From the beginning of 2011, a new Act No. 280/2009 Coll., the Tax Code (hereinafter referred to as the “Tax Code”), came into force, which replaced Act No. 337/1992 Coll., the Act on Tax and Fee Administration, as amended (hereinafter referred to as the “Act on Tax and Fee Administration”). The purpose of this legal circular is to outline briefly how this change will affect entrepreneurs and other taxpayers. The main changes are primarily in the areas of time limits, representation, penalties, tax remission, tax audits and appeals.

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Time Limits

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According to the Tax Code, a time limit determined by weeks, months or years begins to run on the day following the day on which the event determining the commencement of the time limit occurred. This change has resulted in the day for filing the income tax return being moved from the last day of March by one day, to 1 April 2011. In the event that the taxpayer’s tax return is prepared and filed by a tax adviser or if the taxpayer has a statutory obligation to have the financial statements audited by an auditor, the income tax return must be filed and the tax paid by 1 July 2011. The settlement of tax on income from dependent activity must be filed by 1 March 2011.

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Representation

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The Tax Code also brings changes in the area of representation. The most important change compared to the Act on Tax and Fee Administration consists in the concept of the scope of the power of attorney. Under the Act on Tax and Fee Administration, in the case of an unclear power of attorney, there was a fiction that it was an unlimited power of attorney. The Tax Code has abandoned this concept and introduced a provision that the principal is obliged to define the scope of authorisation so that it is clear to which acts or proceedings the power of attorney relates. If such definition is not sufficiently precise, the tax administrator shall call for the power of attorney to be amended. The Tax Code has also abolished dual service; now service will only be effected on the representative, within the scope of his representation. Finally, it should be added that only one representative may be appointed for one matter.

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Penalties

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The Tax Code newly introduces a penalty for late filing of a tax return. If a taxable person fails to file a tax return at all or files it after the prescribed time limit with a delay of more than five days, it becomes liable to pay this penalty. The penalty is set at 0.05% of the assessed tax for each day of delay up to a maximum of 5% of the assessed tax. The taxable person will always have to pay at least an amount of CZK 500 and will have to pay a maximum amount of CZK 300,000. This penalty cannot be remitted.

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Tax Remission

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According to the Tax Code, only the Minister of Finance is authorised to remit tax. The first reason for such remission may be discrepancies arising from the application of tax laws, and the second reason may be extraordinary events, particularly natural disasters. It will no longer be possible to submit individual applications and there will be no individual decisions on tax remission. It should be mentioned that individual tax laws may have the method of tax remission regulated in a different manner than is regulated in the Tax Code. Individual applications for tax remission may continue to be submitted, for example, in the case of inheritance tax, gift tax and tax on transfer of immovable property, or also in the case of levies for breach of budgetary discipline.

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Other Changes

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The tax administrator is now obliged under the Tax Code to give reasons for the majority of decisions it issues. The Tax Code has also introduced limitations on the repetition of tax audits. It is now newly possible to repeat a tax audit only upon discovery of new facts, evidence or upon a change in the taxable person’s assertions. The last important change concerns appeals. In the case of an appeal against an assessment of tax beyond the taxable person’s assertions, the due date of the tax is postponed until the moment of service of the decision on the appeal.

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Conclusion

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The Tax Code has brought many changes, some are to the benefit of the taxable person, some are, on the contrary, to its detriment. The taxable person should primarily be careful about the new penalty for late filing of a tax return.

This text was originally prepared by the law firm Mašek, Kočí, Aujezdský in cooperation with the civic association Association for Electronic Commerce (APEK) as legal circular No. 2/2011 intended for members of this association.

This text was translated from Czech to English using an AI translator.