The Financial Bulletin No. 18/2022 published Amendment No. 9 to Guideline GFŘ-D-29 file no. 111096/16/7100-20116-050484 issued by the General Financial Directorate to waive fines for failure to file an audit report (the “Guideline”). We informed you about the latest amendment to the Guideline by Amendment No. 8 in our article.

Amendment No. 9 to the Guideline introduces the following changes:

• In Article I. – General Provisions, a new paragraph has been added in relation to the amendment to the VAT Act for 2023 (Act No. 366/2022 Coll.) regulating half the amount of the fine, which reads as follows:

“In compliance with the stipulation of article 101h(2) of the VAT Act, as amended from 2023, the amount of penalties under article 101h(1)(b) to (d) of the VAT Act is half the amount of the penalty if:

• the payer is a natural person,
• on the date, on which the obligation to pay the penalty arose (i.e. the infringement occurred in relation to the control report), the taxable period of the payer is a calendar quarter (i.e. a legal entity with a quarterly taxable period), or
• the payer is a limited liability company with one shareholder, who is a natural person; for the purposes of assessing whether these conditions are met, the relevant date is:

(1) the first day of the calendar quarter, in which the obligation to pay the penalty arose (i.e. a breach of the obligation in relation to the audit report occurred), or

(2) the date of incorporation of the company, if this occurs after the record date referred to in point 1.”

• The Guideline further specifies the decisive moment for assessing fulfilment of the conditions for excluding the possibility of waiver under article 259c(2) of the Code of Tax Procedures for individual partial situations.
• The text referring to the original GFD-D-47 Guideline of 8 March 2021 on the waiver of tax accessories No.15921/21/7700-10123-050167 has been updated and replaced with a reference to the new GFD-D-58 Guideline of 23 November 2022 No.49837/22/7700-10123-050167, which we also informed you about
• With regard to the substantive assessment of the extent of the waiver of the fine, the procedure is unified with the guideline GFD-D-58 on the waiver of tax accessories, where Amendment No. 9 also responds to the judiciary conclusions expressed by the expanded chamber of the Supreme Administrative Court in the resolution of 26 January 2021, file no.1 Afs 236/2019-83, i.e.:
  • In assessing the extent of the waiver of the tax accessories, the administrator is entitled, in accordance with recent administrative case law, to take into account the nature, intensity or other circumstances of the so-called source conduct, i.e. the conduct, which is the factual and legal basis of the tax accessory, the waiver of which is requested and which gave rise to the accessory.
  • If the tax administrator finds that the nature, intensity or other circumstances of the source conduct (e.g. abuse of law, tax concealment, knowing participation in tax fraud, etc.) preclude the waiver of the fine, then the decision shall reject the request, even though the violation would be irrelevant from the point of view of the condition under article 259c(2) and (3) of the Code of Tax Procedures.
  • The tax administrator is entitled to make this conclusion in view of the principle that no one can benefit from his own dishonesty, among other things.
  • If it is not appropriate to reject the request on the grounds of defective source conduct (see above), the tax administrator will proceed to a further assessment of the request for waiver of the fine for failure to submit an audit report in compliance with the existing rules in the Guideline.

Thus, we can summarise that in case of tax assessment due to abuse of law, tax concealment, conscious participation of the tax subject in tax fraud, etc., it is necessary to take into account the possibility that the tax administrator will not waive the related penalty.

In the table of “Justifiable reasons”, only the following partial changes have been made: 

• In the case of a justifiable reason related to the functionality of the tax portal (point 10 of the table “Justifiable reason”), after the phrase “The Financial Administration of the Czech Republic or the Ministry of the Interior of the Czech Republic have notified the non-functionality on their side”, the text in brackets has been added, saying “even retrospectively”.
• In items 15 and 16 of the “Justifiable Reason” table, “2016, 2017, 2018, 2019, 2020, 2021 and 2022 (considering separately the periods from 1 January 2016 to 31 December 2016, 1 January 2017 to 31 December 2017, 1 January 2018 to 31 December 2018, 1 January 2019 to 31 December 2019, 1 January 2020 to 31 December 2020, 1 January 2021 to 31 December 2021 and 1 January 2022 to 31 December 2022, respectively)” is replaced by the current text ensuring automatic chronology of the use of this point of justifiable reasons, reading “starting in 2016 and in the following calendar years (with the period from 1 January to 31 December of each calendar year being considered separately).”

The updated Guideline GFD-D-29 with all its nine amendments can be found on the website of the Financial Administration.

If you are currently trying to decide whether a fine imposed by the tax office can be waived and you do not know what to do, please contact us and we will be happy to help.

Autor: Lenka Kočerová, Jaroslava Půtová