Case law limits the powers of the Federal Tax Authority

On April 24, 2008, Tribunal III of the Federal Court of Appeals on Administrative Matters ruled in “Disco S.A.” limiting the scope of a precautionary measure granted in favor of the taxpayer.

According to the facts described in the Court of Appeals’ ruling, the Federal Tax Authority (“AFIP”) and the taxpayer are arguing over the application of certain exemption for VAT purposes before the Tax Court (Tribunal Fiscal de la Nación). In order to avoid suffering further negative consequences, the taxpayer initiated a legal proceeding requesting the judge to limit the AFIP’s powers regarding the company itself and its Directors until the Tax Court rules on the applicability of the exemption. In a first stage, the judge granted the precautionary measure in favor of the taxpayer.

The AFIP appealed, arguing that the taxpayer’s appeal to the Tax Court prevented it from further actions and that the scope of the precautionary measure was not clear because it was not possible to determine what actions it had to refrain from.

The Court of Appeals confirmed the admissibility of the precautionary measure and, most importantly, limited its scope. It resolved that the AFIP should refrain from:

(i)            pursuing new tax assessments on the same grounds for other fiscal periods;

(ii)           pursuing new tax assessments on other taxes as a consequence of the challenged VAT fiscal credits; and

(iii)           requesting precautionary measures. 

On the other hand, the Court of Appeals understood that it was not possible to order the AFIP to refrain from initiating any criminal law proceeding, because that would mean invading the another judge’s jurisdiction.