Waiver of levies for breach of budgetary discipline and penalties
In a recent article, we introduced the possibility of reducing sanctions imposed by the Financial Administration of the Czech Republic due to tax arrears or additional tax assessment. This time, we are focusing on a related area, namely the issue of breach of budgetary discipline. If the beneficiary of a subsidy or another financial aid violates the conditions under which it was granted, they may be imposed a levy for breach of budgetary discipline and related penalties. However, both the levies for breach of budgetary discipline and the penalty may be partially or fully waived.
In recent years, the global market has been adversely affected by the COVID-19 pandemic, and businesses are currently facing an unprecedented rise in costs. Many companies are therefore turning to external sources of financing for their business in the form of subsidies provided by the state budget and the European Union. However, it is necessary to bear in mind that along with the drawing of these funds comes a number of obligations that need to be fulfilled. Although many entrepreneurs fulfil these obligations duly, it only takes a little inattention, failure to meet a deadline or provide the necessary documentation to cause a breach of subsidy conditions and, therefore, a breach of budgetary discipline, which leads to the imposition of a levy for breach of budgetary discipline and, in some cases, a penalty.
If a breach of budgetary discipline has already occurred and your company has been imposed a levy by a tax authority, it is possible to mitigate the negative impact on your company by (partially) waiving the levy and penalty. Both the levy and the penalty are waived on the basis of an application for a waiver in cases where one of the grounds listed in the General Financial Directorate’s (GFD) Instruction is met. Both the levy and the penalty may be waived partially and, in some cases, fully.
When proving the fulfilment of the grounds for a waiver set out in the GFD Instruction, it is the beneficiary who shall prove these decisive factors. It is therefore in the beneficiary’s best interest to pay due attention to the situation. At the same time, according to the GFD’s Instruction, grounds for a waiver of levy or penalty payment may be found beyond the scope of the rules laid down in this Instruction. However, the amount so waived is part of de minimis aid that can be granted to individual entities, the amount of which must not be exceeded.
It is evident from the above that it is advantageous for the beneficiary of the subsidy to address such a situation proactively, preferably in cooperation with an expert on the issue. Otherwise, the beneficiary of the funds may be liable to a levy of up to 100% of the amount granted plus a penalty. We will be happy to guide you through the entire process, from the preparation of the application to the final decision of the Financial Administration. Please do not hesitate to contact us at any time.