Following the decision-making of the Supreme Administrative Court, namely judgments file no. 8 Afs 58/2019-48 of 13 May 2020, file no. 2 Afs 388/2019-70 of 18 June 2020 relating to the so-called “tax loss chain” and judgements file no. 9 Afs 81/2020-40 of 2 July 2020 and file no. 4 Afs 101/2020-41 of 17 July 2020 relating to assessment of the running of the preclusive time limit and a change of its running, the Financial Administration has adjusted its decision-making practice for determining the time limit for assessment of tax according to article 38r paragraph 2 of act no. 586/1992 Coll., on income taxes, as amended (hereinafter the “ITA”) and assessment of the running of the preclusive time limit.

For reasons of legal certainty of taxpayers, the General Financial Directorate has issued, under file no. 66358/20/7100-40110-207203 the “INFORMATION for determination of the time limit for tax assessment (preclusive time limit) when reporting and using tax loss and assessing the running of this time limit and change in its running following judgments of the Supreme Administrative Court”, with which it informs about the new administrative practice, according to which:

• For determination of the running of the preclusive time limit, every tax loss is assessed separately; i.e. “newer” tax loss will not influence the time limit for assessing tax for the taxable period, in which an “older” tax loss emerged or could be used.
• In case of a taxable period, in which it was possible to deduce “older” tax loss and in which “newer” tax loss also emerged or could be used, the end of the preclusive time limit is, according to the stipulation of article 38r of the ITA, determined according to the last taxable period, in which the “newer” tax loss can be used as a deductible entry.
• When determining the time limit for tax assessment under the stipulation of article 38r of the ITA for a taxable period, in which tax loss could be applied, the preclusive time limit is gradually being “shortened” compared to the taxable period, for which the tax loss emerged.
• Actions according to the stipulation of article 148 paragraph 2 to 4 of act no. 280/2009 Coll., Code of Tax Procedure, as amended, have effect only in relation to the taxable period, to which they relate, not in relation to all taxable periods interconnected by posting tax loss.
• The maximum time limit for assessing tax under the stipulation of article 148 paragraph 5 of the Code of Tax Procedure derives from the specific taxable period and reaches 10 years since the time limit has begun to run.

You can find more detailed information, if interested, on the website of the Financial Administration.

In case of interest, we will be happy to provide more detailed information to you, or an analysis of your specific situation.