What are the ways to reduce sanctions imposed by the Financial Administration of the Czech Republic?

With regard to the current economic situation, it has become evident that many companies are trying to minimise expenses and invest all financial resources in maintaining or developing their business. One of the ways to minimise financial impact and improve cash flow may be to reduce potential sanctions imposed on the taxable entity by the financial administration.

In today’s difficult times, it takes little for a company to encounter difficulties in fulfilling its obligations, including tax liabilities. Continuous increase in input prices, customer caution and the associated uncertainty of sales of products and services can easily lead to tax defaults and sanctions. While these situations can be prevented to some extent, typically by requesting a deferral and breaking down the tax payment into instalments, they cannot always be avoided altogether.

If your company has already run into problems with tax compliance and has been sanctioned by the financial administration, consider applying for a remission that can be an effective tool to reduce the negative impact on your company. In fact, the savings that can be achieved by applying for a remission can reach up to 100% in exceptional cases. We therefore recommend addressing the situation proactively. A remission is more likely to be granted to natural persons, that are to be the subjects of the Summer of Grace initiative.

Within the remission process, the tax administrator follows the rules of the Tax Code and the GFD’s guidelines on remissions, where the tax administrator decides, to a certain extent, according to its administrative discretion. In practice, we observe a higher success rate with applications that carefully explain and demonstrate the situation and the reasons for the sanction imposed. It is thus in the applicant’s interest to prove that a remission is justifiable for their application.

Moreover, following the administrative case law, it is necessary to appeal for a justifiable reason also in the case of requesting remissions of penalties, which usually require simple compliance with tax regulations and cooperation with the tax administrator during the tax inspection. The decision-making practice of administrative courts shows that even if these conditions are met, the tax administrator may review the reason for the additional tax assessment and may not remit the penalty in view of the nature, intensity and other circumstances of the conduct that led to the additional assessment.

Each case is specific in this respect and must be thus assessed individually. If this possibility appeals to you, we will be happy to guide you through the whole process and help you choose the appropriate procedure. Please do not hesitate to contact us at any time.

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