Amendment to Tax Procedure Code revisited
The Chamber of Deputies did not pass any of the proposed versions of the amendment to the Tax Procedure Code; the bill thus fell through. Within a week, the Ministry of Finance came up with another bill, drawn up on the same layout as the original one, yet with numerous changes demanded by the opposition and the professional public.
An important change is the preservation of the deadline currently applicable for refunding excess VAT deductions: the deadline shall remain at 30 days, rather than being increased to 45 days as was originally proposed. This change was motivated by the effort to mitigate any negative effects on the taxpayers’ cash flow. Closely connected with this change is also the new concept of an advance for a tax refund, which was amended, too: the limit for the advance has been increased from the original CZK 10,000 to CZK 50,000.
Already in its originally proposed wording the amendment substantially changed the system of sanctions and interest. Many of these changes remained in the newly proposed bill, such as the unification of default interest rates with those under the Civil Code. A positive departure from the original version is the preservation of the sanction-free period before default interest starts to accrue: while the original proposal cancelled it completely, the new one only reduces it to three days. The new version also no longer contains the sentence stating that when calculating interest, only those tax overpayments that are used to settle the underpayment on which default interest accrues shall be taken into calculation. Hence, the current practice under which any overpayment in the taxpayer’s account is included in the calculation should continue. Interest on incorrectly assessed tax is to be double the standard rate while unlawful enforcement proceedings are pending. The tax administrator will also have to inform the taxpayer of the amount of their tax underpayment before proceeding to enforce it.
A new concept has also been added to the amendment – a waiver of the penalty for late tax assertion. Taxpayer may apply for it once they have filed the tax return for which the penalty has been assessed. The tax administrator may then waive it if the late filing was due to justifiable reasons; as part of their deliberation, the tax administrator has to consider the taxpayer’s economic and social circumstances and assess whether imposing a penalty would be excessively harsh.
On the Ministry of Finance, the amendment imposes the duty to stipulate the concrete essentials of printed forms used for individual tax filings. Under the newly proposed amendment, the penalty for the failure to meet a duty of a non-financial nature will be imposed where the filing has not been made in a prescribed manner (e.g. in electronic form), and where it has not been made in the stipulated format (typically .xml).
The extension of the deadline for filing annual tax returns to four months if filed electronically remains in the new wording of the amendment. A new transitional provision makes it possible to already apply the extended deadline to electronically filed tax returns for the taxable period of 2020.
The amendment assumes an effective date of 1 January 2021. However, the version passed by the government on 27 April still has to go through the whole legislative process all over again, so it will be some time before we see the final wording.