The Supreme Administrative Court solved the procedure for taking into account the previously imposed sentence from criminal proceedings into tax proceedings in a charming manner. In practice, however, this will only really help the client in combination with the proposed amendment to the Tax Code.
The Supreme Administrative Court (SAC), in its judgment No 10 Afs 26/2024-62, commented on a situation where a natural person was sentenced by a court in criminal proceedings to 5 years' imprisonment and a fine of CZK 600 thousand for tax evasion. CZK (i.e. the criminal line). Subsequently, shortly thereafter, the Appellate Tax Directorate confirmed the tax assessment of the same person, including the tax penalty - the penalty itself amounted to CZK 469 406.
The penalty is a criminal sanction and therefore the previous penalty imposed for the same offence (tax evasion) must be taken into account when imposing the penalty. In the present case, the Supreme Administrative Court dealt with this by recalling the nature of the penalty, which is imposed in a lump sum (20 % of the amount of tax assessed) and its moderation is possible by way of a waiver provided for in the Tax Code. The SAC concluded that if the principle of taking into account the previously imposed penalty is to be fulfilled, it is up to the taxpayer to initiate the waiver of the penalty by his own request with this justification to the tax administrator.
This conclusion sounds logical at first glance, but if we know all the conditions for forgiveness and especially the form of their application in the practice of tax administrators, we find that this conclusion does not ensure a fair application of the principle of prohibition of double punishment (or taking into account the penalty previously imposed) in any case.
In practice, when waiving penalties, three aspects in particular (in addition to time limits, etc.) must be observed:
- Whether the actual tax on which the penalty has arisen has already been paid.
- Whether the client has seriously breached tax or accounting legislation in the last 3 years - because if they have, then the tax assessment itself, which gave rise to the penalty, cannot be waived (and the assessment itself does not count).
- Whether there was procedural non-cooperation in the tax assessment (for which tens of percentages of the amount to be assessed are deducted) - this means formal non-cooperation, i.e. failure to respond in time to the tax administrator's requests, etc.; it is not about the content of the submission or legal opinion.
Simplifying, it usually works out in practice that:
- Those who have not committed (other) serious breaches of tax/accounting regulations + cooperated in a basic procedural manner in the assessment proceedings are in practice exempted from the statutory maximum, i.e. 75% of the penalty. In our practice, where we defend clients in a procedurally active and courteous manner, we have never seen a tax authority ever reduce the % of the waiver for non-cooperation and thus always waive the maximum.
- Those who have committed (other) serious violations of tax/accounting regulations - the tax administrator may not forgive them at all. Similarly, the penalty is not waived at all if the tax itself, on the assessment of which the penalty was incurred, has not been paid.
If we go back to the case before the court and project the court's conclusion into the practice of remission of penalties, we find that in the vast majority of cases there will be no realistic scope in practice to take account of the penalty previously imposed, as either the maximum would be remission anyway (see point 1 above) or there is an exclusion and remission cannot be granted (see point 2 above).
From my point of view, the most interesting aspect of the whole situation until 12 February 2025 was the fact that the planned amendment to the Tax Code (now in its 3rd reading in the Chamber of Deputies) adds the possibility to waive up to 100% of the penalty "for a reason that can be justified taking into account the circumstances of the case". This reason is therefore independent of the level of cooperation in the assessment and will allow for double penalties (in addition, regardless of cooperation in the assessment) to be taken into account up to 100%. According to the Explanatory Memorandum, it does not appear that the new ground was intended by the author of the amendment to apply to these cases. However, since the case law conclusion and the legislative proposal have come together so nicely, it is certainly a good way to apply the SAC's conclusion.
On 12 2025, as part of the legislative process, MPs received a summary document "Amendments and other proposals to the Government Bill", which already contains a point targeting the exact problem - in Section 259a of the Tax Code, paragraph 5 is added, which reads:
"(5) The tax administrator may, upon request, waive a penalty, in whole or in part, also for the purpose of avoiding double jeopardy, if the penalty arose after the legal force of a court decision imposing a penalty on the taxpayer for a tax-related offence to which the penalty is an accessory; the provisions of the Act excluding or limiting the waiver of a penalty shall not apply."
Although the amendment to the Tax Code will improve the possibilities of taking into account the previously imposed penalty, in practice it will still usually make only a relatively small material difference, as in the most frequent cases the client can go from a 75% remission to 100%, i.e. a difference of at most 25% of the imposed penalty. Admittedly, sometimes a 25% penalty may be a high amount in absolute terms, but let us bear in mind that it is still only 5% of the total tax assessed, from which the amount of the criminal penalty is determined. So, in relation to the total penalty, it is likely to be "small change".
Taking into account the amendment, the exclusions from the waiver (see point 2 above) will now be disregarded. This will therefore at least make it possible to take account of the nature of the prohibition of double jeopardy as an essential rule and principle, which is not to be linked to other conditions, as is the case with remission as a 'beneficia'. Forgiveness in the tax code is perceived as a certain benefit, and the construction of the conditions for forgiveness and access to this institution logically corresponds to this. The prohibition of double jeopardy, on the other hand, is a fundamental principle and a rule which should always be taken into account, in principle, by the nature of the case, without any further conditions in terms of exclusions for remission under the Tax Code.
This different nature of the two institutes makes the satisfactory application of the principle of the prohibition of double punishment through the institute of remission of the tax surcharge under the Tax Code very difficult. The proposed amendment to the Tax Code may at least go some way towards rectifying this situation.
Autor: Václav Čepelák