Penalty for filing VAT ledger statement for incorrect taxable period

In case 5 Afs 281/2021-34, the Supreme Administrative Court (SAC) dealt with the question of whether a CZK 50,000 penalty had been legitimately imposed on an entity who had incorrectly filed a VAT ledger statement for a previous period. The SAC concluded that the purpose of such penalty is to deter taxpayers from not complying with their obligation to file a VAT ledger statement, and that in the case in question, the company’s conduct did not meet this criterion.

In the present case, a company filed a regular VAT ledger statement for August 2019 with a one-day delay caused by technical problems. The company mistakenly attached a VAT ledger statement relating to the taxable period of January 2019. The tax administrator called upon the company to file an additional statement, but the notice was delivered to a company representative without the power of attorney necessary for such matters. The tax administrator then imposed a penalty of CZK 50,000 on the company, corresponding to a sanction for not filing the VAT ledger statement even within a substitute deadline.

The company objected, arguing that they did file the VAT ledger statement, albeit in the form of an incorrect file. Throughout the proceedings, the tax administrator stated their ground claiming that the filing of a VAT ledger statement for another taxable period was completely irrelevant for tax administration, as it did not fulfil its primary function of informing the tax administrator about transactions carried out in the given taxable period and thus not allowing them to respond promptly to a high risk of a reduction in the tax liability.

The Municipal Court agreed with the tax administrator's conclusions, but the company disagreed with its arguments and the case proceeded before the SAC. The SAC strongly opposed the imposed penalty and ruled that it was up to the tax administrator to find out the true meaning of the VAT ledger statement submitted in the form of an incorrect file and call upon the company to remedy the situation by giving them a notice. With regard to the inadequate power of attorney of the representative, the tax administrator should have informed the company directly about the receipt of a VAT ledger statement for a different period, which had been already filed. The penalty imposed by the tax administrator corresponded to a penalty with which the tax administration aims to deter taxpayers from not fulfilling their obligation to file a VAT ledger statement, which was not the case here.

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