected an undue sum—to have the opportunity to remedy such unjust action by promptly returning the excess collected.

•    Furthermore, without disregarding that article 179 is in the chapter of Law 11683 related to the functioning and jurisdiction of the Federal Tax Court, its wording regulates the manner of calculating interests applicable to all tax refund claims, without distinguishing between those in proceedings before the judicial jurisdiction—like this case—or before the Federal Tax Court. This conclusion arises from a literal interpretation of the rule under analysis.
•    Applying article 179 of Law 11683 should not be conditioned by the path the taxpayer chose to claim the tax refund of excess taxes paid. Otherwise, it would improperly restrict that method of calculating accessories to cases brought before the Federal Tax Court.

Why is this ruling important?

This ruling does not only clarify doubts that may exist regarding the moment as of which interests accumulate in cases of tax refund claims; it also prompts reflection on the importance of an adequate procedural strategy when dealing with taxes whose collection could be considered unjustified. In particular, it points out what must be considered, from when interests accumulate, the time it might take to obtain a tax refund judgment, the applicable interest rate, and the prohibition of applying monetary updates.

These factors generally determine that the longer a tax refund claim is prolonged, the greater the loss of purchase power of the capital sought to be recovered. In this context, one might even question the potential confiscatory effect that the prohibition of monetary updating of the amount to be refund and the application of insufficient interest rates produce.