Czech Republic

Have you published your financial statements in the Collection of Deeds?

If not, you face a risk of an administrative fine. Tax authorities have recently become more active in collecting the fine, as it does not require much effort. Do you know that the fine may be imposed not only by a commercial court but also by the tax authority?

Companies are very well aware of the duty to prepare and publish financial statements. Although this duty is nothing new, many entities do not publish their financial statements in the Collection of Deeds either intentionally or by omission. However, the failure of publication carries rather severe penalties.

The duty to publish financial statements is imposed by the Accounting Act, specifically section 21a(1) and section 4 of the Act, and by Government Decree No. 351/2013 Sb. (“Decree”). The duty to publish financial statement is complied with upon delivery to a commercial court. Under the Decree, the statements are only delivered to a commercial court electronically in pdf format. There are disputes over whether or not the document should contain an electronic signature. However, if the financial statements have been prepared properly including the signature of a person responsible for the preparation of the statements before publication, a simple conversion of the file or a scanned copy of the financial statements in pdf formant should be sufficient.

Companies that are obliged to have their financial statements audited must publish the audited financial statements and the audited annual report, both approved by the competent body under special laws, within 30 days of compliance of both conditions specified above, unless the special laws provide otherwise, but no later than within 12 months of the balance sheet date of the financial statements, irrespective of whether the accounting records have been approved as specified above. Companies that are not required to have their statements audited must publish their financial statements under section 21(4) of the Accounting Act no later than within the same deadline as audited companies.

If a company fails to fulfil its duty to publish the financial statements, it may face (i) a procedural fine of up to CZK 100,000 following a request from the commercial court, or (ii) a fine of up to 3% of the asset value following a request from the tax authority in administrative proceedings, or (iii), in extreme cases, criminal liability if the elements of the crime of misrepresenting information about the state of business management and assets and liabilities are accomplished.

Given that the fines imposed by the tax authority might be quite severe, especially in the case of a higher volume of assets, and the tax authorities have become more active in this respect, we recommend examining internally whether you have complied with these statutory duties. If not, we recommend that you should remedy the failure as soon as possible and not wait until requested to do so by the tax administration or until proceedings are initiated for the administrative offence of a failure to publish financial statements under section 37a of the Accounting Act.