On February 28, 2024, the Târgu Mureș Court of Appeal rejected the fiscal body’s appeal and confirmed the illegality of a tax decision with a value of approximately 1.3 million lei, which imposed on a waste collection company the obligation to pay tax on income from other sources. The tax allegation was that the company wrongly failed to withhold income tax due from individuals disposing of ferrous and non-ferrous waste at collection centres.
The build up of a coherent case-law regarding controversial legal issues is one of the objectives of Costaș, Negru & Asociații. A recent judgement of the Târgu Mureș Court of Appeal – Tax and Administrative Section allows us to make brief comments on this particular subject.
A subject frequently debated since 2020 and elucidated by us, is still at the centre of attention of the tax authorities. The tax authorities continue to check companies operating in the field of ferrous and non-ferrous scrap procurement either through the well-known documentary verification procedure or through tax inspections.
From the very beginning, we tried to convince the tax authorities that the income obtained by natural persons from the disposal of waste should not be taxed in accordance with the requirements of art. 62 lit. f) of the Fiscal Code, as long as there are no legal criteria to distinguish between sales of waste from personal property and sales of waste by a business.
The key question that was asked was: In the absence of an explicit legal text, can the tax authorities impose additional tax obligations on economic operators who purchase ferrous and non-ferrous scrap?
We believe that the answer to this question is categorically negative.
This time, the Târgu Mureș Court of Appeal, in its decision of 28 February 2024, rejected the appeal of the tax authorities against the decision to admit the action for tax litigation, annulling the administrative tax acts imposing additional tax obligations following the reclassification of income obtained from the sale of waste from personal assets as income from other sources, thus definitively consolidating the solution.
Our point of view has been validated by the courts in a consecutive manner until now, and there is a large body of case law in favour of the principle of legality in tax matters in conjunction with the principle of legal certainty, which requires that the legal rule be written and known to taxpayers.
On every occasion we have tried to draw attention to the fact that the tax authorities cannot establish, amend or supplement the tax law, despite the law, control teams continue to set thresholds not provided for by law, imposing additional tax obligations on taxpayers who exceed these thresholds (e.g. threshold of 5,000 lei/transaction, threshold of 5 transactions).
Our position has been firm: as long as it can be proved that the waste is part of the personal assets of individuals on the basis of documents that can be used as supporting documents, the quantity is of no importance in determining taxability, as the law does not impose a limit in this respect.
It should be recalled that, at the level of tax controls, these revenues from other sources were reclassified by reference to the provisions of Article 114 para. (2) letter g) of the Tax Code.
I have shown, in context, the importance of the legal criteria of distinction and the impossibility of replacing them by individual assessments of the control teams or by referring to some general estimates of the amounts of waste that a natural person could have in his personal heritage.
Of course, the courts have correctly penalised this abusive and unlawful conduct, noting that the law, neither in its primary form nor by way of secondary legislation, does not provide any criteria or elements from which it can be concretely, clearly, predictably and predictably deduced how the tax provisions are to be applied. In other words, in the absence of a firm option of the legislator, the sale of ferrous and non-ferrous waste remains as having been carried out from personal patrimony (of course, unless the natural persons declare at the time of the sale that the situation would be different).
The jurisprudence recently consolidated by the decision of the Târgu Mureș Court of Appeal includes previous judgments issued by Cluj Court of Appeal, Oradea Court of Appeal, Sălaj Tribunal, Sibiu Tribunal, Alba Iulia Court of Appeal.
This article was prepared, for the blog of the civil society of lawyers Costaș, Negru & Asociații, by Ms. Larisa Mărginean (Cluj Bar Association) and Dr. Cosmin Flavius Costaș (Arad Bar Association).
Costaș, Negru & Asociații is a civil society of lawyers with offices in Cluj-Napoca, Bucharest and Arad, which offers assistance, legal representation and consultancy in several practice areas through a team composed of 19 lawyers and consultants. Details regarding legal services and team composition can be found on the website https://www.costas-negru.ro. All rights for the materials published on the company’s website and through social networks belong to Costaș, Negru & Asociații, their reproduction being permitted only for informational purposes and with correct and complete citation of the source.
