Recently, information has begun to circulate about the practices of the financial authority in handling applications for the 2022 compensation bonus. On 24 January 2022, the Chamber of Tax Advisers issued a statement on the approach of the Financial Administration to claimants of this bonus. This report shows that the tax authorities approach the applications for the compensation bonus in a very restrictive way in terms of assessing the conditions for entitlement to the bonus.

Applicants for the compensation bonus who, according to the tax administrator, have not been directly affected by the crisis measures, are invited by informal communication to prove the legitimacy of their entitlement. The tax authorities want to hear a “story” from applicants, in which they are asked to describe their situation regarding the drop in sales following the government measures. Should the subsequent response of the applicants fail to convince the tax administrator of the validity of the application or should the applicant fail to respond to this informal communication at all, the tax administrator issues a formal decision to discontinue the proceedings. 

According to the Chamber of Tax Advisors, this procedure is completely unlawful because, according to the explanatory memorandum to the Compensation Bonus Act, the tax administrator may apply the subsequent correction only on the basis of an audit procedure, i.e. during a tax audit. 

Furthermore, the actual material content of the excessive demands of the tax administration is also a problem. Under the current law, the applicant must meet two conditions “that at least one of the business activities has been significantly affected by the pandemic, i.e. that in the comparison period the amount of income from that activity did not exceed 70% of the average monthly amount of such income from the same activity in the comparison period, and that this decrease should not be apparently due mainly to reasons other than the impact of the epidemic measures” and “that its income from all significantly affected activities represents the predominant part of its income in the comparison period”. However, no exhaustive or demonstrative list of professions or activities affected by the pandemic is stipulated in the law, yet in practice the Tax Administration attempts to reject applicants based on the individual fields.

Statement of the Financial Administration

The Financial Administration is issuing a statement on 26 January 2022, assuring applicants that it by no means rejects request from businesses in specific fields in a blanket manner. At the same time, they also object to an alleged order or instruction, according to which financial authorities should reduce requests or their payment. Out of the total number of claims processed, up to 97% have now been paid or ordered to be paid. 

According to the Financial Administration, the situation regarding informal communication with applicants is seen as an effective procedure for removing doubts and should be less of an administrative burden. If the applicant does not respond to this communication, the tax administrator should invite the applicant to remove doubts through official channels. 

The Financial Administration also apologises to those claimants, who have been pressured into withdrawing their application for a compensation bonus, and adds that should anyone encounter such behaviour, they have the option of using legal remedies against such action.