Czech Government Tax Liberation Package – Q&A

Here are the answers to your questions about how the measures of the Government of the Czech Republic mentioned in the Liberation Package will affect you. Connect Economic Group s.r.o. Tax Advisor Tomáš Navrátil and owner of CEG and Tax Specialist Šárka Pelikánová have answered your questions.

Why did the government introduce a liberalization package?

The government justifies the introduction of these measures to ensure the health and administrative security. The government official statement is:

• On the possibility of later payment of income tax, the Ministry of Finance states that “the purpose of remission of late payment interest is to limit the number of people at the tax offices, and to respond to staff shortages on the part of legal persons as a result of virus spread”

• Other measures include an increase in the tolerance of the least serious misconduct on the part of taxpayers, in circumstances where the spread of the virus reduces their ability to perform their duties, etc.

Therefore, it is better not to perceive the measures introduced by this package primarily as economic support from the Czech Government towards taxpayers, i.e. entrepreneurs. It will be better for you to understand all the measures and adapt yourself to them. When should I file my income tax return?

(Question from self-employed/company owners)

This year you can at any time until 1.7.2020

Normally the filing date is 1st of April. When filing the so-called deferral through the tax advisor 1st of July at the latest. But, thanks to an extraordinary government resolution, the possibility of filing the income tax return by the end of June was announced without any sanctions, and no need to apply for a postponement.

However, if you want your tax advisor to file your income tax return on your behalf and thus be then responsible for the professional part, we strongly recommend that you authorize your tax advisor to submit a tax return by 31st March.

The tax advisor or you simply send one copy of the ‘power of attorney’ via the data box (you do not have to go to the tax office). Of course, this service is subject to a fee. Remember that by filing a deferral by a tax adviser, you also have the option of postponing the reporting for your health insurance company and the DSSA until 3.8.2020

Is it better to file a tax return by April 1st, or wait until July 1st?

(Question from self-employed/company owners)

It depends on the individual situation of each entrepreneur. For some, this may be advantageous because they gain time. However, it should be noted that filing returns in due time may be more beneficial to the taxpayer in some situations (eg: the existence of a refundable overpayment or a change in the amount of the tax advance).

What if I have already filed my tax return?

(Question from self-employed/company owners)

Great, at least you are all done! Anyway, it also means for you that if you have not yet paid the tax, you have the opportunity to postpone the payment until the end of June.

What if I have already deferred my tax return to a tax advisor?

(Question from self-employed/company owners)

By the power of attorney you gave to your tax advisor, you ensured that your tax return would be properly filed. Therefore, your advisor is entitled to payment for this service. Be glad you made this decision, and we strongly recommend that all entrepreneurs take this opportunity. The accountant is not liable for professional accuracy.

At the same time, thanks to the postponement, you have the possibility to submit your overviews for the DSSA and the health insurance company until 3.8.2020.

What if I do not have to pay the tax?

(Question from most of you)

It is possible to ask the tax office for so-called tax deduction. Usually, this application costs 400 Kč. It is thanks to the Liberation Package that this fee will be waived if you apply until July 31, 2020.

The tax office will then decide on such an application within 30 days. (If it is currently making a faster decision, it cannot be estimated at all). In most cases, this results in the creation of a repayment schedule for the taxpayer.

But be careful – not even delaying tax is “free”!

The tax office always accesses the so-called interest rate. It is possible to apply for remission of this interest. On the basis of the Liberation Package, the interest on the sown? The amount will be justified and it is credible to prove that the delay in the payment of the tax was due to extraordinary measures.

Do I have to fill out a form to be relieved of my obligation to pay tax on time?

{Question from most of you)

Here it is necessary to differentiate between personal and corporate income tax for 2019 and other taxes.

For personal and corporate income tax, you can pay until July 1, 2020, without any sanctions and requests. If you would like to pay after this date, you would have to apply for a tax delay (mentioned above).

Also, you must file a similar application for other taxes (VAT, excise duty, etc.). For these, the deadlines for filing tax returns have not been extended.

Do I have to file a tax return with VAT in this situation? What happens if I do not or do not pay VAT?

{Question from monthly and quarterly VAT payer)

The Liberation Package does not directly take into consideration the filing of VAT returns. VAT returns and related payments must be made in a timely manner.

However, it is possible to apply for a delay of the tax (see above) or a waiver of the fine for late submission of the VAT return. This must be done actively by the taxpayer.

Do I have to file my tax return electronically?

{Question from self-employed)

If you do not have a data box, you do not have to file your tax return electronically. Legal entities, ie: all companies, non-profit organizations, etc., have the need to have a data box active and communicate only through it. Enterprising individuals, ie: all self-employed persons, have the possibility to set up a data box. If they do, they are obliged to use it for the entire duration of their trade.

Alternatively, you can submit your tax return by post, tax portal (followed by a physical submission within 5 days), or in person. However, the tax authorities have reduced their opening hours due to the high incidence of persons in offices. The Registrar’s Offices are now open only on Mondays and Wednesdays from 8 am to 11 am.

Is it better now to set up a data box so I don’t have to physically go to the tax office?

{Question from self-employed)

It is up to you, you can file a tax return by post or electronically through the tax portal. You can set up a data box if you want. You can create it at the post office or elsewhere at Czechpoint. In any case, expect that you will have to use it regularly going forward. At the same time, anything you receive via data box will be considered delivered, even if you don’t actually read the message.

Is it obligatory to file a report on social and health insurance by May 4, 2020? Or is the deadline also postponed to the end of June?

{Question from self-employed)

The government has not announced the possibility of later filing and payment of social and health insurance. It is therefore necessary to stick to the date 4.5.2020.

However, if you asked to postpone the tax return via your tax advisor (see above), then you have the option to file report latest on 3.8.2020.

Therefore, if your tax return is not filed by a tax advisor and you would not be able to file your reports or pay any arrears resulting from them, the only option is to use the applicable law:

• in the case of social insurance, this is the possibility of applying to your DSSA (OSSZ in the Czech Republic) for the so-called remission of a penalty. {The penalty would start to accrue at a later payment of the insurance). Social security administrations can only make a decision to waive a penalty payment if you have already paid the insurance debt. Furthermore, it is possible to apply for permission to pay insurance in consecutive instalments. The time of repayment of the debt is determined by the relevant DSSA based on your proposal. This is included in the application for the payment of instalments, provided that the repayment period must not exceed 36 months.

• Similarly, in the case of health insurance, there is the possibility of submitting an application for remission of a penalty by means of an application to remove the so-called “hardness of the law”. The payer may submit this application at the latest until the payment assessment comes into force. Such an assessment would prescribe a penalty payment. In assessing the application, account shall be taken, in particular, of serious health, social and financial reasons, substantiated by the applicant. Essential for waiver, reducing the penalty is also whether it is a rare or short-term “offense” of the payer. That is, whether it is a repeated case or whether the entrepreneur had otherwise good payment discipline. Even health insurance companies can then enable the debtor to repay the debt in instalments. You can apply for this in writing under the “Debt Instalment Agreement” under the Civil Code.