The Tax Code allows for the waiver of penalties, default interest, interest on deferred amount and fine for late claims. Once the basic conditions, i.e. the formal requirements and a good tax morale, have been met, the waiver depends on the fulfilment of substantive conditions.
According to the Tax Code, these include, in the case of penalties, the taxpayer’s cooperation in the procedure leading to the ex officio additional assessment of tax, and, in the case of interest and fine, the existence of a justifiable reason. Furthermore, economic or social circumstances of the taxable entity giving rise to severity are assessed. The waived amount may be reduced according to the criterion of the frequency of breaching tax administration obligations.
These statutory conditions are then regulated in more detail by a guidance of the General Financial Directorate. The existing guidance GFD-D-47 will be replaced by a new guidance GFD-D-58 from February 2023, introducing one important change.
As part of the assessment of applications for waiver, the tax administrator shall now examine the factual aspect of the additional assessment first (i.e. the source conduct), which resulted in the creation of the tax accessory, i.e. penalties, interest or fine. The new guidance is based on the case law of the Supreme Administrative Court and shall determine that, as part of the assessment of the scope of waiver of the tax accessory, the tax administrator is entitled to take into account the nature, intensity or other circumstances of the source conduct that gave rise to the tax accessory.
The significance of this change can best be demonstrated by the example of penalties. Until now, the subject of assessment principally included only the cooperation during the tax audit, and if the taxpayer cooperated, the penalty waivers were accepted. However, the tax administrator will now have to look into the factual reasons that led to the additional assessment of tax and will be able to refuse or reduce the waiver only based on the assessment of such reasons. The guidance also includes examples of situations when this will probably be the case, including the additional assessment of tax due to the abuse of law, tax concealment or conscious participation in tax fraud. This will make it even more necessary to pay attention to the legal qualification of the additional tax assessment already during the tax audit. However, these are mere examples and only practice will show how widely this new condition will be interpreted.