Czech Government Approves Mitigation Measures Related to Coronavirus Emergency UPDATE02

In connection with the coronavirus emergency, the Czech government has approved a liberation tax package aimed at mitigating the consequences of the emergency. What does it contain?

The Government approved a general waiver of the fine for late filing of corporate and personal income tax returns and a waiver of late payment interest on relevant tax for taxpayers who would be otherwise obliged to file their tax returns and pay tax by 1 April 2020, for the period until 1 July 2020. However, the tax return will have to be filed and the tax paid no later than 3 months after the original deadline for submitting the tax return, typically by 1 July 2020. The measure also applies to withholding tax settlement, which is due to be filed on 1 April 2020, as well. Taxpayers will not be required to apply individually for remission of fine or late payment interest or to prove a link with COVID-19.

Please note that the deadlines for filing summary reports to the Czech Social Security Administration and health insurance institutions imposed on sole proprietors (self-employed entrepreneurs) depend on the deadline for their personal income tax returns. These deadlines expire on 4 May 2020. The deadline for paying any 2019 social security and health insurance underpayments is 8 days following the submission of the 2019 reports. If the reports are not submitted by 4 May 2020, then the underpayments must be paid by 12 May 2020. Please note that late submission of reports and late payment of social security and health insurance underpayments are subject to penalties, since the above-mentioned general waiver of tax interest and charges only applies to income tax and not to social security and health insurance.

To the date, some health insurance institutions have already announced (on their websites) that they would tolerate 2019 reporting to be filed by 3 August 2020. Therefore, we recommend that all self-employed entrepreneurs contact their health insurance companies to obtain relevant information. The Czech Social Security Administration did not extend the 2019 reporting deadline. It advises self-employed entrepreneurs to submit all forms and other important documents either electronically or through mailboxes usually located at the entrance to local branch offices.

In addition, the government approved a waiver of late tax claims in all cases (for example, filing a value added tax return) where the taxpayer individually applies for a waiver of interest or for a tax payment deferral and proves the grounds that must relate to the coronavirus epidemic.

Approval was also granted for an automatic waiver of CZK 1,000 fines for late submission of VAT control statement, which may be incurred in the period from 1 March 2020 to 31 July 2020. Other penalties for late submission of VAT control statement (CZK 10,000, CZK 30,000 and CZK 50,000) will be waived upon individual requests filed by taxpayers, who will have to demonstrate the grounds that must relate to the coronavirus epidemic.

Moreover, the administrative fee has been waived for applications for tax deferral or tax instalment schedule and applications for late-payment interest remissions or deferred-tax interest remission and applications for remission of a fine for a failure to submit the VAT status report; this will apply across the board until 31 July 2020 without the tax party being required to file a request therefor.

The Ministry of Finance granted a three-month pardon for the launch of the third and fourth stage of electronic sales records (“EET”) (as of 1 May 2020). During the grace period, businesses that are to newly register sales will not be fined. This measure is designed to relieve taxpayers from having to deal with the new EET obligation and to avoid their going in person to the tax authorities to ask for authentication data. As of 1 May 2020, the Financial and Customs Administration will be as lenient as possible, will serve solely an advisory function, and will not impose any penalties if the newly registered business fails to get ready for the registration on time.

Furthermore, please note the general waiver of tax penalties due to this current situation does not apply to deadline for filing a report of exempt income. Individuals who received any income exempt from personal income tax exceeding CZK 5 million in 2019 and whose deadline for filing the tax return is by 1 April 2020 (their personal income tax return is not prepared and filed by a tax advisor) are obliged to file a report on exempt income by 1 April 2020 with no exceptions. Individuals face the risk of high penalties in case of late filing of the report.

Czech Financial Administration published on its website a guide to help taxpayers with their questions related to the current situation and liberation tax package. Furthermore, the Czech Financial Administration launched a crisis line at 225 092 392 to which all taxpayers can call with their questions about how to proceed correctly in individual situations. One hundred of methodologists of the Czech Financial Administration will answer the question.

The coronavirus emergency-related tax measures are subject to updates and amendments, where necessary.