Extended information duty towards tax administrators currently in the Senate
In early spring, the Chamber of Deputies approved an amendment to the Tax Procedure Code, expanding the information duty towards tax administrators from financial institutions to attorneys and tax advisors. A draft amendment and motions to amend the draft filed by some deputies arouse a strong response especially from professional chambers. Some motions were approved. The amendment is yet to be discussed in the Senate and signed by the president.
The amendment to the Tax Procedure Code not only implements the EU Directive on Administrative Cooperation in the Field of Taxation (DAC 5), ensuring access to data ascertained under the AML Act, but also expands the information duty of banks. The original version of the draft amendment from January underwent a number of changes. The tax administrators should not eventually have access to information on internet banking and other remote-access services and their utilisation. They should also not be able to receive information about the equipment used for these services. According to the new regulations, the tax administrators will have access to information about the following: authorised persons; persons who have deposited funds in an account; payment recipients; and established safe deposit boxes.
According to the new information duty of liable persons pursuant to the Act on Some Measures against the Legalisation of Proceeds from Criminal Activity and the Financing of Terrorism (the AML Act), the tax authority may ask various entities for any information they obtained while identifying and checking clients in compliance with this act. This also involves all written documentation and information on how these data were collected.
For certain professions such as attorneys, notaries, tax advisors, auditors and bailiffs, the original draft limited the new information duty only to ensuring international cooperation in the administration of taxes. A motion to amend the original draft submitted during its second reading, requiring to expand the information duty to the domestic administration of taxes involving tax evasion cases exceeding half a million Czech crowns, received wide media coverage. The Czech Bar Association in particular criticised this motion, claiming that it would interfere with attorney-client confidentiality and thus would likely be unconstitutional. In the end, this controversial amending motion was not approved.
The proposed information duty of selected professions will thus remain restricted to international cooperation in the administration of taxes. However, certain changes in this area were approved nonetheless. In accordance with the approved proposal, only the General Financial Directorate will communicate with the above professions on an exclusive basis. A new temporary provision has also been adopted, according to which the information duty of attorneys, notaries, tax advisors, auditors and bailiffs will be restricted to information and documentation obtained only after the effective date of the amendment. In contrast, the tax administrators will be allowed to investigate on a retrospective basis in financial institutions.