Payers of the value added tax have been facing the duty of submitting a control report for more than a year. Since the introduction of the control report itself, payers have been worried about the very strict fines in case of failure to meet the deadline for dispatching a control report. These worries have been partially accommodated by the Financial Administration and the application of fines was gradually moderated, first by a directive of the General Financial Directorate, D-29, from August 8, 2016, and subsequently by an amendment to this directive from March 5, 2017. And it is this updated version of the D-29 directive that we would like to focus on briefly in the following article.

For greater clarity, we would first like to mention the height of the sanctions impending in connection with a control report.

The current version of the VAT act sets a fine of CZK 1,000 in case of a failure to meet the set deadline for its submission. We would like to note that in this area, the protective deadline of 5 workdays for delay does not apply, as stipulated by the code of tax procedure. The fine of CZK 1,000 does not ensue, though, if no other delay in submitting a control report occurred for the taxpayer in the given calendar year. To make the picture complete, it is suitable to point out here, the neither the original nor the updated D-29 directive deals with the CZK 1,000 fine. This automatic immunity from the CZK 1,000 fine is based directly on the VAT act.

Higher fines ensue, then, if the taxpayer is summoned by the tax administrator to submit the report, to amend it or to confirm it.

In case of submitting a control report within an additional period upon summons from the tax administrator, a fine of CZK 10,000 is impending. The taxpayer may face a fine of CZK 30,000 if failing to submit the report even after summons for change, completion or confirmation of the data stated in the control report. The highest fine needs to be expected in case the taxpayer does not submit a control report even within the additional period. In such a case, the fine reaches CZK 50,000. Based on the original version of the D-29 directive, it was possible to file a request for immunity of the above-mentioned fines only in ten relatively strictly specified cases. These cases mainly related to an unfavourable health situation of a natural disaster affecting the taxpayer.

The Financial Administration has newly come up with an expansion of justifiable reasons, for which it is possible to request immunity from fines ensuing in connection with the control report.

The updated version of the D-29 directive newly gives the option of requesting immunity from fine for example in the case that a mistake occurred in the year 2016 without stating any reason and a fine was imposed. This option can even be used for up to two fines, which ensued due to mistakes in the year 2016.

If a mistake without stating the reason occurs in connection with submitting the control report in the year 2017, it will be possible to request immunity from one fine.

The situation, when a taxpayer dies, is newly also taken into consideration, which was not the case previously.

The updated version of the D-29 directive regulates the situation, when a taxpayer reacted to the summons for submitting a regular or subsequent control report after the expiration of the deadline, but the duty to submit a control report did not arise for the entity at all. The entity must, nonetheless, react to the summons, within five days after the expiration of the additional period at the latest, which is five days according to the law, and it must also be his only mistake in the individual calendar years 2016 and 2017. The same conditions apply for the situation, when the tax subject submitted a subsequent control report, in which it only confirmed the correctness of the last control report submitted.

Another point in the updated version of the D-29 directive relates to the option of immunity from the fine in a situation, when the summons for submitting a control report was only sent to the email address of the taxpayer. On this issue, it is suitable to mention that according to a finding of the Constitutional Court, from February 15, 2017 it is not possible to view the moment, when the email was sent by the tax administrator, as the moment of delivery of the summons.

To conclude, we would like to point out the fact that the D-29 directive relates to the option of filing a request for immunity from fine, within a deadline of three months from the date on which adjustment notice took effect. In other words, if the taxpayer does not use this option, which the updated version of the D-29 directive offers, no one will give him immunity from the fine.

We believe that we have at least briefly presented other options for immunity from fine, which may ensue for taxpayers from the updated version of the D-29 directive in connection with mistakes in submitting a control report.

If you have any questions to this issue or need any professional help with preparing a request for immunity from a fine, please, do not hesitate to turn to us. 

Author: Martin Valášek