Adjustment of penalties for control reports

From 1 January 2023, the forthcoming amendment to the VAT Act will come into force. In addition to increasing the turnover threshold for registration, it should also adjust the penalties for control reporting.

Currently, if a taxpayer fails to submit the control report within the prescribed time limit, they are obliged to pay a fine of:

  • CZK 1,000 if they subsequently submit it without being asked to do so;
  • CZK 10,000 if they submit it within an alternative period after being requested to do so by the tax administrator;
  • CZK 30,000 if they fail to submit it following a request to amend, supplement or confirm the information given in the submitted control report; or
  • CZK 50,000 if they fail to submit it even within the alternative period.

These are draconian penalties. For example, a delay of one day in responding to a call in which the tax administrator asks the taxpayer to correct errors in the control report or to confirm its truthfulness "costs" the taxpayer CZK 30,000. Not to mention that the deadline is currently set at five calendar days.

The forthcoming amendment to the VAT Act modifies these penalties so that in the case of:

  • individuals,
  • limited liability company (s.r.o.) with a sole shareholder who is a natural person, and
  • payers with a quarterly tax period

the penalty should be half the amount.

In this case, the penalty would not be CZK 30,000 but only CZK 15,000. This too is undoubtedly a high penalty for many taxpayers, but in conjunction with the possibility to apply for a waiver, the proposed change seems reasonable to me.