New Year with the new Tax Procedure Code!

Compared with other tax regulations, the Tax Procedure Code does not change very often; therefore, its amendment definitely deserves our attention. The amendment affects a large number of concepts regulated by the Tax Procedure Code, the most crucial of which we summarise below.  

The extension of the tax information mailbox’s functionalities is a change connected with the planned formation of the MOJE daně portal. The amendment now provides the legislative framework; we have to wait and see what the changes to the technical parameters of mailboxes will be. The tax information mailbox has been designed to accelerate communication with taxpayers and should be used by the tax administrators for this purpose. However, it is not meant to replace data boxes. Access to tax information mailboxes for third parties will only be possible upon authorisation.

The amendment significantly changes the deadlines for filing income tax returns. The basic three-month deadline after the end of the taxable period remains in effect; however, the amendment also stipulates a four-month deadline for tax returns filed electronically. The deadline for electronic filings shall be extended automatically without having to submit an application. Where income tax returns are filed by tax advisors, it will not be necessary to submit a power of attorney to the tax administrator before the end of the three-month period. Contrariwise, where tax advisors file tax returns based on powers of attorney within the basic deadline, the relevant tax will be assessed to the taxpayer within this basic deadline. The provisions on deadlines shall apply already for the taxable period ended 31 December 2020.

The amendment introduces significant changes to the system of sanctions and penalties, regulating interest rates and unifying interest for both the taxpayer and the tax administrator. Interest will derive from the amount of default interest under the Civil Code, i.e. 8% + repo rate as set by the Czech National Bank. Simultaneously, the sanction-free period when paying taxes changes: default interest charged for the non-payment of tax starts to accrue on the fourth calendar day of the date the tax is payable. The sanction-free period has thus been shortened from four working days to three calendar days; this is compensated by an increase in the minimum threshold for assessing default interest to CZK 1,000. Compared with the existing wording, the basis for calculating interest will change: the basis will be the current income tax amount that has not yet been paid. This means that under the new provisions, it is necessary that any tax overpayments are actually used to settle the tax (e.g. based on an application), otherwise the accruing of interest will not be suspended.

The amendment significantly simplifies the commencement and the completion of tax inspections, abandoning the formalised concept that has so far been applied. Under the new provisions, it will no longer be necessary to commence a tax inspection personally during oral proceedings, but a formal notice on the commencement of a tax inspection delivered to a data box will suffice. Similarly, it will no longer be necessary to close a tax inspection by meeting personally and discussing a report on the inspection’s outcomes, but it will suffice to deliver the report to the taxpayer along with a notice on the completion of a tax inspection. 

In relation to VAT, the amendment gives the tax administrator the option to pay out to the taxpayer a part of a VAT deduction that is not subject to examination in form of an advance. To pay out the advance, part of the unexamined VAT deduction must amount to at least CZK 50 thousand. After completing the examination, the tax authority should issue a decision and make a final reconciliation to determine the amount that should be paid by the taxpayer and the amount that should be refunded. 

The financial administration has repeatedly declared that the amendment to the Tax Procedure Code should make taxpayers’ lives easier. We just have to wait and see whether this will really be the case.