Czech Republic: Under the new rules, the finance office may sanction the violation of non-monetary obligations with a fine of up to CZK 500,000
As of 1 January 2015, the finance office have new competences when it comes to sanctioning taxpayers’ misconduct: they may newly impose a fine for the violation of non-monetary obligations of up to CZK 500,000. The tax authorities may impose this fine in the following cases – failure to comply with registration or reporting duties or other duties of disclosure stipulated by law or by the tax authorities, as well as failure to comply with record-keeping duties or other evidentiary duties stipulated by law or by the tax authorities. According to the language of the law, the tax authority is expected to take into account the severity of the breach of obligations, and the scope of consequences of such a breach for the tax administration, when determining the amount of the fine, so as to ensure that the fine is not grossly disproportionate.
Another new fine in the arsenal of the finance offices applies to situations in which the taxpayer fails to observe the electronic form for certain submissions for which submission via electronic channels is mandatory. This fee amounts to CZK 2,000 for each submission. If the taxpayer’s behavior represents a significant obstacle to the tax administration, then the authorities may impose an additional fine of up to CZK 50,000.
Aside from these new sanctions, the existing fines for late filing of tax returns by more than five working days (or for not filing them at all) continue to apply, in the following amounts:
– 0.05% of the assessed tax / pre-tax deduction for each subsequent day of delay (but no more than 5% of the assessed tax / pre-tax deduction);
– 0.01% of the assessed taxable loss for each subsequent day of delay (but no more than 5% of the assessed tax / pre-tax deduction);
whereas the maximum fine amounts to CZK 300,000.
Also unchanged remains the 20% penalty for supplementary tax assessments (i.e., an increase of the tax owed or a reduction of the pre-tax deduction) and the default interest charged for late payment of tax owed, in the amount of the Czech National Bank’s repo rate plus 14 percentage points, as of the fifth working day of default.
As can be seen from the above, not filing tax returns for whatever reasons can have devastating consequences for the taxpayer.
At least some comfort may be derived by some taxpayers from the new right to compensation in cases in which the finance office has been withholding the pre-tax deduction. The new law automatically awards interest on such deductions for the welfare of the taxpayer if the ‘clarification procedure’ which the authorities may invoke in cases of doubt takes more than five months. This interest accrues from the beginning of the sixth month, in the amount of the Czech National Bank’s repo rate plus 1 percentage point.
Source: General Fiscal Code (Act No. 280/2009 Coll.)