Amendment to the Tax Code 2025/2026

An extensive amendment to the Tax Code is set to take effect on 1 July 2025 and, in part, on 1 January 2026. What are its key changes?

The amendment to the Tax Code (TC) primarily targets the area of enforcement and interest, but it goes far beyond that. It contains many legislative and technical adjustments, and the explanatory memorandum often states that these are merely confirmations of existing practice. This is not always entirely true.

The amendment to Section 251c of the TC now expressly excludes the accrual of interest paid by the tax administrator in cases where it unlawfully fails to prescribe or refund interest to which the taxpayer was entitled. The exclusion of so-called interest on interest is the result of more than a decade of developments in case law and legislation, with administrative courts clearly declaring that the taxpayer is entitled to such interest on interest. This raises the question of whether this legislative development will be the final word on the matter or just a minor episode. Particularly at a time when the financial administration did not grant interest for the verification of tax deductions in a timely manner and in the amount required by the courts, there were cases in practice where high interest on interest arose for entities due to the late payment of high excess deductions and interest thereon. The new legislation cannot retroactively deny these cases, and therefore redress in the form of interest on interest can still be obtained in these older cases.

The amendment to Section 252 of the Tax Code confirms the existing administrative practice of "interest gouging", namely that in the event of an overpayment on a personal tax account with the tax office, the tax entity's underpayments are not subject to interest up to the amount of this overpayment. Even in the case of additional tax assessments, default interest is calculated from the original due date of the relevant tax for the given tax period. Interest is therefore usually a much more significant penalty for clients than tax penalties. The courts have obliged the tax administrator to take into account, when calculating this interest, the situation where, for some time during the interest period, an overpayment "lay" in any tax account of the taxpayer (so-called "gnawing"). Even if you are not aware of any overpayments, if, for example, you regularly have excessive deductions that the tax administrator assesses in accordance with the claim, i.e. implicitly, it is likely that your personal VAT account is regularly (continuously) in overpayment. However, the tax administrator does not always automatically "bite off" this interest, and it is necessary to claim it, which in practice can sometimes mean savings of hundreds of thousands or millions in interest on late payments in the case of large tax assessments. The courts recently obliged the tax administrator to take such overpayments into account across the entire country – for all tax administrators – but immediately corrected this conclusion with the condition of uncomplicated feasibility. The amendment to the Tax Code implements these judicial conclusions in accordance with this requirement.

A significant change is the possibility of waiving up to 100% of penalties in Section 259a of the Tax Code. This was followed by the amended instruction on the waiver of tax accessories GFŘ-D-72 in the conditions of the Financial Administration. For more details, see my article in BDO News 10/2025 "New Financial Administration guideline on the waiver of tax accessories".

Another new development is the addition of a provision on penalties for late tax returns in Section 250 of the Tax Code, which confirms existing administrative practice and contradicts some of the conclusions of the administrative courts. The administrative courts have obliged the tax administrator to impose the above-mentioned penalty whenever the last known tax for the same tax period changes. In other words, if a taxpayer files a late tax return, for example, for which they are fined for late filing, and the basis for calculating this fine is the assessed tax, then according to some judgments, the amount of this fine must be recalculated whenever the same tax period is subsequently reassessed (whether on the basis of a tax audit or due to the taxpayer's own additional tax return). This applies both to the taxpayer's advantage and disadvantage. The amendment prohibits this recalculation of the penalty if the decision on the penalty has already become final.

From 1 January 2026, the new Section 240e of the Tax Code regulates the tax liability upon the termination of a trust fund. A similar regulation for taxes has been lacking until now, and the new one will apply, according to the transitional provisions of the law, in cases where the administration of the trust fund ends on or after 1 January 2026.

The delivery of documents by the tax administrator to addressees abroad will be made more efficient by the amended provisions of Sections 39, 47 and 49 of the Tax Code. This means that the conditions of the Tax Code do not have to be complied with when delivering documents, provided that the rules "under the laws of the country concerned" are complied with. Furthermore, if it is not possible to deliver documents to a foreign addressee repeatedly and effectively, the tax administrator may begin to deliver documents to them by public notice. However, these rules do not affect the procedures carried out by the tax administrator using international requests, which are not affected by this amendment.

From the perspective of the extensively amended area of enforcement, the following should be noted:

Section 206a establishes a new possibility for tax administrators to enforce movable property registered in official records. This amendment will theoretically allow for the registration of items that are usually impossible to register at their location, such as ships or aircraft; in practice, this will mainly concern motor vehicles registered in the motor vehicle register. This change is also related to the amendment to Section 18 of the Czech Financial Administration Act, which allows the Ministry of Finance and the Czech Financial Administration authorities to request data from the Czech Republic's aircraft register, the register of sports flying equipment and the register of unmanned system operators, the Czech Republic's maritime register, the Czech Republic's shipping register, the register of small vessels and the register of vehicles with Ukrainian licence plates.

Express permission for the sale of property rights by the tax administrator at auction in Section 193a of the Tax Code. In practice, this will involve, for example, long-term monetary claims, cooperative shares or participations in other forms of corporations, leasing rights, etc.

New Section 215a of the Tax Code, which is intended to enable the effective enforcement of crypto assets of tax debtors.

A new option not only to use but also to set up a protected account during tax enforcement.