HFHR statements regarding imposing taxes on damages awarded for excessively lengthy proceedings

The HFHR sent a letter to the Ministers of Justice and Finance and the Prosecutor General, in which it raised the issue of taxes being imposed on the sums awarded as damages under the Excessively Lengthy Proceedings Complaint Act.
Tax authorities are still advocating the proposal to subject the said amounts to income tax, despite a Supreme Administrative Court’s judgment issued in December 2011, in which the Court found that the awarded sum ought to be exempt from taxation as a form of compensation for moral injury. In all three letters, the Foundation underlined the need to eliminate the discrepancy between the practice of tax authorities and the jurisprudence of the SAC.

The HFHR noted that the current state of legal uncertainty affects the interests of both payers and remitters of income tax. In addition, the interpretation adopted by the authorities is unjust and unconstitutional. “The court’s decision awarding a pecuniary amount to a party to excessively lengthy proceedings is undoubtedly a measure aimed at compensating the moral injury suffered by this party. Hence, this remedy ought to be tax exempt”, reads the letter.

The Foundation called on the Minister of Justice and Prosecutor General to appeal to the Minister of Finance to coordinate actions designed to amend the current legal uncertainty. On the other hand, in the letter addressed to the Finance Minister, the Foundation inquired what steps the Ministry is going to take to unify the practice of the subordinate tax authorities and prompt them to comply with courts’ judgments.