In connection with the spread of coronavirus, the Minister of Finance of the Czech Republic has used the powers granted to her by in the Tax Code and has decided to waive penalties for late filings and related late tax payments and certain administrative fees. Detailed information on each of the measures can be found in this article.
The Government has adopted the following extraordinary measures:
- Penalties for late filing of personal and corporate income tax returns and late payment interest shall be waived across the board provided that the tax return is filed and the payment of the respective tax is made by 1 July 2020, with no need to document any reasons related to coronavirus. In practice, this means that those who were required to file their tax returns by 1 April 2020 may file their returns and pay the income tax up to 3 months later without penalty.
- A penalty in the amount of CZK 1,000 for the failure to file a control report in 2020 shall be waived across the board without the need to document any reasons related to coronavirus provided that the obligation arose between 1 March 2020 and 31 July 2020. As of today, only the first penalty is automatically waived by force of law.
- Administrative fees for filing an application for tax deferral or payment in instalments, an application for forgiving interest on late payment or interest on the amount deferred, and an application for forgiving the penalty for the failure to file a control report shall be waived in applications submitted by 31 July 2020.
- An Instruction (D-44) has been issued by the General Financial Directorate making it possible to waive, on a case-by-case basis, interest on late payment, interest on the amount deferred and the penalty for the failure to file a control report, in the period from 1 March 2020 to 31 July 2020, provided that a reason related to coronavirus (e.g. disease or quarantine) is documented. This measure affects all taxes administered by bodies subordinate to the Ministry of Finance (e.g. VAT) and all taxable entities (individuals and entrepreneurs).
- In the event that, upon an individual request, interest on late payment is waived or tax deferral or payment in instalments is allowed, the penalty for a late tax return, control report or statement of accounts for which the law does not allow for a case-by-case waiver shall also be automatically waived.
Practical impacts of selected extraordinary measures
Individual and corporate income tax returns
If you know that you will have a refundable overpayment, it is in your best interest to file your tax return as soon as possible and request the tax refund. The Tax Office shall refund the overpayment to you within 30 days of the filing date of the application. The Minister of Finance has promised they will do their best to refund overpayments without delay.
If, for example, you know that the current situation will significantly reduce your income, you may also request that the Tax Office reduce your personal and corporate income tax advance payments.
Advance payment of corporate and personal income tax due on 15 June 2020
The practical impact of the decision will also have to be addressed with respect to the advance payment due on 15 June 2020, which with taxpayers required to file their tax return by 1 April 2020 should be calculated based on their 2019 tax liability. However, if you have not processed your tax return by 15 June 2020, you will not know the correct amount of the advance payment. It is therefore recommended that you prepare your tax return in a timely manner, or request that your advance payment be waived.
Value Added Tax
The automatic postponement of the filing date and of the deadline for tax payment by 3 months, i.e. until 1 July 2020, does not apply to VAT returns. The deadline for filing VAT returns remains unchanged. However, should there be a delay in tax return filing or tax payment, it is possible to apply for a waiver of penalties provided that the taxable entity proves that the delay was caused by the adopted extraordinary measures.
The Ministry of Finance has so far published a single measure aimed at limiting the number of people congregating at government offices, stating that taxpayers who are not obliged to communicate with the tax office electronically may file their income tax returns and pay the tax by 31 May 2020. For this period, the tax administration shall not impose any penalties.
This does not apply to VAT payers, legal entities entered in the register and individual entrepreneurs, as these communicate with the tax administration electronically.
Any other possible measures to help mitigate the consequences of the spread of coronavirus are currently in discussion with business association representatives. Given the political situation, any further measures can be expected in the coming days.