Will tax administrators have to file taxpayers’ financial statements in the Collection of Deeds?

The current legal regulation imposes the duty on persons recorded in public registers to file their ordinary, extraordinary and consolidated financial statements in the Collection of Deeds. Pursuant to the Accounting Act, corporations must do so before the end of the accounting period immediately following the period for which the financial statements have been prepared. If an entity does not meet this duty despite having been called upon to do so, the court keeping the register may impose a fine of up to CZK  100 thousand on such an entity or, in exceptional cases, even dissolve it with liquidation. Members of the statutory body of an entity not meeting this duty are deemed to violate due managerial care principles. Under the Accounting Act, in such cases, the tax authorities may impose a penalty of up to 3% of the value of assets determined from the entity’s financial statements.

Taxpayers must attach the above accounting documentation to their income tax returns. Consequently, according to the deputies that have prepared the draft amendment, where the state already has such documentation at its disposal, filing the financial statements in the Collection of Deeds by the persons recorded in public registers represents an unnecessary burden for them. According to the explanatory report, financial statements are documents significant enough to shift the duty to disclose them to the state administration bodies to which they have been submitted. It would therefore suffice to submit financial statements to the appropriate tax administrator with the income tax return, while the tax administrator would then ensure their proper disclosure. The duty of persons recorded in public registers to file the above documents in the Collection of Deeds would in fact cease to exist as a result of the proposed regulation.

The government’s viewpoint on this proposal is negative, claiming that such a change would require changes to several laws, especially the Accounting Act. If the proposed change were approved in its current form, the duty to file accounting documentation in the Collection of Deeds would fall on two entities: the tax administrator and persons recorded in the public register.

However, we consider the proposed change a step in the right direction to open discussions on this topic, as we know from practice that this duty is often violated for various reasons. A discussion and subsequent change may result in the enhanced interconnectedness of public administration systems in this area.