Expanding the scope of information that the Tax Administrator may obtain about taxpayers

Today, it is hardly surprising that the Tax Administrator can obtain a large amount of information about taxpayers for the purposes of tax administration. This is made possible by the relatively extensive obligation of public authorities and third parties to provide the Tax Administrator with information upon request. For these purposes, obliged entities are often exempted from confidentiality under special legislation, e.g. bank secrecy. The Tax Administrator may impose a fine of up to CZK 500 thousand for failure to comply with the information obligation.

Additional information may be obtained by the Tax Administrator on the basis of an international request to a foreign tax authority or from third-party reporting obligations to the Tax Administrator (e.g. VAT control statements, country-by-country reporting or the upcoming reporting obligation of digital platform operators under DAC 7). The easiest way to obtain information concerning taxpayers is by direct access to a database maintained by another public authority. This option is newly open to tax authorities in the case of the vehicle inspection information system.

On the basis of the amendment to the Act on Roads, which was approved by the Chamber of Deputies and is now being discussed in the Senate, the tax authorities will have direct remote access to information from the vehicle inspection information system. If the amendment is approved, the Tax Administrator will have easier and probably more frequent access to tachometer data and other information that can be effectively used to check the keeping of the logbook used by taxpayers to prove their entitlement to VAT deduction or to claim tax-effective costs.

The significance of information originally obtained by public authorities for other purposes and subsequently used by the Tax Administrator in tax proceedings was reflected in a ruling of the Supreme Administrative Court recently discussed in the media. In this case, the Tax Administrator obtained information on the movement of a motor vehicle that had been captured by a camera system operated for the purpose of ensuring public order in traffic, following a request from the Police of the Czech Republic. However, the information obtained did not correspond with the data in the logbook kept by the taxpayer. This irregularity resulted in the taxpayer failing to prove that the conditions for entitlement to deduct VAT had been met and the Tax Administrator assessing an excessive deduction at a lower rate. The Supreme Administrative Court concluded that the Tax Administrator was entitled to request the records in question from the police, as they were data necessary for tax administration and the police is an entity obliged to provide such data to the Tax Administrator upon request.

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