Procedural options for flood-affected taxpayers
All tax relief options contained in the Czech Financial Administration’s notice in response to the recent flooding have been summarised in a recent article. In this issue, we thus focus on the procedural options open to taxpayers affected by this emergency.
Read here about the possible tax relief options provided by the Financial Administration in its notice.
Waiver of tax-related penalties and interest
The financial administration provides that it is possible to apply for a waiver of default interest, interest on the deferred tax amount, and penalties for late tax assertion. In general, the waiver of tax-related interest and penalties is governed by the General Financial Directorate’s Instruction D-58. It provides an exhaustive list of justifiable grounds for waiving interest and penalties, including situations where the taxpayer has been affected by a natural disaster. In such a situation, the tax authority should waive the tax-related penalty and interest up to 100% provided that the other conditions for this waiver are met. In addition to the justifiable grounds, the tax administrator assesses, e.g., whether the taxpayer has met the deadline for filing the application or the deadline for paying the administrative fee, and evaluates the frequency of the taxpayer's previous breaches of their tax administration obligations.
We cover waivers in more detail in a series of articles focused on minimising tax penalties here.
The financial administration has also issued information on a blanket waiver of the CZK 1,000 penalty for the late submissions of a VAT ledger statement concerning VAT payers who have been affected by the floods or whose VAT ledger statement is prepared by a person affected by the floods. The waiver applies to payers whose submission deadline falls between 12 September and 31 October 2024. For the waiver to apply, they must file the VAT ledger statement by 25 November 2024 and notify the tax administrator of having been affected by an emergency within the same deadline. There is no prescribed form for the application, although it is possible to use the template available on the Financial Administration’s website.
Further details have been published in Financial Bulletin 7/2024.
Tax payment deferment
If a taxpayer is in danger of defaulting on payment of tax prepayments and taxes, they may apply to the tax administrator for the deferment of their tax payment (i.e. postponing the tax's due date) or for an instalment schedule. The application’s form or structure has not been prescribed by law and can be submitted on a form available on the financial administration’s website. It is only possible to defer the payment of tax in cases provided for by law, e.g., where the payment of the tax would cause serious harm to the taxpayer following their extraordinary expenses due to floods.
During the deferment period, instead of default interest, interest on the deferred tax amount arises, amounting to half the default interest. It is possible to apply for a waiver of both interest rates, and the occurrence of a natural disaster is a reason for waiving 100% of the interest amount provided that other conditions are met.
You can read about other aspects of deferment here.
Determining tax prepayments otherwise
If you expect a change in your tax liability and that change is not reflected in the tax prepayments, you can apply to the tax authorities to set the prepayments at a different amount or to cancel them for the entire taxable period. This application, as well as the application for the deferment of the tax payment, can be submitted using the official prescribed form on the financial administration’s website.
You can also apply for a change in tax prepayments retrospectively and the tax administrator will consider whether the grounds for your application are justifiable.
Extension of the deadline for filing tax returns
If you are hesitant about whether you will be able to prepare and submit your tax return within the statutory deadline, the tax administrator may extend the deadline by up to three months. An application to extend the deadline including justifiable grounds must be filed with your local tax authority before the statutory deadline for filing your tax return.
The extension of the deadline cannot be used for VAT returns or VAT ledger statements, as the VAT Act does not allow this.
If the current situation is causing you problems with the payment of your tax liability, which could give rise to default interest, or if it is complicating the filing of your tax assertion, we recommend you consider the above procedural options. We would also like to add that for persons affected by the current emergency, all procedures discussed above have been exempt from administrative fees.