The Recovery Package in the context of tax changes
Following the Government announcement on the Recovery Package, the related amendment to the tax regulations was published. Below we summarise a selection of the most important changes in this area.
In relation to the spread of the SARS-CoV-2 virus, the Ministry of Finance has issued a new decision that partially builds on the previously issued decisions on remission of taxes and related interest and fees. Essential information included in this decision is summarised below.
However, in the area of corporate income tax, the decision surprisingly does not apply to taxpayers falling under the Specialised Tax Office, who still have to file their corporate income tax returns for 2019 within the regular deadline.
The decision extends the period of blanket remission of the interest and fees related to a late filing of the tax return and payment of tax, provided that these obligations are met by 18 August 2020 at the latest.
However, this remission does not apply to taxpayers whose competent tax authority is the Specialised Tax Office.
If these entities meet the conditions for extending the deadline for filing the tax return pursuant to the Tax Code, they can ask the tax authority to extend the deadline in the standard manner. Nevertheless, based on our experience it should be pointed out that in many cases, the Specialised Tax Office denies requests for extension of the deadline for tax return filing justified with the impacts of the SARS-CoV-2 epidemic.
In addition, it should be noted that just like the previous decision of the Minister of Finance, the remission only concerns taxpayers with the calendar year as their taxation period (i.e. the 2019 taxation period) and therefore does not apply to taxpayers using the financial year.
The decision means that penalties for late filing of the personal income tax return for 2019 are automatically remitted, as is late payment interest on late payment of the 2019 tax liability, provided that the tax return is filed and the tax paid by 18 August 2020 at the latest. The decision newly also covers the potential penalty for not reporting tax-exempt income exceeding CZK 5,000,000 received in 2019; this penalty is remitted if the notification is made by 18 August 2020 at the latest (related sanctions connected with the late filing of the additional tax return for the 2018 taxation period are also remitted).
Penalties for late reconciliation of personal income tax from dependent activities collected as deductions in the form of prepayments and paid by the employer will also be remitted, provided that this reconciliation for the 2019 taxation period was submitted no later than on 31 May 2020.
With respect to the planned cancellation of the statutory measure regarding property acquisition tax that is currently being discussed in the Chamber of Deputies of the Czech Republic, it has been decided that the period for remission will be extended with respect to late payment interest, penalty for a late tax statement and interest on the deferred amount.
The remission of the above sanctions should therefore concern property acquisition tax in tax returns whose filing deadline is after 31 March 2020 and newly until 30 November 2020. If the property acquisition tax ends up not being cancelled, remission will apply only if the tax returns are filed and related tax paid by 31 December 2020 at the latest.
At the same time, this decision remits VAT on supplies of selected types of goods provided free of charge (donations of face masks, protective gloves, COVID-19 test sets, ventilators, thermometers etc., including donations of material needed to manufacture the above goods). The decision principally follows the previous decision about VAT remission, which was effective from 17 May 2020; it has therefore essentially only extended the possibility to continue not applying VAT from 18 May 2020 until 31 July 2020.
The decision additionally extends the period for remission of the below administrative fees, provided that the request for remission is filed by 31 December 2020. The relation to the consequences of the SARS-CoV-2 spread will not have to be demonstrated due to administrative impacts.
- Administrative fee for accepting a request for remission of late payment interest or interest on the deferred amount
- Administrative fee for accepting a request to allow deferment of payment of tax
- Administrative fee for accepting a request for refund of tax on import or for remission of customs arrears
- Administrative fee for issuing a confirmation of no debts
The period for remitting the administrative fee for accepting a request for remission of a penalty for failure to file a local sales/purchases report will also be extended, specifically until 31 December 2020 provided that the call to file the local sales/purchases report or call to amend, supplement or confirm the information in a filed local sales/purchases report is issued and the related local sales/purchases report is filed between 1 March 2020 and 31 July 2020.
A blanket remission also applies to late payment interest and interest on the deferred amount in cases where the taxable entity has been allowed, based on an individual request, to defer tax payments or to pay tax in instalments in relation to the spread of SARS-CoV-2. The remission will be subject to a time limit (from the declaration of the state of emergency until 31 December 2020) and it will apply to all taxes administered by authorities subordinated to the Ministry of Finance and to all taxable entities.
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