Initiation and termination of tax inspections after amendment to Tax Procedure Code

The Tax Procedure Code has been amended, with changes already effective since 1 January 2021. How has the amendment affected tax inspections, in particular their initiation and termination? One positive aspect is that it will definitely help digitalise the whole process and transfer it to the virtual world. Nonetheless, the absence of personal contact at the beginning and the end of a tax inspection has practical implications, not only regarding signing in to data boxes or problems with remote access. The following information about the recent changes to tax inspections will start our new regular section dedicated to tax procedures: we will comment on new and established procedures, provide advice, draw attention to practices followed by the tax authorities, and share our experience with tax litigation.

From 1 January 2021, tax inspections are initiated by correspondence: the tax administrator issues a formal notification of the initiation of a tax inspection and delivers it (most often) to a data box. There are no more advance notices by email or phone nor is there any oral meeting during which an inspection is initiated. Taxpayers thus lose their chance to rectify the situation at the last minute and remove hidden skeletons in their imaginary tax closet. However, current practice shows that at least some tax authorities continue to advise taxpayers on the initiation of a tax inspection by phone before sending a formal notification to the data box. As before, the initiation of a tax inspection must be directly followed by actual inspection activities, as the tax administrator is obligated to initiate an inspection immediately. At that moment, the deadline for assessing tax is interrupted, and a new deadline starts to run. If the initiation were merely formal, the deadline would only be interrupted once the inspection activities actually commence.

Tax inspections are to be terminated by correspondence as well. This removes any possible discussion regarding inspection report findings: taxpayers no longer get to agree with the report’s conclusions or refuse to sign the report. The former procedure, i.e. the personal discussion about the tax inspection report, is now replaced by the delivery of a notification of the termination of the tax inspection, with a tax inspection report forming an obligatory part.  When assessing tax exclusively based on the result of a tax inspection, under the amendment, the moment a tax inspection is terminated may also be the moment a tax is assessed or additionally assessed. The notification on the tax inspection’s termination may thus also include an (additional) payment order.

The financial administration expects the above changes to the initiation and termination of tax inspections to simplify the entire tax inspection process. Before the amendment’s adoption, the professional public drew attention to the fact that borderline situations have not been properly addressed and that many of them will have to be decided before the courts. In practice, the tax administration mainly gains the element of surprise, as taxpayers will no longer know in advance when an inspection will be initiated or terminated, thus losing their chance to respond at the last minute by filing supplementary tax returns or obtaining final means of evidence and arguments.

Sdílet článek