The Czech Government will provide tax breaks in relation to the spread of the coronavirus diseas, which should help entrepreneurs to cope with the loss of income. e State will provide tax breaks in relation to the spread of the coronavirus contagion which should help entrepreneurs to cope with their loss of income.
In Financial Newsletter No. 4/2020, the Minister of Finance’s decision to waive the tax penalties and administrative fees due to an extraordinary event and the new D-44 Instruction of the General Financial Directorate to waive default interest, interest on a deferred amount and penalties for failure to submit a control statement were published. The media proclamation of business-friendly measures has thus taken its official form. What are the most important ones?
Tax entities which are not subject to a statutory audit or on whose behalf the tax return is not submitted by a tax advisor will most appreciate the fact that the fine for late tax statements and default interest is waived, provided that the tax return is filed or, more precisely, the tax is paid, no later than on 1 July 2020.
This means that those who planned to file the tax return before 1 April 2020 do not have to hurry to seek a tax advisor to postpone the tax payment. The deadlines for refunding tax overpayments will, of course, not be affected by the Minister of Finance’s decision.
If the taxpayer fails to meet the deadline, he/she loses the right to the waiver and the relevant penalty will be assessed to him/her in full. Therefore, taxpayers wishing to take advantage of this option should bear in mind that the day of payment is considered to be the day on which the tax is credited to the tax administrator’s account. In this case, the normal tolerance of five working days will not apply. The waivers are independent of each other; therefore, a failure to pay the tax does not extinguish the right to a have the fine for the late tax statement waived.
Another helpful step is the waiver of fines for failure to submit a control statement in due time, which the taxpayer submitted before he/she was asked to do so by the tax administrator. This fine is set by law at CZK 1,000 and is not imposed in the case of the first violation in a calendar year. The waiver is limited to the period from 1 March 2020 to 31 July 2020.
For the remainder of the calendar year, taxpayers should be aware that the waiver of the fine for the first late submission of a control statement may also fall within the period when the fines are waived. Similarly, excessive delay in submitting a control statement cannot be recommended. As soon as the request for its submission is received, the fine cannot be waived pursuant to the decision of the Minister of Finance.
Instruction D-44 adds extraordinary measures related to the spread of coronavirus to the relevant guidelines as a justified reason for waiving default interest, interest on a deferred amount and fines for failure to submit a control statement. If the taxpayer proves in a sufficiently credible manner that his/her delay is due to the application of extraordinary measures, the interest or fine will be waived in full. The Instruction is limited to the period from 1 March 2020 to 31 July 2020 in relation to the waivers of fines for failure to submit a control statement.
In particular, VAT payers who, due to the closure of their establishments, will not have sufficient funds to pay the tax could benefit from the D-44 Instruction.
In the second wave of tax reliefs, all taxpayers’ advance income tax payments for June were waived and so they will not have to pay them. Given that a decline in economic performance is almost certain, taxpayers should apply for a reduction in advance payments on income tax. Another measure in the second wave is the general waiver of the fine for filing a real estate acquisition tax return late and the related interest on late payment. Taxpayers with a duty to file a tax return in the period from 31 March 2020 to 31 July 2020 will be allowed to file a tax return without penalty and pay the tax advance until 31 August 2020. As in the above cases, it is recommended to meet this deadline.
Despite the long-standing refusal by the Minister of Finance to postpone the 3rd and 4th phases of EET (Electronic Sales Records), the Ministry of Finance has suspended the obligation to electronically record sales for all phases of EET while the state of emergency lasts and for three months after it ends.
These measures are certainly welcome. However, the main source of financial burden for self-employed people is the payment of social security and health insurance contributions. The government has already passed a bill to allow self-employed people to be exempt from paying the minimum mandatory payments for pension and health insurance for 6 months. Self-employed people will therefore pay advances equal to the difference between their normal advance and the minimum advance. It is not a flat waiver of advance payments. If this regulation during a state of legislative emergency passes through Parliament, it will be effective from March.
We will see how the situation continues to evolve. New measures are issued almost daily and further steps to support the economy and entrepreneurs can be expected.
Financial Newsletter No. 4/2020