Every taxpayer, if subject to applicable tax legislation, is obliged to submit a regular tax statement which the tax administration uses as a base for assessment and collection of tax. Every such taxpayer then carries the burden of proof of the declared statement. However, it is often the case that the originally declared statements are deemed incorrect, and the reasons may be many. The Tax Code allows for these to be corrected via the correctional or supplemental tax statement (depending on whether the taxpayer had found the discrepancies in the claimed tax before or after the deadline for its submission).

It may seem at first that submitting a supplemental tax statement is a simple affair, however, practice suggests that this is not always the case and that submitting a faulty statement could bring very negative consequences for the taxpayer.

Upon submitting a supplemental tax statement, a taxpayer must follow the procedural conditions, i.e. provisions included in the Tax Code. The Tax Code says that a taxpayer has the right to submit a supplemental tax statement if the tax is lower than the last known tax, or the last know tax hasn’t changed but the information previously stated has; a taxpayer is obliged to submit a supplemental tax statement if the tax is higher than the last known tax. If, based on the newly arisen facts or information, the last known tax has not changed but information stated previously by the taxpayer has, then the taxpayer has the right to file a supplemental tax statement. The last known tax is understood as the effective resulting tax as so far assessed by the tax administration in the related tax proceeding.

It is important to bring one’s attention to the fact that, even though this process follows common procedural rules stated by the Tax Code, the supplemental tax statement of particular taxes and the processes of filling them out show several differences. That is why we suggest that one should be familiar with the instructions by the Financial administration as to how to fill in particular statements. The instructions include besides other things information on how to correctly proceed with a preparation of a supplemental tax statement.

Simplifying the issue, we can say that the main difference comes down to whether the taxpayer, in comparison with a regular tax statement, is obliged to report only the newly occurring changes while pointing out the difference as opposed to the last know tax, or whether the taxpayer must fill in the whole statement again (i.e. including both information that stayed the same and information that has changed). An example of the first mentioned case is a supplemental tax statement for VAT, an example of the second instance would be for instance a supplemental income tax statement.

There is also an approach combining both where following one or the other process is made possible mainly based on the number of the taxpayer’s immovables. This approach is allowed for in the filling in of a supplemental real estate tax. A special case of supplemental tax statement is the road tax. The taxpayer has a choice to state either all vehicles or only new/fixed/cancelled ones, assuming that all the ones not mentioned are taxed correctly.

Considering that we’ve seen in practice, how negative the consequences can be if a tax subject doesn’t fill in the statement correctly, we would like to present a specific case here.

A taxpayer, who shall remain anonymous, has submitted a supplemental VAT tax statement due to a faulty declaration, and did not follow the correct process of filling it in. In this case, the reason for the supplemental statement was only a difference in stated information which did not affect the amount of the last known tax. The taxpayer should have only put in the new information, which should not have led to a change of the last known tax. But instead, this taxpayer incorrectly filled in the entire statement including the information which was correct and did not require to be re-written and was stated in the previous regular tax statement. This lead to the taxpayer submitting a supplemental tax statement at which end the last known tax (known from the previous regular statement) was stated again in its entirety.

The result was a newly given tax obligation which was of the same amount as the previous one. The company, thinking that the supplemental tax statement was filled in correctly, ignored this new tax obligation. Unfortunately, not even the tax administration recognized this absolutely evident mistake and issued significant interest for non-payment. The whole thing was happening at a very quick pace and the taxpayer did not manage to proceed in any way in the relation towards the tax administration and subsequently has been entered into execution procedures, and was assessed executory fees of considerable amounts. Thus, the company ended up in a very unpleasant situation due to their own mistake.

But if the correction was made to the last known tax in the income tax statement, the process would be different. In such cases it is necessary to fill in all the information stated in the previous regular tax statement and through corrections update them so that the tax statement is correct.

Another pitfall, often overlooked, is the deadline for submitting a supplemental tax statement for a tax lower than the one stated previously. According to the Tax Code, this can be done only until the end of the month following the month during which the taxpayer learned these circumstances. For these purposes, this date is to be written in the forms of supplemental tax statements. While compiling an entire supplemental statement, it is necessary to pay attention to that because in some cases it can be expected that submitting a supplemental tax statement for a lower tax will get the tax administration’s attention.

As follows from the contents of this article, we focused on some basic mistakes which occur in practice. Other questions regarding the procedure of supplemental tax statements, for instance the option of submitting or not submitting based on a formal notice from the tax administration, before the commencement of tax control etc. are not included in this article.

Concluding, we would also like to point out that ignorance of given procedures could bring about a significant not only financial but also time difficulties. It is therefore important to bear in mind the correct procedures that the taxpayer can use in order to prevent the above mentioned situation.  

Michaela Kozminská & Milan Kolář