Amendment to the Tax Procedure Code: more questions than answers

Waiver of penalty

One of the changes introduced by the amendment at first glance seems positive. Under the new rules, the tax administrator could waive up to 100% of a penalty (compared to 75% to date). Currently, even taxpayers who voluntarily file an inadmissible tax return after discovering irregularities in their earlier tax return even before the tax is assessed by default, are obliged to pay the penalty. The legislators have recognised that this is unnecessarily harsh on taxpayers and propose to give the tax administrator the option to waive penalties altogether. However, this does not change the taxpayers’ obligation to first pay the penalty before it is waived. 

Fiction of being notified

In practice, informal communication with the tax administrator is not unusual. The amendment now introduces a novelty in this area – the fiction of being notified. If a tax administrator informally (e.g., by email) notifies a taxpayer of something, the tenth working day from the sending will be considered the day when the taxpayer became notified of the fact; it will not matter that the taxpayer did not check their email at all and did not actually read the tax administrators’ notification. However, due to the unreliability of the public data network, the mere sending of an email cannot guarantee that the document will actually reach the addressee, or that it will reach them in time – as has been consistently adjudicated by the Constitutional Court as well. Moreover, the deadlines relating to the notification will also start to run at the moment of the fiction. This could create a very confusing situation for taxpayers.

Taking of evidence

The amendment proposes evidence to be taken even before the tax administrator formally initiates proceedings. This means that the tax administrator will be able to process and evaluate the information they obtain even while they are still only verifying whether there are grounds for initiating the proceedings. The legislators explicitly declare in the explanatory memorandum that this will not affect the taxpayers’ right to be informed of the results of evidence taking, e.g. by inspecting the file. Nevertheless, one could argue that doctrine of the distribution of the burden of proof between the tax administrator and the taxpayer could be undermined, and the principle of immediacy of evidence taking and the taxpayers’ right to comment on the evidence taken could be breached.

Information obligation

Currently, the tax administrator may request information from other public administration bodies or from individuals and legal persons who process other data necessary for tax administration. Under the amended wording, the tax administrator may request information from individuals/legal persons who process other data needed for tax administration. The slight change in one word actually means a widening of the information obligation: the tax administrator could thus also access information which is not strictly indispensable but which they consider useful or suitable. This would result in a very broad definition of what information the tax administrator may request from persons, and it is questionable whether this is not contrary to the fundamental principles of tax administration (in particular the principles of proportionality and economy).

Other changes

The forthcoming amendment is extensive and will affect many provisions of the Tax Procedure Code, including the anchoring of a possibility of mass waivers or deferments of tax in response to COVID-19 pandemics, changes to the tax enforcement procedure, transfers of tax liabilities upon the termination of a trust, and many others. More than a hundred other laws, including e.g., the Criminal Procedure Code, are also likely to be affected by the changes to some extent. 

The amendment is now at the beginning of the legislative process. For most of the provisions, the proposed effective date is 1 July 2025.