Until when can additional tax return for lower tax be filed?

The extended chamber of the SAC dealt with a case where a taxpayer had paid VAT on receivables from a customer. According to the customer, however, the receivables did not in fact arise; this was later confirmed by the civil court. This eliminated the reason for the payment of the (already paid) VAT on the non-existent receivables. Therefore, following the judgment of the civil court, the taxpayer filed an additional tax return, asking the incorrectly paid VAT be refunded.

The tax administrator refused to do so because, according to them, the taxpayer had filed the additional return late by not sending it by the end of the month following the month in which they had learned of the final and conclusive dismissal of their action against the customer (i.e., within the subjective deadline). This tax administrator’s conclusion was also supported by the Supreme Administrative Court’s case law at the time, whereby the SAC had repeatedly deduced that upon the expiry of a subjective deadline, the taxpayer's right to file an additional tax return reducing the originally claimed tax liability ceases to exist. The rejection of additional tax returns was subsequently confirmed by both the Appellate Financial Directorate and the Municipal Court in Prague.

The taxpayer did not agree with their opinion, and neither did the second chamber of the SAC, which dealt with the cassation complaint. However, because they were bound by the SAC’s previous case law, they had to present the differing opinion to the extended chamber of the SAC as the only one that may change the conclusions of the existing case law.

Game-changing verdict

After a comprehensive assessment of the case, the extended chamber concluded that the subjective deadline shall not apply to the filing of an additional tax return for lower tax (the judgment can be found on the SAC website under file No. 2 Afs 363/2019). According to the judgment, the taxpayer may file an additional tax return for lower tax at any time during the deadline for assessing tax. Thanks to this, taxpayers will have more freedom to decide when to file an additional tax return for a lower tax liability, not only for VAT, but also for all other taxes, especially income taxes.

The obligation to file an additional tax return for a higher tax liability within the set deadline does not change, and the taxpayer is subject to sanctions for missing it. Other deadlines, such as the three-year deadline for exercising the right to deduct VAT, also remain unchanged.