EURA vs. Slovak Tax Authorities

Slovak textile importer EURA Slovakia, s.r.o. is facing EUR 5600 in fines because it did not buy and use the Microsoft Windows operating system for submitting electronic tax reports. Slovak tax administration gave EURA only two options: either it buys and use Microsoft Windows or face the fines. This is also how we could briefly summarize the decision of Slovak tax administration from May 2012.

Background of the case

Since January 2010 Slovakia has a law requiring every monthly tax report concerning value added tax (VAT) to be submitted by electronic means and signed by a certified electronic signature. As many Slovak companies still don't have certified electronic signatures, the law enables an exception under which the company can enter into an agreement with the tax office and then use a special web-based application called “eDane”.

However, the eDane application works only under the Windows operating system together with the Internet Explorer web browser. None of the other operating systems can run this application. As EURA Slovakia uses a competing operating system in the entire company and despite help from its IT staff, it was impossible for it to send anything electronically. When the company notified the tax administration about this problem, nothing happened. The company thus decided to fulfill its statutory obligations at least by submitting the tax reports in classical paper form. The tax office however, consider this to be contrary to the law.

Imposing the fines

When the company pointed to the fact that it could not electronically fulfill its obligation, it received 12 fines from the Slovak tax administration. "We were really trying to respect the law, but in Slovakia there is no state-certified application that would support the electronic signature on the other operating system than Windows. We therefore had to enter into the agreement with the tax office and try to use the web-based application. Unfortunately, neither us, nor our technicians with years of experience, were able to run it," says the director of EURA Slovakia, Mr. František Slivka.

For submitting the tax report in the paper form, the company was fined several times, and so far wasn't successful with a single appeal before various administrative bodies. It has therefore decided to appeal to the court. "Thousands of Slovak companies resigned on this behavior of the Slovak tax administration and simply bought a license to the Windows operating system only to be able to submit this monthly electronic reports. We believe that it is unfair. The administration thus directly forces Slovak companies to buy Windows, even though they do not need it for other purposes," says Slivka.

European problem

"If the state requires the electronic form as a only way of fulfilling the statutory obligation, it has to offer the multi-platform solution, which is available to everybody. Otherwise, the state in advance precludes its citizens to behave in accordance with the law," comments Martin Husovec, member of the FSFE Legal, who assists the Slovak company in filling the case before the court. This problem is not unique for Slovakia.

Many companies in the other member states of the European Union have to deal with the very same problem. However, the Slovak case at hand is one of the most blatant and striking examples of the injustice in society caused by ignorance of the Open Standards in the digital world. It shows that the negligence of state in the field of open standards not only leads to the social injustice, but also hurts the competition, increases costs for the small companies and bureaucracy.

In its effect it also conflicts with European rules and recommendations, like the European Interoperability Framework, which clearly states that "Member States setting up ICT-supported national public services need to be more aware of the risk of creating new electronic barriers if they opt for solutions that are not interoperable. Such so-called ebarriers fragment the internal market and hinder it from functioning properly. Member States and the Commission should step up their efforts to avoid this."

These new electronic barriers "digitally" handcuff the citizens and thus prevent them from behaving in accordance with the law. FSFE calls for a change in this practice.


FSFE toghether with experts from European Information Society Institute (EISi) assisted EURA Slovakia in its appeal before the Regional Court in Banská Bystrica. Our basic arguments were that this behaviour of the state is in breach of local legislation on open standards, competition laws, principle of rule of law and basic right to engage in entrepreneurial activity. In the submission, we also argue that state acted contrary to art. 3(7) of Electronic Signatures Directive. For this reason we also request that Slovak court makes preliminary reference to the Court of Justice of the European Union on the issue of whether it is compatible with art. 3(7) of Electronic Signatures Directive to restric the use of electronic signatures in public sector to only one vendor.

Article 3 - Market access (7) Member States may make the use of electronic signatures in the public sector subject to possible additional requirements. Such requirements shall be objective, transparent, proportionate and non-discriminatory and shall relate only to the specific characteristics of the application concerned. Such requirements may not constitute an obstacle to cross-border services for citizens.

Soon after the filing of the case, the Court attempted to proceduraly devide one case into 11 different and paralel cases. As this would pose extraordinary obstacles for litigation, we helped EURA Slovakia to file a compliant before the Constitutional Court of Slovak republic. After its decision, the case will continue before the Regional Court in Banská Bystrica.

(Partially) successful appeal at the regional court

Regional court in Banská Bystrica decided EURA's case in April 2013. While it can be said this decision is in favor of EURA, it cannot be considered a victory for Open Standards. Court stated explicitly in it's reasoning, that – due to procedural rules applicable in Slovakia – it is not competent to undertake arguments offered by FSFE and EISi in the appeal.

Court claims in its decision, that it cannot review arguments offered by EURA's appeal, because these arguments were not contained in the previous administrative phase of proceedings. “Court isn't a continuation of administrative process. In connection with filed action, court could only take into consideration objections of plaintiff in such extense, which was introduced in legal remedies against the decision of the first-instance administrative body.” Therefore, Court says it was not competent to review such arguments, because they were introduced in later stage of the proceedings - before the Court - and not earlier, before the Tax Administration.

Martin Husovec, one of the FSFE's co-operators and EISi's leading lawyer in this campaign thinks otherwise. “We cannot agree with the decision of Regional court in Banská Bystrica. Court was supposed to deal also with [our] core arguments about unlawfulness of the fine. There is no procedural reason, why Court couldn't do this. This verdict should be appealed.”

On the positive side, Court acknowledged that it was unlawful to impose 12 different fines for the same act. Verdict of the decision annulled all 12 fines and the case is supposed to go back before administrative body – Tax Authorities – again, in the first instance. Although, as it was mentioned above, Court rejected the core arguments of EURA's appeal, it offered a hint about how this case could unfold next. “In case that the administrative body imposes single fine [...], and this decision will be challenged in court again, the court will be able to reevaluate this matter”. But this time, Court will be obligated to review EURA's arguments.

New proceedings before Tax Authorities

With regards to the Court's decision, new proceedings began in the EURA matter before the Tax Authorities. Not surprisingly, the Tax Authorities did what was suggested in Court's decision and reduced their fine. Nonetheless, they still refused to recognise EURA's main arguments, according to which the fine was illegal and should never have been imposed.

So the roller-coaster starts once again. EURA has appealed against the new administrative decision. However, due to some technical changes in Slovak legislation, this appeal was dismissed. According to new tax regulations, EURA can file an appeal only in electronic form. EURA was not aware of this obligation, mainly because this change in legislation occurred during period for filing of appeal. This change was also not reflected in decision by Tax Authority. Advice of remedies, contained in the administrative decision, didn't explain, that appeal in must be in electronic form and that paper form is no longer available. Nevertheless, the second-instance authority dismissed EURA's appeal anyway.

At the current time, EISi's legal team is doing everything possible to use every legal remedy available in order to avert the present menace of the Tax Authority's decision.

Stay tuned for new development. This page will be updated accordingly.