After the Chamber of Deputies was unable to form a majority for the approval of the original draft amendment to the Tax Code, a new, revised draft was submitted shortly after. It largely copies the original draft, but differs in a couple of important details.
The draft was submitted in such a way that it could be approved in the first reading, with the expected effective date of 1 January 2021. We will inform you about the course of the legislative process. Below you can find an overview of the most important changes.
What remains the same in the new draft?
- Introduction of the MY taxes (MOJE daně) portal
What remains the same is the planned computerisation of financial administration through the introduction of the MY taxes portal, the primary aim of which is to facilitate communication with the tax administrator and reduce administrative burden.
- Change in the sanction system and reduced sanctions
The amendment revises the system of sanctions in the Tax Code; at the same time, it reduces interest rates significantly (default interest, interest on deferred amount), up to half the baseline value.
- Advances on excessive deduction
The institute of advances on excessive deduction allows for a partial payment of a claimed tax deduction. Therefore, the tax administrator will withhold the payment of only the part of the deduction it has doubts about.
- Change in control procedures
The amendment to the Tax Code simplifies the process of tax audit initiation and termination for the tax administrator. To a certain extent, it allows the tax administrator to conduct the tax audit “by correspondence”. At the same time, it gives the tax administrator the possibility to move from a procedure to eliminate doubts to a tax audit at any time.
How is the new draft different?
- Abolition of the effective extension of the deadline for tax deduction refund
The new draft no longer includes an extension of the deadline for the refund of excessive deductions from 30 days to 45 days, which was one of the most discussed changes proposed by the original draft. This is important mainly for VAT payers, whose deadline for excessive deduction refund will not be extended. This is also related to the change in the institute of advances on tax deductions. The new draft proposes that the claim to an advance should be assessed in the course of a tax audit, or, alternatively, a procedure to eliminate doubts, and not before their initiation, which is what the original draft proposed.
- The tolerance period remains
The original draft proposed the abolition of the so-called “tolerance period”. The new draft maintains the tolerance period in the existing length of five days for filing a tax return. For late payments, the tolerance period is reduced from the original four working days to three calendar days.
- Initiation of a tax audit by a mere notice
Even though the new draft keeps the possibility to initiate a tax audit by simply delivering a notice, the new draft also covers the situation when the tax administrator does not effectively carry out its inspection activities without an unnecessary delay after the delivery of the notice on tax audit initiation. In such a case, the period for tax assessment is not interrupted.
Other important changes proposed by the new draft include especially the introduction of a possibility to waive the penalty for the late filing of a tax return, prescribing tax forms through a decree, and abolition of the rule under which only actually existing overpayments were taken into consideration in the calculation of default interest (so-called “cherry picking”).