Handbook for taxpayers

Handbook for taxpayers in connection with coronavirus disease

The taxpayers should prefer other contact than personal contact with the Financial Administration and use remote forms of communication as much as possible, i.e. file the tax returns using data box, using application Elektronická podání pro Finanční správu (Electronic filing for the Financial Administration) or postal services.

What can taxpayers do?

Since Monday 16 March 2020, the taxpayers may defer certain payments concerning applications for deferral of tax payment, requests for adjustment (reduction) of prepayments or exemption from their payment, requests for relief of penalties in case of delay, requests for extension of deadlines for certain tax return without payment of an administrative fee. Furthermore, since Wednesday 15 April 2020, the taxpayers can apply for a certificate of non-indebtedness or for a confirmation of the status of the personal tax account without paying an administrative fee. The taxpayers will now also be allowed to claim their tax loss retroactively in previous years.

Deferral of tax payment or tax payment in instalments

Information of the General Financial Directorate to the deferral of tax payment is available HERE (Information in Czech).

In the case of an application for deferral of tax payment, all applications submitted from 16 March to 31 December 2020 are relieved of administration fees.

The Instruction, which was published in the Finanční zpravodaj (Financial Bulletin) No. 9, provides relief of interest on arrears and interest on deferral of tax payment in cases where interest arose from 12 March 2020 to 31 December 2020 and which deferral of tax payment or payment of arrears in instalments were permitted on the basis of an individual request in connection with coronavirus (COVID-19).

Deferral of prepayments of tax on payroll income and withholding tax at a special tax rate on personal and corporate income

The Methodological Instruction to deferral of tax prepayments is available HERE (Information in Czech).

In the case of an application for deferral of prepayments and tax on payroll income and withholding tax, all applications submitted until 31 July 2020 are provided relief of administration fees.

Adjustment (reduction) of prepayments on income tax or exemption from their payments

According to General Pardon No. 2, a relief of prepayments on personal and corporate income tax is provided for taxpayers, specifically the relief of the first half-yearly advance or the second quarterly advance due on 15 June 2020. Other taxpayers who use, for example, a business year may, in justified cases, apply for relief individually. The relief of prepayments does not provide a relief of the tax itself. In the case that the prepayment was paid by the taxpayer as of 15 June 2020 and a refundable overpayment arises on the basis of this payment, it is subject to the standard procedure pursuant to Sections 154 and 155 of the Tax Code.

Relief of penalties in case of delay

Relief of penalties in case of delay can be requested according to the instructions published by the General Financial Directorate in Finanční zpravodaj (Financial Bulletin) No. 4/2020, No. 5/2020, No. 6/2020, No. 7/2020 and No. 9/2020.

The relief of a penalty for a delayed tax return occurs widely for all tax subjects without the need to individually apply for its relief:

1. If, on the basis of an individual request, the tax administrator at least partially provides relief of interest on arrears or allows deferral of tax payment of tax due to COVID-19.
2. In the case of income tax returns for the 2019 tax period having the legal deadline for filing tax returns on 1 April 2020, if the tax return is filed no later than 18 August 2020. The same applies to taxpayers having the legal deadline for filing tax returns on 1 July 2020, with the exception of entities competent to the Specialized Tax Office.
3. In the case of tax return for real estate acquisition tax, where the deadline for filing a tax return expires in the period from 31 March 2020 to 30 November 2020, if this tax return is filed no later than 31 December 2020.
4. In the case of clearance of withholding tax on payroll income in the form of prepayments pursuant to Section 38j (4) of the Income Tax Act, if the clearance for the 2019 tax period is filed no later than 31 May 2020.
5. In the case of clearance of withholding tax at a special tax rate pursuant to Section 38d Paragraph 9 of the Income Tax Act for the tax period of 2019, if this clearance is filed no later than 1 July 2020.
6. The penalty pursuant to Section 38w of the Income Tax Act for non-notification of exempt income pursuant to Section 38v for the 2019 tax period to natural persons shall also be relieved, provided that the notification is filed no later than 18 August 2020.
7. In the case of filing a supplementary tax return for the 2018 tax period, if in the 2019 tax period there was a change in the method of claiming expenses, starting accounting books, keeping tax records or keeping records of income and expenses and if a supplementary tax return is filed no later than 18 August 2020.
8. Penalties for delayed filing of VAT returns will be addressed as follows:
   Without the call of the tax administrator, penalties for delayed filing of a control statement in the amount of CZK 1.000 incurred in the period from 1 March to 31 July 2020 will be automatically relieved. Some additional penalties for delayed filing of the control statement during this period will be relieved at the payer´s individual request for reasons related to COVID-19.
9. In the case of delayed submission of the VAT return, the procedure will be as follows:
   In addition to the relief of penalties for delayed submitted tax return widely introduced for all tax subjects under the conditions mentioned above, there is an automatic relief of penalties for delayed tax returns also for taxpayers who were, at their individual request, at least partially provided relief of the penalty for no filing a control statement (CZK 10 000, 30 000, 50 000) for reasons related to COVID-19. This is provided that this delayed tax return will be filed no later than on the day on which the related delayed control statement was filed.

The relief of penalties resulting from delayed payment of tax (interest on arrears or interest on deferral of tax payment) occurs on a generalised basis for all taxpayers without need to individually apply for their relief:

1. If, on the basis of an individual application, the tax administrator allowed the deferral of tax payment or its distribution to instalments due to COVID-19, and this interest arose from 12 March 2020 to 31 December 2020.
2. In the case of payment of income tax for the tax period of 2019, the due date of which will be on 1 April 2020, if this tax is paid no later than 18 August 2020. The same applies to taxpayers with income tax due on 1 July 2020, with the exception of the entities competent to the Specialized Tax Office.
3. In the case of payment of real estate acquisition tax, the due date of which will occur within the deadline for filing a tax return in the period from 31 March 2020 to 30 November 2020, if this tax is paid until 31 December 2020.
4. In the case of payment resulting from the clearance of income tax pursuant to Section 137 (2) of the Tax Code for the 2019 tax period, if the clearance is also associated with the obligation to pay tax, if this tax is paid no later than 1 July 2020.
5. In the case of filing a supplementary tax return for the 2018 tax period, if in the 2019 tax period there was a change in the method of claiming expenses, starting accounting books, keeping tax records or keeping records on income and expenses and if the tax is paid no later than 18 August 2020.
6. In the case of payment of road tax prepayments due by 15 April 2020 and by 15 July 2020, if they are paid no later than 15 October 2020.

Relief of administrative fees

For all applications for the relief of penalties in the event of delay submitted until 31 December 2020 is newly provided relief of the administrative fees paid to the Financial and Customs Administration.

Information of the General Financial Directorate about relief of interest is available HERE (Information in Czech).

Certificate of non-indebtedness or confirmation of the status of the personal tax account

In the case of issuing a certificate of non-indebtedness or confirmation of the status of the personal tax account, for all applications submitted from 15 April to 31 December 2020 is provided relief of administrative fees, and the taxpayer does not have to prove the purpose for which the certificate of non-indebtedness is required.

How is it with the Electronic Sales Control System – Registration of Sales (EET)?

The amendment to the Act on Registration of Sales (No. 263/2020 Coll.) was published in the Collection of Laws of the Czech Republic and is effective beginning 3 June 2020. The amendment in accordance with the law on EET extends the deferral of the selected requirements until the end of this year, i.e. until 31 December 2020. This is applicable for both, subjects that fall within the first two phases of EET (i.e. wholesale, retail trade, catering and accommodation services), and for subjects that should have started keeping records on sales beginning 1 May 2020. Therefore, the requirement to keep records on sales arises to all subjects beginning 1 January 2021 regardless the phase of EET. The suspension of complying with the requirements set out in the Act on Registration of Sales applies to all regimes of keeping the records on sales (i.e. normal, simplified and special regime).

What does the deferral of EET mean?

The suspension of EET means that until the end of 2020 the taxpayers are not required to send data on sales to the Financial Administrator, they are not required to issue receipts in accordance with the Act on Registration of Sales and they are not required to place information announcement. If the validity of the certificate already expired or will expire in the near future the taxpayers may postpone the replacement of the certificate and take the necessary steps before relaunching of the registration of sales (EET). Similarly, it is possible to postpone submitting the request for authentication data assignment or request for registration of sales in the special regime. Therefore, we recommend to postpone the personal visits to the tax authorities’ offices in order to collect the authentication data, submit a request for registration of sales in the special regime or to collect sales receipts.

The recommendation applies also to taxpayers that intend to apply personally for authentication data as they have forgotten or lost their original data and they cannot log in the web application “Elektronická evidence tržeb” (i.e. Registration of Sales), e.g. in order to generate new cash register certificate or its replacement for the expired cash register, or to announce data change about the place of business. The taxpayers are recommended to use remote forms of communication when addressing the tax authorities.

If the taxpayer has data box he can ask for authentication data electronically, using “Daňový portal” (i.e. Tax portal) via our form “Žádost o autentizační údaje do EET” (i.e. Application for authentication data in EET). The form has to be signed using login information for the data box that was used for signing the application.

The taxpayers that cannot file the application electronically or for whatever reason do not use this option, and at the same time are interested in collecting the authentication data, may collect the data personally at whatever local tax authorities’ office. We would like to notice that it is necessary to ask for authentication data before accepting the first registered sales.

The applications for registration of sales in the special regime that are filed beginning the effectiveness of the amendment (i.e. from 3 June 2020 to 30 September 2020) will be handled by the tax authorities after 1 October 2020. Applications filed before the effectiveness of the amendment will be handled continuously. The tax authorities will agree with the taxpayer on the way of delivering the decision and the sales receipts, usually in the frame of protocoled negotiations. If this way of delivering the decision will not be possible, the situation will be solved by correspondence. The taxpayers that already received the permission to register sales in the special regime will not be required to submit new application. However, they are required to monitor if they still meet conditions for the special regime (VAT non-payer, 2 employees at maximum, the amount of recorded sales for 4 immediately preceding calendar quarters does not exceed CZK 600 000 and expected amount of the income in 12 immediately succeeding months does not exceed CZKv 600 000). If the conditions for special regime are not being met, it will be necessary to switch to normal regime.

The taxpayers that already have authentication data, cash register certificate or sales receipts in their disposal should note that they are still required to handle it in a way preventing abusive practices

In spite of the deferral, EET registration system is currently full-functioning. If the taxpayers want to record the sales, they can do it. However, they will keep the records on a voluntary basis, beyond their duties. The taxpayers do not have to log out from the EET system. The taxpayers are not required to announce the suspension of EET during the deferral to the tax authorities.

What are we preparing for the taxpayers?

The Ministry of Finance has prepared an anti-crisis package of tax changes that shall mitigate the unfavourable economic impact of the pandemic disease on entrepreneurs and entities.

The package includes an amendment of the Income Tax Act, according to which the taxpayers will be newly allowed to deduct their tax loss retrospectively in the 2 preceding years. It will enable to deduct the loss on personal and corporate income tax for taxable periods beginning in 2020 from the tax base of taxable years 2019 and 2018 at the amount of 30 million CZK at maximum. Therefore, the taxpayers may get back the tax paid for these years. It will be possible to claim the loss based on supplementary tax returns for 2019 and 2018 taxable periods. The arisen overpayment on the income tax will be returned based on request. For 2019 it will be possible to apply so-called estimate of tax loss expected for 2020.

In addition, the package reduces VAT at accommodation services, admission fees for cultural and sports events, entrance fees to sports fields (including fare for ski lifts) and entrance fees to sauna and other similar facilities. In all of the cases the VAT rate is decreased from 15% to 10%.

Municipalities will be allowed to exempt tax on real estate at wider scope of emergency situations.
Currently, the municipalities are allowed to accept full or partial tax exemption on real estates based on a binding measure of general decree in the case of real estate that were affected by natural disasters (e.g. flood, windstorm, extreme drought). Newly, it will be possible also for the case of a pandemic disease, crisis prevention measures in accordance with the Emergency Act or industrial accidents. The exemption will be possible also retroactively.

Road tax for vehicles with the maximum allowed weight exceeding 3.5 tons will be decreased by 25%. The change will apply retroactively, from the beginning of 2020, which will lead to reduction of prepayments for this year’s tax liability.

What do we recommend to the taxpayers?

The taxpayers should prefer other contact than personal contact with the tax authorities and use remote forms of communication as much as possible, i.e. to file the tax returns using data box, using application Elektronická podání pro Finanční správu (Electronic filing for the Tax Administration) or postal services.

What can the taxpayers expect?

The taxpayers can expect friendly policies of the tax authorities. Due to this reason the tax authorities modify its instructions and has issued a new directive D-44, which extends directives D-21 and D-29 for further justifiable reason to measures against spreading COVID-19. The full wording of the general pardon (so called “Liberal package”) and Directive D-44 are available at Finanční zpravodaj (the Financial Bulletin) no. 4/2020, 5/2020, 6/2020, 7/2020 and 9/2020.

Where the taxpayers can find further information?

New telephone information lines were set up, the lines operate during work days from 9-17.00 (9 a.m. to 5 p.m.) and can be used for answering questions related to current situation measures. The crisis info line of the Financial Administrator is available at telephone number 225 092 392. Overview of each tax regulation, its impact and other regularly updated information regarding COVID-19 are also available at special pages of Ministerstvo financí (Ministry of Finance) and Finanční správa (Financial Administration).