Tax liberation packages – practical recommendations
Keeping track of all tax-related measures published so far in connection with the coronavirus pandemic might be quite difficult. To help, below we are providing you with practical recommendations sorted by individual tax areas.
Corporate income tax – taxpayers having to file their income tax returns within three months after the end of the taxable period
- It is possible to file corporate income tax returns and pay the relevant tax on 1 July 2020 based on a general waiver of penalties and default interest (applicable also for fiscal periods with filing deadlines of 1 May or 1 June 2020).
- Where taxpayers report a tax overpayment, they should file relevant income tax returns as soon as possible, as the deadline for refunding overpaid tax remains unchanged – within 30 days of the deadline for filing income tax returns or the date an income tax return was actually filed if filed after the deadline.
- Those who decide to opt for postponement must file a tax return and actually pay the tax on 1 July 2020 (the date on which the amount must be credited to the tax administrator’s account). If tax returns are filed later, the general waiver of penalties will not apply, and penalties will be imposed retrospectively from April 2020; it will still be possible to apply for an individual waiver of penalties.
Corporate income tax – all taxpayers
- Taxpayers using the calendar year as their taxable period will neither have to pay an income tax prepayment due in June nor have to apply for this; other taxpayers (using fiscal year) may apply for an individual waiver of the income tax prepayment due in June, providing reasons for their reduction or waiver. This also applies to prepayments payable in other months. It is also possible to waive a prepayment retrospectively, i.e. if a prepayment is already payable or has already been paid, based on an individual application.
- Apart from as mentioned above, the standard 4/5-day sanction-free period applies to the filing of income tax returns/payment of tax. Where necessary, it is also possible to apply for the extension of the deadline for filing income tax returns for up to three months (taxpayers having to file their income tax returns within six months after the end of the taxable period even if the deadline is before 1 July 2020). Where income from abroad is concerned, it is possible to apply for deferment for another month (a maximum of 10 months from the end of the taxable period).
- If an income tax return is filed and the tax paid late, the taxpayer may file an application for a waiver of default interest: if the application is granted, a penalty for the late filing of a tax statement is waived automatically. The application is currently not subject to an administrative fee. However, we recommend filing an income tax return within the deadline (if possible) and applying for the payment of tax in instalments or at a later date (deferment of its due date). The related interest can be waived based on an application.
- The postponed filing deadline (the general waiver of penalties for late filings) also applies to the statement of income tax withheld, excepting the statement of income tax on employment withheld in form of prepayments, and to the payment of tax, while no underpayments should arise if the tax was withheld correctly during the period.
- Common sanction-free periods apply to the filing of VAT returns and the payment of VAT: a penalty for late filing does not arise if the default is no more than five working days; default interest accrues from the fifth working day.
- CZK 1,000 penalties for the late filing of VAT ledger statements between 1 March and 31 July 2020 will be waived automatically if the VAT ledger statement is filed earlier than called upon by the tax administrator. The financial administration has promised to call upon taxpayers no earlier than five to seven days after the statutory filing deadline. In practice this means that the five-day sanction-free period will also apply to VAT ledger statements.
- If any of the higher penalties for the failure to file a VAT ledger statement is imposed (e.g. for filing the statement after the taxpayer has been called upon by the tax administrator to do so), the taxpayer may apply for its waiver on an individual basis.
- If VAT is not paid (or a VAT return not filed) until the end of the sanction-free period, the related default interest can be waived based on an individual application. If the default interest is waived, a penalty for the late filing of a VAT return shall also be automatically waived. If default interest does not arise (e.g. as a result of an excess deduction), the penalty for the late filing of a VAT return will be waived if, simultaneously, the penalty for the late filing of a VAT ledger statement is waived and the tax return is filed together with the VAT ledger statement.
- Where an excess deduction arises, it is advisable to file a VAT return within the five-day sanction-free period to eliminate any potential negative impact.
- Similarly, when a tax liability arises, it is recommendable to file a VAT return and apply for the payment of VAT in instalments or at a later date. Any related interest could then be waived based on an individual application while proving the relation with the coronavirus pandemic.
Immovable property acquisition tax
- The Ministry of Finance announced its intention to cancel this tax – details should be discussed on Monday 30 March 2020.
- Immovable property acquisition tax returns with a filing deadline between 31 March and 31 July 2020 may be filed without any sanctions until 31 August 2020. The payment of tax or its prepayments may also be postponed until this date. Technically, the postponement is carried out through a general waiver of penalties for the late filing of returns and default interest.
- Those who decide to opt for postponement must file a tax return and actually pay the tax until 31 August 2020. If the tax return is filed later, the general waiver of penalties will not apply, and penalties will be imposed retrospectively from the original deadline. At the end of August, it will not therefore be possible to use a regular five-day tolerance period.
The Ministry of Finance announced the postponement of deadlines for the payment of road tax prepayments payable in April and July until 15 October 2020, again in form of a general waiver of interest on the late payment of the tax.
Property and other taxes
So far, no measures have been adopted in relation to these taxes. However, it is possible to utilise options set by the Tax Procedure Code, especially:
- potential sanction-free period (4/5 working days for the payment of tax/filing of a tax return);
- option to apply for the payment of tax in instalments or for the payment of tax at a later date while subsequently applying for a waiver of default interest.