What changes can be expected from the amendment to the Tax Code?

16 March 2020

The Chamber of Deputies approved an amendment to the Tax Code that will bring a number of changes to business. Among others, the amendment aims to promote electronic communication with tax authorities by introducing some incentives, including tax overpayments being refunded 15 days earlier when submitting returns electronically or extension of the deadline for filing income tax returns by one month. The time limit of six months is maintained for entrepreneurs who are subject to an audit or whose returns are handled by a tax advisor.

The positive changes are:

  • extension of the existing tax information box, making it more transparent;
  • reduction of interest on late payments to a level corresponding to the amount set out in the Civil Code (reduction from the current 16% p.a. by six percentage points to 10%);
  • reduction in interest on the amount retained, which corresponds to half of the default interest (reduction from the current 9% p.a. by four percentage points to 5%);
  • increase of interest by one percentage point to 5% as compensation for long-term retention of excessive deduction;
  • increase in the limit for incurring fines and interest on late payments from the current CZK 200 to CZK 1,000.

The clearly negative changes are:

  • extension of the deadline for refunding tax overpayments in connection with the introduction of an advance for tax deductions by 15 days;
  • abolishment of the grace period for late payment of four working days, while the grace period of four working days in case of late filing of the tax return remains unchanged;
  • the possibility of the tax administrator to make a visual or audio record of the negotiations without prior notice to the persons participating in them;
  • the possibility, for the avoidance of doubt, to initiate a tax audit, the object and scope of which are not restricted by that purpose;
  • the possibility, subject to certain conditions, to repeat tax audits;
  • the possibility of extending or narrowing the scope of a tax audit during the course of the delivery of a notice of change in the scope of the tax audit.

It is clear from the above that the changes to the Tax Code are not only positive, as the Ministry of Finance seeks to declare in its statements. Interest inequalities continue to exist in the case of errors by state authorities and entrepreneurs, not to mention the negative impact extending the deadline for refunding tax overpayments will have on cash flowsIt remains to be seen how the government will apply some of the changes, but I already recommend greater vigilance and attention to protecting your rights.

The amendment to the Tax Code is proposed to take effect on the first day of the second calendar month following its promulgation in the Collection of Laws. This will depend on the course of the legislative process, the amendment having been included in the Senate meeting scheduled for 18 March 2020.