Beware of fines related to VAT control statements

The Regional Court in Prague has recently issued a judgement favourable to VAT payers on fines for VAT control statements. In the judgement 43 Af 6/2020-37, the court assessed whether submitting the control statement in XML is effective if the box “Street” mistakenly contains the VAT payer’s land registry number.

It is only a formal typo that can happen to essentially anyone. The tax administrator, however, imposed a fine to the VAT payer of CZK 50 thousand under Section 101h (1) (d) of the VAT Act because the original submission was assessed as ineffective, and a new control statement for the period was not submitted within the extended deadline following an additional request.

The Regional Court in Prague stated that “following the conclusions in the judgement of the Regional Court in Ostrava reg. no. 22 Af 19/2020-46 the present court finds that the ineffectiveness provided for in Section 101a (4) of the VAT Act applies only to errors in form (including structure, that is, the internal arrangement of the submission), rather than to errors of the contents of the submission. Such differentiation follows from the text of Section 101g (2) of the VAT Act related to the content errors of control statements.” The Appellate Financial Directorate has filed a cassation complaint in the case, and so the dispute will now be judged by the Supreme Administrative Court.

In case you have received a penalty payment assessment from the tax administrator for breaching your obligations concerning control statements, it is advisable to consider whether the penalty has been set in accordance with the VAT Act and legal principles and to possibly defend yourself by way of an appeal or subsequent litigation. Another possibility is to apply for a waiver under the instruction of the General Financial Directorate (Instruction GFŘ-D-29 on waiving fines for failure to file a control statement). We will be happy to assist you in such matters.

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