Subsequent filing of tax returns, employee billing and notification of exempt income

June 15, 2020  |  Taxes

Tax returns for personal and corporate income tax can be filed without a penalty until 18 August 2020. Likewise, the income tax calculated under such returns will be payable until 18 August 2020. However, this option does not apply to entities which report to the Specialized Tax Authority. Natural persons can file a notification of exempt income in excess of CZK 5 million until 18 August 2020. The deadline for filing employment income tax statements was prolonged to 31 May 2020.

Income tax returns can be filed and the tax paid until 18 August 2020

On 10 June 2020, the Ministry of Finance published a decision in Financial Bulletin 9/2020 to waive the fine for not filing a tax return and paying late-payment interest on time. The decision concerns individuals and corporations alike and applies both to returns which are due to be filed by the statutory deadline of 3 months after the end of the tax period (i.e. this year, until 1 April 2020 in the case of a calendar year) and to returns filed within the 6-month deadline. (i.e. until 1 July 2020). Sole proprietors (self-employed individuals) must pay attention to their filing deadlines.

Income tax returns can therefore be filed without a penalty and the tax paid until 18 August 2020. ATTENTION: the tax return must actually be filed, and the tax paid, by this date. The five-day grace period does not apply in this case; 18 August 2020 is the LATEST deadline by which the return must be filed and the tax credited to the Tax Authority’s account. Otherwise, standard penalties will be imposed and will start running five business days after the expiry of the original statutory deadline (i.e. from 8/9 April, or 8/9 July).

However, taxpayers who report to the Specialized Tax Authority are required to file their return and pay income tax by the statutory deadline, i.e. by 1 July 2020 (here, the five-day grace period applies by default).

In this context, it is worth mentioning that the administrative fees have also been waived in the case of individual applications filed for deferment and payments of tax in instalments, and when an application for waiver of late-payment interest is filed in the period from 1 August 2020 to 31 December 2020. Late-payment interest and interest on the amount of tax deferred due to the spread of coronavirus accrued between 12 March and 31 December 2020 will also be waived. This may be relevant for taxpayers who are unable to pay their income tax even on 18 March 2020 and will have to apply for an individual deferral.

Sole proprietors (self-employed individuals) should keep in mind that the Czech government’s previous mitigation measures made it possible for them to submit their 2019 social security and health insurance income & expenditure statements by 3 August 2020 without any penalty. The Ministry of Labour announced in the media, however, that it was also working towards extending the deadline for submitting the statements until 15 September 2020. Specifically, in the case of social security, this deadline will have to be met since it is a precondition for abandoning sanctions retroactively from the statutory deadline. However, the latest information indicates that theoHHo deadline for sole proprietors to file their health insurance statements will still be 3 August 2020  (however, failures, if any, to pay health insurance would not be penalized before 22 September 2020).

There will also be no penalty for individuals who fail to file an additional return on time if they are changing from the flat-rate expenses method to the actual expenses method or vice versa.

Individuals who:

  • switch from the actual-expenses method to the flat-rate method in calculating their business (self-proprietorship) income or lease income; or

  • have commenced accounting, tax record keeping or income-expenses record keeping (after they had been applying flat-rate expenses in the previous tax period)

are obliged to file an additional tax return for the previous tax period, in which they will adjust the tax base for items stipulated by law. Additional returns are generally not associated with penalties as long as they are filed and the tax paid by the statutory deadline for the period in which the particular change occurs.

The Finance Minister’s decision also harmonized the reduction of penalties for additional returns filed on the grounds outlined above. Therefore, if the return is filed and the tax paid by 18 August 2020, the penalty for not filing the return or not paying the late-payment interest on time (for late tax payment) will not apply.

The filing deadline for exempt income notifications is 18 August 2020

Individuals are required to file a notification to the Tax Authority by the deadline for filing the tax return if they received income in excess of CZK 5 million in the previous year which is exempt from tax. This duty also applies to individuals who are not required to file a tax return (for example, employees or retired individuals), and is typically established, for example, as a result of inheritance, family donations or the sale of property for which the exemption period has expired (real estate, business shares, artwork, etc.).

Notifications can be filed until 18 August 2020 without any penalty. The deadline must be met, as the “substitute” filing deadline is a precondition for not applying penalties. The penalties depend on the value of income and can be relatively high.

The deadline for employers to file employment income tax statements is 31 May 2020

The Finance Minister’s decision releases taxpayers who file an employment income tax clearance statement (the tax being collected by deduction in the form of advances) from the duty to pay a penalty for late filing of the 2019 statement provided it was filed by 31 May 2020.