Czech Republic

Tax Code Amendment Ultimately Not Adopted with Only Three Votes Short

We will have to wait a little bit longer because easier electronic communication with the Tax Office and management of our tax accounts is still to come. The Chamber of Deputies was only three votes short of adopting the amendment to the Tax Code.

At the same time, however, the subtle extension of the deadline for an excess deduction refund by 15 days did not pass either, which, under the current circumstances, is undoubtedly good news for all VAT payers.

In today’s newsletter, we will share the central points of this (not yet adopted) amendment.

We’ve already listed the proposed changes to the Tax Code in our pre-Christmas seminar on News in Taxes and Accounting held on 11 December 2019. The Government introduced the amendment to the Chamber of Deputies on 28 August 2019, and since then, it has been gradually negotiated and supplemented with many proposed changes. The last of these, proposed by the Senate, was submitted to the Chamber of Deputies on 19 March 2020 and included, among other things, the cancellation of the infamous extension of the excess VAT deduction refund from 30 to 45 days.

However, the Chamber of Deputies rejected the Senate’s version of the amendment and subsequently voted in favour of its original version on 22 April 2020, which required the consensus of an absolute majority of all deputies (101). Only 98 deputies (from ANO, ČSSD, and KSČM) expressed their consent to the proposal, thus dismissing all of the proposed changes.

The amendment contained a relatively large number of changes, a summary of which you will find below

MY Taxes (MOJE daně)

The main, and probably the most promoted, point of the amendment was the MY Taxes project, supposedly representing a way to “Modern and easY online communication and settlement of tax obligations with the Tax Office from the comfort of your home”.

What exactly does this project entail? In reality, this project was mainly about expanding the possibility of filing tax documents (tax returns, reports, or statements) using the existing tax information box (DIS). Taxpayers should also be able to obtain information from DIS collected in their respective files and selected information on their rights and obligations. It should be mentioned that the amendment’s statement of reasons did not specify what “selected” information should be available in DIS or when.

Introducing Digitisation

An equally important point of the amendment was the introduction of electronic devices aimed at motivating taxpayers to use such devices in order to simplify their administrative and communication activities with the tax administrator.

These could include:

  • Extending the deadline for filing income tax returns by one month for those taxpayers who are not legally required to file an audited financial statement or whose tax return is not processed and filed by a lawyer or tax advisor,
  • The tax administrator’s obligation to refund the returnable overpayment within 15 days, instead of the current 30 days, from the date of receipt of the request for a returnable overpayment refund, provided such a request is submitted electronically.

Deadline for Excess VAT Deduction Refunds

The subject of subtlety and very little media recognition was supposed to be the proposed amendment of Section 140 of the Tax Code. Among other things, the new wording of the section – “The day of receipt of the payment assessment by the taxable entity is deemed to be the last day, the fifteenth day after the last day of the deadline for filing the tax return…” – resulted in the extension of the deadline for an excess deduction refund by 15 days, i.e., to 45 days, as stated in the opening paragraph. The Ministry of Finance argues that a change to this provision is necessary for the tax administrator to be able to carry out its control activities on a high-quality level.

Tax Deduction Advance

On the other hand, a positive change should come in the form of the advance on VAT deduction, where the tax administrator is obliged to pay the VAT taxpayer the part of the excess deduction which is not the subject of verification. This provision was proposed on the basis of the Constitutional Court’s ruling from the end of February 2019, which stated that the withholding of the undisputed part of the excess VAT deduction by the tax administrator is a violation of property rights.

One can conclude that the missing parliamentary votes will not stop the MY Taxes project and the overall amendment of the Tax Code, which Alena Schillerová, the Minister of Finance, confirms by saying: “The possibility of electronic communication is important. Therefore, I will resubmit the compromise wording of the amendment. If digitisation is truly on the mind of the opposition, it will support the introduction of the online Tax Office.”.

Now, all we have to do is wait for the newly revised form of the amendment to appear in the Chamber of Deputies and see whether the Senate likes the “compromise” proposal, thus slightly speeding up the legislative process behind the amendment negotiations.