Amendment to the Tax Code - overview of changes
09 January 2020
The legislative process, among many other things (e.g. a significant amendment to the Business Corporations Act), also includes an amendment to the Tax Code. The completion of the legislative process is expected by the middle of this year. The Ministry of Finance presents this amendment in connection with the My Taxes project (modern and simple) or sometimes as an online tax office. The system should allow an overview of the management of one's tax obligations, similar to that of internet banking. For us, it will certainly be interesting to see the completely different changes contained in the amendment. It should be noted that on the one hand they are positive (e.g. considerable simplification of the exercise of powers of attorney for filing tax returns), but on the other hand, the amendment also contains a number of changes that are certainly to the detriment of taxpayers (e.g. the introduction of a correspondent way to start and end a tax audit).
What are the main changes that the amendment is likely to bring in 2020?
- Milder sanctions - reduction of default interest from 14% p.a + repo rate to 8% p.a. + repo rate (according to the Civil Code), reciprocally, i.e. both in the case of interest paid by the taxpayer in case of its occurrence to the tax administrator, and interest paid by the tax administrator to the taxpayer. This will also result in interest on tax retention, which will amount to half the default interest.
- Advance for tax deduction - excessive deductions for value added tax, for which the possibility of advance payments is newly created. The amendment provides for the obligation to pay the amount of the excess deduction that is not disputed (at least CZK 10,000). However, following the introduction of advances for tax deductions, the amendment plans to extend the deadline for refunding the VAT deduction to 45 days, which can have a significant negative impact on cash flow. This is an extension by 15 days of the reimbursement period compared to the current situation, which is intended to help the tax authority assess which part of the deduction is questionable.
- Changes in deadlines - there is an extension of one month for three-month deadlines, even if the tax return is submitted electronically, even without processing by a tax advisor. However, the so-called tolerance periods are cancelled (five working days for filing and four working days for payment). In terms of shortening the deadline for overpayment, the deadline for electronic submission of overpayment requests is halved from the current 30 days to 15 days.
- Due to the occasional obstruction of taxpayers, it will be possible to start a tax audit by delivering a notice of initiation of a tax audit to the tax entity. Delivery can take place directly (typically during inspection at a taxpayer), but also by correspondence. Similarly, to change the scope of inspection and the results of inspection findings.
- In the framework of the submitted act, it is proposed to allow the taxpayer's own identifier to be used for the purposes of creating a tax identification number instead of the personal identification number of a taxpayer
- As a "compensation" for the loss of the benefit consisting in tolerance of late submission for up to five working days, it is proposed to increase the minimum level of a fine for late submission from CZK 200 to CZK 500.
- Furthermore, the interest on late payment is not prescribed and there is no obligation to pay it if it does not exceed CZK 1,000 for one type of tax for one tax administrator for a single tax period or for one calendar year for a one-time tax.