In March 2022, the Federal Inland Revenue Service (FIRS) served Check Point Software Technologies B.V. (Check Point) with notices of administrative penalties for the late filing of its Country by Country Reporting (CbCR) notification forms for the 2019 and 2020 financial years. These penalties were levied as stipulated in the Income Tax (Country by Country Reporting) Regulations 2018 (CbCR Regulations ). Check Point objected to the notices on the basis that the CbCR Regulations were invalid because they were not issued following the due process required by law. The FIRS refused to withdraw its penalty notices and, as a result, the company approached the Tax Appeal Tribunal (TAT) for a decision.
Check Point's position was based on the following:
- The CBCR Regulations were issued by the Chairman and not the Board of the FIRS as required by the FIRS Establishment Act (FIRSEA).
- The CBCR Regulations were issued pursuant to the Country-by-Country Multilateral Competent Authority Agreement (CbC MCAA) – a Multilateral treaty which had not been passed into law by the National Assembly
In a judgment delivered on 17 August 2023, the TAT generally agreed with Check Point and ruled that the penalties served by the FIRS were unconstitutional and void.
The ruling calls into question the validity of some of the other regulations that were issued by the FIRS during this period (such as the 2012 and 2018 TP Regulations). We expect that the FIRS will appeal the decision of the TAT and possibly take steps to regularise any regulations that may be vulnerable to a similar challenge.
Download PwC Tax Alert - TAT ruling on the validity of the CBCR regulations
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