With effect as of 1 January 2021, act no. 280/2009 Coll., Code of Tax Procedure, as amended (hereinafter the Code of Tax Procedure”) was amended, one of the fundamental changes being the change in the legal regulation on interests paid by the taxpayer as well as the interests paid by the tax administrator. The amount of these interests is derived from the amount of the late-payment interest, which the taxpayer is obliged to pay in case of being late with the payment of due tax. Until 31 December 2020, the late payment interest was treated in the stipulation of article 252 of the Code of Tax Procedure, with effect until 31 December 2020, the new legal regulation of late payment interest has remained in the stipulation of article 252 of the Code of Tax Procedure, with effect as of 1 January 2021, in connection with the completely new stipulation of article 251a and article 251b of this act.

For the purpose of clarifying the way, in which the amount of interest will be determined, as well as the construction of the calculation of the amount of the interest itself, the Finance Ministry has issued Guidance no. MF-18, which was published on 22 April 2021 in the Financial Newsletter (hereinafter the “Guidance”).

According to the Code of Tax Procedure, with effect until 31 December 2020, the amount of the late payment interest was determined as follows:

“The amount of the late payment interest corresponds annually to the repo rate set by the Czech National Bank, increased by 14 percentage points, and is due on the first day of the respective calendar half-year.”

According to the transitional provisions of the amendment (act no. 283/2020 Coll.), this interest, for which the conditions for its incurrence continue as of 1 January 2021 (i.e. the delay continues, which occurred before the legal regulation, on which the interest is based, took effect) will apply until 31 December 2020, and in the period from 1 January 2021, the interest will be applied in the newly determined amount, until the day the respective tax is paid.  

According to the Code of Tax Procedure with effect from 1 January 2021, “the amount of late payment interest corresponds to the amount of late payment interest according to the Civil Code”. According to the Civil Code, unless the parties arrange the amount of a late payment interest, the amount stipulated by a government regulation is considered the arranged amount. This government regulation is regulation no. 351/2013 Coll., and according to the stipulation of its article 2, the amount of late payment interest is as follows:

“The amount of the late payment interest corresponds annually to the repo rate set by the Czech National Bank for the first day of the respective calendar half-year, in which the delay occurred, increased by 8 percentage points.”

It is clear that with effect from 1 January 2021, the amount of late payment interest paid by the taxpayer has been lowered, from the original amount corresponding annually to the repo rate set by the Czech National Bank raised by 14 percentage points, to the amount corresponding to this repo rate raised only by 8 percentage points.

Further, by a mere comparison of these two legal regulations, it may seem that a change in the construction of late payment interest occurred as well as of 1 January 2021, because the legal regulation of the Code of Tax Procedure effective until 31 December 2020 reflected the fact that the repo rate set by the Czech National Bank may change in the course of the duration of the delay, while the civil-law regulation anticipates an unchanging amount of interest for the entire duration of the delay. No change in the construction of the late payment interest occurs, though, in fact, as the Guideline points out.

According to the Guidance, it is necessary to take into account the specifics of the regulation on late payment interest in the Code of Tax Procedure, which in this respect represents a special regulation. It is also necessary to respect that a number of rules relating to the construction of the calculation or the management of late payment interest are common to all interests under the Code of Tax Procedure, interests paid both by the taxpayer (in addition to the late payment interest also the interest on the deferred amount), and by the tax administrator (interest on returnable overpayment, interest on incorrectly assessed tax, interest on tax deduction). In case of other interests under the Code of Tax Procedure than the late payment interest, the situation of “delay” plays no role, but the incurrence of the given interests derives from other facts. According to the Code of Tax Procedure, interests incur and are calculated always for an individual day, and therefore the quoted stipulation of article 2 of the government regulation needs to be applied for every individual day. According to the Guidance, the logical consequence of this is that the relevant amount of the repo rate set by the Czech National Bank must always be assessed as of the first day of the calendar half-year, into which the day, on which interest incurred, belongs, for which the interest is calculated. According to the Guidance, the government regulation needs to be interpreted as follows:

“The amount of the late payment interest corresponds annually to the repo rate set by the Czech National Bank for the first day of the calendar half-year, in which “it incurred” (instead of the word “delay”), increased by 8 percentage points.”

It is thus possible to conclude that in the light of the Guidance of the Finance Ministry, the construction of the amount of late payment interest according to the Code of Tax Procedure is not changing from 1 January 2021, only the amount of the rate of this interest is changing. The amount of the late payment interest will derive from the two-week repo rate announced by the Czech National Bank, raised by eight percentage points (and no longer by 14 percentage points, as was the case until 31 December 2020), and a potential change of the rate always occurs depending on a potential change of the repo rate on the first day of the respective calendar half-year for the duration of the delay in the payment of a specific tax.