What will the amendment to the Tax Code bring?
At an October meeting, the Parliament of the Czech Republic will start discussing an extensive amendment to the Tax Code, which should come into force in 2020, and which will significantly affect communication between taxpayers and tax administrators.
The main areas of the proposed changes are:
- Support for the electronisation of taxes – The creation of an electronic portal MY tax (modern and simple) and a new function of the Tax Information Mailbox (DIS). Taxpayers will be positively motivated to use electronic form of communication, e.g. the period for filing tax returns for an annual tax period will be automatically extended to four months in the case of electronic filing, as opposed to the 30-day period that would remain valid for paper submissions. Also, electronically submitted overpayment requests would be handled by the tax authorities twice as quickly – within 15 days as opposed to 30 days for paper submissions.
- Revision of the sanction system – Interest paid by tax subjects and tax administrators will be unified. The current interest rate on late payment interest (CNB repo rate + 14% p.a.) should be reduced to the CNB repo rate + 8% p.a. Interest on the cut amount and interest on tax deduction should be at half the amount (CNB repo rate + 4% p.a.).
- Abolition of the tolerance period – The Ministry of Finance proposes to abolish the five working day tolerance period for late filing of tax returns, reports or billing and to abolish the four working day tolerance period for late tax payment. For taxes with a tax period shorter than one year, i.e. in the case of VAT returns, excise duties and gambling tax, the possibility of filing tax returns within five working days remains without penalty.
- Repayment of excess deduction – The amendment introduces an advance for tax deductions. Tax administrators will receive a tool to return part of the excess deduction that they do not intend to investigate. When initiating a tax inspection or a doubt procedure, tax administrations would have to assess whether the conditions for the advance payment were met. A negative change for taxpayers is the proposal to extend the deadline for refunding excessive VAT deductions from 30 to 45 days.
The amendment contains several other changes, too. For instance, natural persons will be able to request the replacement of the social security number in the core part of the tax identification number (DIČ) by an anonymous identifier generated by the tax administrator.
As the amendment is extensive and introduces many changes, the government has proposed that it become effective six months after its publication in the Collection of Laws. We will continue to follow the deliberations of the Parliament of the Czech Republic and will keep you updated about the approval process.
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