With the emergence of the pandemic, the government has announced a number of emergency measures which, although necessary to stabilise the current situation, have a significant impact on everyone, including businesses. Some entrepreneurs have benefited from the current situation, as their sales have increased, while many entrepreneurs, and the majority of them, it should be noted, have had to stop providing their services and/or have had to close their establishments. The lucky ones have “only” had to limit their services. However, this brings cash flow problems for entrepreneurs. This has reduced the income of businesses while leaving them with obligations to fulfil. These include tax obligations. Today we are going to have a look at income tax.
Generally, if a taxpayer wishes to file a tax return in 2020, he or she must do so by 1 April 2020, 4. unless he or she files the return through a tax adviser. In that case, the taxpayer can take advantage of the postponement of the deadline for filing the tax return and paying the tax until 1 July 2020. 7. 2020. In connection with the current situation regarding the pandemic, the Ministry of Finance responded to this situation by waiving the penalty for the late filing of tax returns and interest on the late payment of income tax. [1] Indirectly, the Ministry of Finance postponed the filing of tax returns and the payment of tax. Indirectly because it did not officially postpone the deadline for filing tax returns and paying tax, but rather waived the relevant penalties for the late filing of tax returns and/or the payment of tax. Therefore, if the tax is paid and the tax return filed by 1 July 2020, the person concerned will not be at risk of being subject to a penalty in the form of a fine and/or interest on a late payment. Due to the fact that the deadline has been postponed to 1 July 2020 on the basis of a decision of the Ministry of Finance, it cannot be relied upon that the aforementioned 8. 4. 2020. 5 working days of tolerance will be observed even within this postponed deadline, and it can be recommended that taxpayers fulfil their obligations by the set deadline. However, the decision is positive in the sense that it is not necessary to prove the reasons for the late filing of tax returns or payment of tax. Although the main purpose of the decision was to limit the concentration of people at the tax offices and post offices, it applies to all taxpayers, i.e. also to those who are obliged to file their tax returns via a data box.
By issuing the general pardon, the Ministry of Finance has thus resolved the issue of filing tax returns and paying income tax, but what about the related obligations? The issue of personal and corporate income tax advances was resolved by the Ministry of Finance in its decision of 3. 24 March 2020 [2], in which it made it clear that it would waive the claim to advance income tax due in June 2020 from all taxpayers. This pardon applies to persons who have a calendar year as their tax period. In cases where taxpayers have a fiscal year as their tax period or in other cases, it will be necessary to proceed in such a way that these persons will have to apply to the tax office for a different determination of advances or for an exemption from the obligation to advance tax.
Another issue related to filing a tax return is the submission of income and expenditure reports to the Czech Social Security Administration. These reports are to be filed no later than one month after the date on which the person should have filed the tax return. Given that, in effect, the deadline for filing tax returns has not been postponed, but only the penalties have been waived, the question arises as to the obligation to file those reports. According to the official opinion of the Czech Social Security Administration, it is possible to file the relevant reports and pay the contribution balance due, if any, without penalty until 3 August 8. 2020.[3]
The Ministry of Finance is also preparing an amendment to the law that would allow taxpayers to claim their tax loss retroactively over the previous two years. The loss should be allowed to be deducted from the tax base for the tax periods of 2019 and 2018, and would be claimed on the basis of an additional tax return for 2019 and 2018. [4]
The following opinion also appeared on the Aktuálně.cz server: “According to Martin Tuček, a tax specialist at BDO, the tax measures are a positive step. However, he pointed out that there was no promise from the tax administration that the late filing of the return would not be recorded as a breach of duty which would later affect the assessment of further applications for remission of tax or related fees.” [5] We cannot agree with this argument, for the reason that such an interpretation would completely negate the purpose of the introduced measure. The tax authorities will thus have to take into account the extraordinary circumstances that led to the late filing or payment of the tax and the fact that the Ministry of Finance itself presents this measure as a postponement of the deadline for filing a tax return, as expressed by the Minister of Finance, Alena Schillerová, in a tweet on 16 March 2020. [6] This will not be considered a serious violation of tax regulations that affects the decision to waive the tax or related fees.
It is clear that the measures adopted will give entrepreneurs the opportunity to gain more time to find the necessary funds to pay the relevant tax, but even these measures are not universally beneficial. Entrepreneurs can now be advised to issue all types of vouchers for their services, which could help them to obtain the necessary funds.
If the above is still not enough, there is the possibility to ask the tax office to determine the tax differently or to grant an exemption from the obligation to advance the tax for the entire tax period. Furthermore, the Tax Code offers the possibility of postponing the payment of the tax (its payment or spreading out the payment in a payment plan). You must apply for a tax postponement and meet one of the statutory grounds. These grounds include the fact that immediate payment would cause serious harm to the taxpayer by, for example, limiting the viability of the business or from the loss of key employees or contracts. [7] It is positive news that the applications are currently exempt from the administrative fee, provided that they are submitted by 31 July 2020. [8]
[1] Decision on remission of interest, fees and other charges related to tax and administrative fees due to an extraordinary event of 16 March 2020, Ref. No. MF-7108/2020/3901-2.
[2] Decision on remission of interest, fees and other charges related to tax, tax prepayments and administrative fees due to an extraordinary event of 24 March 3. 2020, Ref. No. MF-7633/2020/3901-2.
[3] https://www.cssz.cz/web/cz/koronavirus-a-osvc-dotazy-a-odpovedi.
[4] https://www.mfcr.cz/cs/aktualne/tiskove-zpravy/2020/pruvodce-pro-danove-poplatniky-v-souvisl-37856.
[5] Virus package: Deferral of loan repayments and taxes. How the state and banks will help people and companies. Available at: https://zpravy.aktualne.cz/finance/coda-eko-ulevy/r~a70adb3e646b11ea9d74ac1f6b220ee8/v~sl:96c4715fa9cdf5fd66114f347d41e7d1/.
[6] https://twitter.com/alenaschillerov?ref_src=twsrc%5Egoogle%7Ctwcamp%5Eserp%7Ctwgr%5Eauthor.
[7] https://www.financnisprava.cz/assets/cs/prilohy/d-danovy-system-cr/letak.pdf.
[8] Decision on remission of interest, fees and other charges related to tax and administrative fees due to an extraordinary event of 16 March 2020, Ref. No. MF-7108/2020/3901-2.
