The Supreme Administrative Court of Lithuania spoke on the allocation of the burden of proof in tax disputes between the parties.

The Attorney at Law of Vilnius law firm SPES successfully represented the client in the Supreme Administrative Court of Lithuania during the tax dispute.
The dispute in the case arose because the tax administrator, through property appraisers, estimated the construction costs of the taxpayers’ real estate at commercial value, i. e. determining the construction costs that would be incurred if the object were built by hired contractors. On the basis of that assessment, the tax administrator decided that the taxpayer’s expenses exceeded the taxpayer’s income and included tax arrears.
Meanwhile, the taxpayer argued in the case that the immovable property was built not only in the economic way, but also in a completely different period from the period inspected during the tax control procedures.
In its judgment, the Court of First Instance stated that it upheld the decisions of the tax administrator and the pre-litigation tax dispute authority.
The Supreme Administrative Court of Lithuania, annulling the decision of the Court of First Instance, clarified that if a person applies to the court after the dispute has been examined by the institution of preliminary out-of-court settlement of disputes, the court shall resolve the dispute not due to the decision of the institution of preliminary out-of-court settlement of disputes, but due to the violated right or interest protected by law. The Court of First Instance does not have a quasi-appeal function in reviewing the legality reasonableness of a decision of an out-of-court settlement body. Thus, in administrative proceedings, the Court of First Instance cannot simply uphold the findings set out in the decisions of the pre-litigation tax authorities, but must resolve the dispute on the merits.
The court also clarified that in resolving a dispute regarding the compliance of the taxpayer’s expenses with the taxpayer’s income, it is not the indication of data on the construction period published from the State Enterprise Centre of Registers (from the issuance of the construction permit to the registration of the construction completion act), but the actual period of experience of the construction costs, which both parties to the dispute must prove and/or deny.
In the part of the dispute concerning the method of construction and, accordingly, the determination of the amount of costs, the Supreme Administrative Court of Lithuania clarified that it is not the taxpayer who must prove that the construction was carried out in the economic way, but it is the tax administrator who has levied the tax liability, who must collect data confirming that the applicants carried out the construction in another (non-economic) way.
Thus, the Supreme Administrative Court of Lithuania clarified the burden of proof of the parties both in order to substantiate the occurrence of the tax liability and in order to deny its validity.
The Lithuanian Court of Appeal clarified that the pre-trial procedure for the settlement of disputes in public procurement cases also applies to disputes that have arisen already after the conclusion of the preliminary contract.
The Attorney at Law of Vilnius law firm SPES defended the interests of the client – the contracting authority – in a case in which the issue of the legality of its public procurement procedures was resolved.
The procedural opponent brought a claim before the court seeking the annulment of the contracting authority’s decision to rank the tenders and announce the winner. The action did not comply with the pre-litigation procedure for disputes arising from public procurement law, since, according to the applicant, the pre-litigation procedure is no longer applicable in the event of contesting a decision taken after the conclusion of the preliminary contract, having regard to the time at which the dispute arose.
The Lithuanian Court of Appeal, which examined the dispute on appeal, clarified that according to Part 1 of Article 4232 of the Code of Civil Procedure, the supplier must follow the mandatory out-of-court dispute resolution procedure established by the Public Procurement Act before applying to the court. The essence of this stage of legal protection is to allow the supplier and the contracting authority to resolve disagreements before concluding the public procurement contract, avoiding legal proceedings, i. e. allow the contracting authority to set aside its incorrect decisions or the complainant supplier to set out in more detail the reasons and motives for those decisions.
The pre-litigation procedure does not apply only in cases where the contract itself (preliminary or main) is contested. However, in the present case, there is no dispute as to the preliminary contract concluded, and the dispute arose out of the contracting authority's decision on the order of the tenders and the recognition of the third party as the successful tenderer in the reopened tendering procedures for the award of the main contract. Thus, the preliminary dispute settlement procedure before going to court was mandatory, and the legal consequences of non-compliance were the termination of the case.

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