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 briefly outline how this change will affect entrepreneurs and other taxpayers. The main changes are primarily in the areas of time limits, representation, penalties, remission of tax, tax audits and appeals.

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Time Limits

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According to the Tax Code, a time limit determined according to 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 they have a statutory obligation to have their financial statements audited by an auditor, they must file the income tax return and pay the tax 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 lies 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 presumption 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 determined with sufficient precision, the tax administrator shall call for the power of attorney to be amended. The Tax Code has also abolished dual service; now service will be effected only on the representative, and only to the extent of their representation. Finally, it should be added that for one matter there may be only one representative.

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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 tax subject 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 tax subject 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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Remission of Tax

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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 acts 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 real estate transfer tax, 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 provide reasons for most decisions that it issues. The Tax Code has also introduced a restriction on the repetition of tax audits. It is now possible to repeat a tax audit only upon the discovery of new facts, evidence or upon a change in the tax subject’s assertions. The last important change concerns appeals. In the case of an appeal against the assessment of tax beyond the scope of the tax subject’s assertions, the due date for the tax is postponed until the moment when the decision on the appeal is served.

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Conclusion

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The Tax Code has brought many changes, some are to the benefit of the tax subject, some are to its detriment. The tax subject should above all be careful of 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.