Tax 

Remission of sanctions for breaching grant conditions

A grant recipient who breaches the conditions under which the grant was provided will be asked by the provider to refund the grant or its part. If the recipient refunds the requested portion of the grant, no additional interest or fees will be charged, but by refunding the grant voluntarily, recipients lose the option to defend themselves against the obligation to refund it.

If the grant recipient instead opts for a defensive strategy, the taxation authority will perform an audit of compliance with the grant provision conditions, and if a breach is identified, the taxation authority will assess a levy on a breach of budgetary discipline (again in an amount corresponding to the grant or its part). Together with the levy, a penalty will be assessed to the recipient amounting to 1‰ of the levy per day, which can reach a sum equal to the levy on the breach of budgetary discipline itself. Since the penalty tends to be assessed at the end of the audit, it is very common for it to reach the amount of the levy. However, the recipient has the possibility of appealing against the decision to revoke the grant to the General Financial Directorate, or to file a legal action against the decision as part of administrative proceedings. This course of action may reverse the unfavourable decision and even avoid the obligation of paying the levy.

Penalty remission

Grant recipients often decide not to defend themselves against the call to refund the grant precisely because they are concerned about the obligation to pay a penalty if their defence is unsuccessful. In this respect, we welcome the new decree of the General Financial Directorate, no. GFŘ-D-46, which expands the grounds for remitting the penalty. The remission of the penalty will consequently allow grant recipients to defend themselves without the risk of having to pay a penalty.

In cases where the recipient has truly broken the rules, the remission may be used to mitigate the negative consequences thereof. Since the penalty can easily reach the amount of the levy itself, its remission entails significant savings.

The new decree will apply to penalties assessed after 1 October 2020, but in the event that it would be more favourable to the grant recipient than the previous regulation of penalty remission, it may apply also to penalties assessed after 1 February 2020, even if a decision on penalty remission has already been made.

Reasons for the remission

The decree divides specific reasons for remitting the penalty into four categories, of which objective reasons outside of the recipient’s sphere and marginal errors will be particularly important for legal entities.

Objective reasons include in particular a breach of the grant provision conditions due to a demonstrated mistake on the part of the provider, and a breach of the rules as a result of a natural or other disaster. If the recipient is able to prove these facts, the penalty will be remitted in full.

The category of marginal errors will be interesting for example for recipients of aid from the Antivirus programme. If the recipient pays social security and health insurance contributions after the deadline set by the Labour Office, the entire grant should be revoked according to the rules of the Antivirus programme. In addition to the fact that we are convinced that in such a case it would be possible for recipients to successfully defend themselves also against the obligation to refund the grant, recipients will be able at the very least to have the entire penalty remitted, thereby minimising the negative consequences of their error.

Similarly, it will be possible to remit the entire penalty in the event of other administrative errors (late submission of monitoring reports, final evaluations etc.).

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