As the new year arrives, the time for the preparation of financial statements and the income tax return for the past taxation period comes. This year, it is necessary to pay increased attention to the time limit for filing the tax return as the amendment to the Tax Code, which took effect on 1 January 2021, significantly rephrased the existing rules. According to the transitional provisions and the information of the Financial Administration of the Czech Republic, the new rules apply already to the 2020 taxation period.
Basic time limit for everybody
Even after the amendment, the basic time limit for filing the tax return for a taxation period of 12 months or more remains to be 3 months, starting from the day following the end of the taxation period. As
a result, the deadline for the tax return for the 2020 taxation period is 1 April 2021. The basic time limit newly applies to all taxpayers who are not required to prepare audited financial statements (e.g. including permanent establishments). This, however, does not affect the possibility to file the tax return through an advisor as late as 1 July.
Two types of an extended time limit
It continues to be possible to file the tax return in a time limit longer than the basic one; however, the rules saw some changes. Mainly, the Tax Code makes it possible to file a tax return in two extended deadlines, in
a four-month time limit and a six-month time limit. If the taxpayer meets the conditions for the extension of the time limit for filing the tax return, the deadline will be automatically extended by law to 3 May 2021 (the next working day after 1 May 2021) or 1 July 2021.
There are two conditions for an automatic extension of the basic time limit to 4 months:
(a) the tax return was not filed in the basic time limit, i.e., before 1 April 2021, and concurrently
(b) the tax return was subsequently filed electronically.
A taxpayer with a data box can consequently select whether it will file the tax return within the deadline of 1 April 2021 or within the deadline of 3 May 2021. If it selects the longer time limit for filing the tax return, it has to do it electronically. If a taxpayer does not file the tax return electronically, the time limit will not be extended and, as such, the filing of the tax return for example by mail on 3 May 2021 would be considered late.
There are two conditions for an automatic extension of the basic time-limit to 6 months:
(a) the tax return was not filed in the basic time-limit, i.e., before 1 April 2021, and concurrently
(b) the tax return was subsequently filed by a tax advisor or a lawyer (“advisor”).
A taxpayer represented by an advisor continues to have the deadline of 1 July 2021 for filing the tax return. However, it is necessary to be careful about when the advisor actually files the tax return. If it were filed by 1 April 2021, the time limit would not be extended to 6 months as the tax return was filed in the basic time limit. Newly, there is no obligation to deliver the power of attorney granted to the tax advisor for filing the tax return to the tax administrator before 1 April; it is sufficient to deliver the power of attorney together with the tax return.
A taxpayer who has an obligation to prepare audited financial statements always has a six-month time limit for filing the tax return regardless of when it files the tax return.
Extension of the time limit following an individual request
Even after the amendment to the Tax Code, a taxpayer may ask the tax administrator for an individual extension of the time limit for filing the tax return by 3 months. In the event of income from abroad, the tax administrator may extend the time limit for filing the tax return up to 10 months, i.e. to 1 November 2021. In addition to the reasons for extending the time limit, the taxpayer needs to state in its request whether it intends to use the statutory extension of the time limit for filing the tax return. This is because the tax administrator does not know whether the taxpayer will be obliged to file a tax return in the basic time limit, or in the four-month or
six-month time limit.
What are the impacts of the length of the time limit for filing the tax return?
The fact whether the conditions for the extension of the time limit for filing the tax return have been met or whether the time limit remains to be the basic one is also significant for the determination of the correct tax due date (or for the deadline for the return of tax overpayment). The deadline for filing the tax return is also the deadline for the tax liablity payment. The new legislation thus makes it possible for taxpayers to consider their situation when assessing the time limit and method of tax return filing.
Consequences of the failure to comply with the time limit for filing the tax return
A drawback of the new legislation is a certain temporary uncertainty regarding the length of the time limit for filing the tax return, as it is only after the filing of the tax return that the tax administrator will be certain about the time limit in which the taxpayer was obliged to file the tax return and pay the tax. If the tax return is not filed in time, the taxpayer puts itself at risk of a fine being imposed for a late tax return. If the tax is also paid late, an obligation arises for the taxpayer to pay default interest to the tax administrator.
Summary
Even this year, taxpayers have the possibility to file the tax return through an advisor until 1 July 2021. At the same time, they no longer have to send the power of attorney granted to the advisor to the tax administrator in advance. In addition, the amendment to the Tax Code brought changes which allow the taxpayer to better reflect their needs. However, these changes also contain hidden risks that certain taxpayers may overlook. It remains to be seen how the Financial Administration of the Czech Republic eventually addresses the mistakes and errors of the taxpayers.
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