In its judgment 7 Afs 49/2022-26 of 16 August 2022, the Supreme Administrative Court (“SAC”) resolved a dispute between the plaintiff (an individual) and the defendant (the Financial Office) on a cassation complaint concerning the refusal to reimburse a tax overpayment.

Under article 155a paragraph 3 of Act No. 280/2009 Coll., the Code of Tax Procedures (hereinafter referred to as the “CoTP”), a taxpayer registered with the tax administrator is obliged to designate one of the accounts with the payment service providers specified at the time of registration for the refund of the refundable overpayment; in doing so, he is obliged to give priority to an account held with a payment service provider in the Czech Republic. Under article 155a paragraph 4 of the CoTP, if the tax subject fails to fulfil the obligation under paragraph 3, the tax administrator shall invite the tax subject to remedy the situation.

The plaintiff did not receive a refund of the tax overpayment he incurred, as he did not provide an account for the refund of the overpayment. He, therefore, filed a lawsuit, which was challenged by the defendant on the ground that disclosure of the registered account for refund of the overpayment to the registered tax entity is a mandatory part of the application for refund of the overpayment. The plaintiff argued that no provision implied an unconditional obligation to register a bank account, not only at the time of initial registration but also afterwards by changing the registration details, and that the overpayment should have been paid to him in cash.

The Code of Tax Procedures does not list the registration data and refers to the registration application, i.e. Annex No. 7 to Decree No. 525/2020. According to the relevant instruction, a registering natural person is obliged to fill in all account numbers with payment service providers, where funds from business activities are concentrated. Thus, a situation may arise, in which a compulsorily registering natural person does not fill in any data on the bank account he owns in accordance with the law, because the funds from his business activities are not concentrated in it and this situation still exists, which was the case of the plaintiff, who in the year in question received mainly income from dependent activities and the income from business activities was an insignificant amount received apparently in cash.

The defendant insisted that, in the context of article 155a of the Code of Tax Procedures, paragraph 3 must be read as meaning that the indication of the account for the refund of the overpayment with the registered tax entity is a mandatory element of the application for refund of the overpayment. If this is missing, it is a defect in the submission, for the elimination of which the tax administrator shall apply the procedure referred to in paragraph 4, namely the issuance of summons to remedy. The tax entity shall designate an account to refund the overpayment. Failure to do so will result in the overpayment not being refunded.

The defendant misinterpreted article 155a of the CoTP because, despite finding out that the complainant had no registered account, it insisted on requiring the complainant to disclose that account in the application for refund of the overpayment. However, as follows from the above analysis of article 155a, if the registered tax subject has not indicated any bank account in the registration procedure, article 155a paragraph 3 of the Code of Tax Procedures and the requirement to identify the registered account for the refund of the tax overpayment cannot be applied. Thus, the implementation of these requirements under article 155a paragraph 4 of the CoTP cannot be called for.

The SAC concludes that, for the reasons stated above, it annuls the contested judgment and the defendant’s decision on account of an incorrect interpretation of article 155a paragraph 3 of the Code of Tax Procedures, which does not correspond to its text or to the system of the law. If the complainant did not have an account at a financial institution indicated at the time of registration, article 155a paragraph 3 of the Code of Tax Procedures and the resulting requirements regarding the return of the overpayment to such a registered account cannot be applied to his situation; for this reason, it was not even appropriate to ask the complainant to indicate a registered account under article 155a paragraph 4 of the CoTP.

Author: Roman Burnus, Marek Toráč