Controversial amendment to Tax Procedure Code published in Collection of Laws

In early June, a long-awaited and widely discussed amendment to the Tax Procedure Code was published in the Collection of Laws. The amendment expands the information duty towards tax administrators and implements – with a few months’ delay – the EU Directive on Administrative Cooperation in the Field of Taxation (DAC 5), ensuring access to data ascertained under the AML Act and enabling banks to obtain a wider variety of information about taxpayers.

With the new regulations, the tax administrators will be allowed to request information about persons authorised to dispose of funds in bank accounts, persons who have deposited funds in accounts, payment recipients, and those who have established safe deposit boxes. During the legislative process and after heavy criticism, the amendment underwent a number of changes, eventually excluding from the reporting duty information on remote-access services and their utilisation as well as information about the equipment used for these services.

The entirely new information duty following from DAC 5 will affect liable persons in the light of the AML Act. The tax authority may ask various entities for any information and documentation they obtained while identifying and checking clients in compliance with this act. The amended regulation mainly affects regulated advisors, in addition to financial institutions, and in many ways exceeds the requirements of EU legislation (with the exception of selected professions), since EU legislation only requires access to information for international tax administration purposes but the amendment plans to use such information also for domestic tax administration purposes. The amendment authors argued that it is hard to separate the administration of taxes for domestic and international purposes. For certain professions such as attorneys, auditors, bailiffs, tax advisors and notaries whose obligation to maintain confidentiality is traditionally protected, the new information duty only applies to ensure international cooperation in the administration of taxes. Only the General Financial Directorate and not every tax authority will be allowed to request information from these professions, aiming mainly to ensure the right to legal assistance.

However, this is not the only amendment associated with DAC that may have to be adopted in the future. DAC 6 is discussed in a separate article. Moreover, the European Commission has officially criticised the Czech Republic for the incorrect implementation of DAC 2, introducing the automatic exchange of information about financial accounts, known also as the Common Reporting Standard (CRS) or GATCA (a global version of FATCA).

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