In its judgment Ref. No. IV. ÚS 925/26, the Constitutional Court emphasised the importance of protecting attorney-client privilege also in tax proceedings.

If a taxpayer claims legal service expenses as tax-deductible costs, it must, of course, be able to demonstrate that the services are genuinely related to its economic activities and meet the conditions for tax deductibility under Section 24(1) of the Income Taxes Act. According to the Constitutional Court, however, this burden of proof cannot result in the tax administrator automatically gaining access to the content of communications between the client and the attorney or to the actual results of the legal services provided.

The tax administrator therefore cannot, solely for the purpose of verifying the tax deductibility of an expense, require, for example, complete legal opinions, the specific content of legal advice or other documentation revealing the substance of the attorney’s legal work if this would breach attorney-client privilege. The protection of confidentiality between an attorney and a client does not depend on the area of law to which the legal advice relates.

At the same time, the judgment does not mean that an invoice for legal services alone automatically establishes their tax deductibility. The taxpayer must still demonstrate the existence and purpose of the expense and its connection with the taxpayer’s business activities. What is crucial is primarily the manner in which the evidence is provided. This should be structured so that the tax administrator receives sufficient information to assess the tax relevance of the expense without disproportionately interfering with attorney-client privilege.

In practice, it may therefore be appropriate to demonstrate the nature of the services provided by means of, for example, a more general description of their subject matter, the scope or period during which they were provided, or by submitting documents in anonymised or redacted form. The appropriate method will always depend on the circumstances of the particular case.

The Constitutional Court’s judgment thus confirms that the taxpayer’s burden of proof has constitutional limits. The tax administrator may require evidence demonstrating that the claimed expense is justified, but it cannot automatically demand access to the confidential content of legal advice. Tax proceedings must therefore strike a balance between the legitimate requirements of the tax administrator to verify the facts asserted by the taxpayer and the protection of confidentiality in the attorney-client relationship.

Are you dealing with the tax deductibility of legal costs or evidence requirements during a tax audit? Contact our tax team, we will help you set up an approach that stands up to tax authority scrutiny while protecting the confidentiality of legal advice. 

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