16 February 2018

Information duty towards tax administrators extended again

Right after New Year’s Day, the government submitted to the Chamber of Deputies an amendment to the Tax Procedure Code, significantly expanding the extent of information that the tax authority may request from third parties. The extended information duty should be in effect as soon as the amendment is promulgated in the Collection of Laws and will primarily affect banks and liable persons pursuant to the Anti-Money Laundering Act.

Viktor Dušek
Linda Kolaříková
Jana Fuksová

The amendment deals with two issues: the expansion of the banks’ information duty in response to the interpretation of the Supreme Administrative Court from 2016 and the implementation of the EU Directive on Administrative Cooperation in the Field of Taxation (DAC 5). This directive should have been transposed into Czech legislation by 1 January 2018. The government meant to adopt it on an accelerated basis during the deputies’ first reading but the chamber refused. The amendment will thus have to go through the standard legislative procedure.

Pursuant to the new amendment, the financial administration should have - upon request - access to information on the following: persons authorised to dispose of cash at bank accounts; persons who have deposited funds in these accounts; payment recipients; remote access services and their utilisation, including information to identify equipment through which access is made; and information about established safe deposit boxes. In addition, to implement DAC 5, the amendment introduces a new information duty of liable persons pursuant to the Act on Some Measures against the Legalisation of Proceeds from Criminal Activity (the AML Act). Pursuant to the new amendment, the tax authority may request from various entities any information they obtained while identifying and checking clients in compliance with this act. This also involves all written documentation and information on how these data were collected. The draft amendment also enables the tax administrator to obtain information for domestic tax administration purposes, hereby surpassing the EU legislative framework requiring access to such data only for international cooperation in tax matter purposes.

The amendment derives from a draft that the Ministry of Finance had already submitted for an accelerated comment procedure in the spring of last year. Despite the original version of the amendment having been further amended, the Czech Bar Association continues to draw attention to some pitfalls of the proposed legislation. As opposed to the original draft, the Chamber of Deputies’ print specifies the duty of attorneys, notaries, tax advisors, bailiffs and auditors to provide the tax authority only with information acquired within the AML processes and only for the purpose of ensuring international cooperation in the administration of taxes. The proposed legislation thus prescribes that persons involved provide foreign tax administrations with client information that would never have to be, and may not be, provided to the Czech tax administration. Despite the changes to the original version, the Czech Bar Association considers the new draft to be interfering with attorney-client confidentiality and thus likely to be at variance with the constitutional order. 

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