Taxes in the time of coronavirus

If the economic crisis was spoken at the beginning of the year, it was only quietly and usually with the wish that it would be as mild as possible and that we would have enough time to prepare. Even more common was the belief that there would be no crisis, only a bit of a cooling.

But the COVID-19 pandemic has brought changes to our lives that we couldn't even imagine a few days ago. With them, the economic crisis has invaded our lives as well. No one doubts anymore that it will occur.

Thus, the governments of the concerned countries accepted not only draconian measures to restrict population movement to prevent the uncontrolled spread of new coronavirus but were also forced to take measures to support the economy.

In the Czech tax area, these measures are expressed in the so-called Liberation Tax Package, approved by the Government of the Czech Republic on 16 March 2020. However, if anyone was looking forward to extension of deadlines for submission of tax declarations, they remained disappointed. So, which relieves did this package bring?

Right in the beginning, it should be one more time emphasized that the deadlines for submission of tax returns and other tax declarations have not been extended in any way. The same applies to the obligation to pay the corresponding tax liability.

The deadline for submission of corporate as well as personal income tax returns is therefore maintained as of 1 April 2020. The extension of this period by up to three months, i.e. until 1 July 2020, is possible on the basis of standard statutory institutes introduced already in the Czech tax legislation, i.e. in case that the tax returns are prepared and submitted by the tax advisor based on the power of attorney, for legal entities subject to statutory audit as well as on the basis of individual and justified application for deadline extension.

However, if a legal person or an individual does not utilize any of the options above and fails to comply with its obligation to file an income tax return on 1 April 2020, the penalty for late submission will be automatically pardoned, provided that the tax return will be submitted additionally by 1 July 2020 at the latest. Similarly, the late payment interests in case of delayed payment of tax liability will be pardoned provided it will be paid within the abovementioned period.

In this respect, it is necessary to point out that the above does not apply to the tax returns to be submitted on 1 April 2020 due to the fact that a legal entity applies a financial year ending as of 30 September 2019 and is entitled to apply an extended period because it is subject to statutory audit or its tax return is submitted by a tax advisor on the basis of a power of attorney.

Individuals shall also not forget that the above described applies solely and exclusively to income tax, not to social security and health insurance. As a result, the deadline for submission of overviews of earnings remains on 4 May 2020.

End of March brings with also other tax obligations. On 1 April 2020, the deadline for submission of the annual statement of withholding tax for the year 2019 will also expire, which is also not postponed. However, a similar regulation applies here as in the case of income tax returns, i.e. if the annual statement is submitted by 1 July 2020 at the latest, its late submission will not be penalized.

It should be noted that the above does not apply to the annual statement of payroll advance tax. Similarly, this relief shall in no way affect the submission of notifications on exempted income.

In the area of value added tax, the relieves are even less noticeable. Only fines for delayed submission of VAT Ledger Statements in the amount of CZK 1,000, incurred between 1 March 2020 and 31 July 2020, will be pardoned automatically. Other, more noticeable penalties for late submission or even failure to submit a VAT Ledger Statement will be pardoned on a case-by-case basis if relation with coronavirus will be proved.

However, the above is not a complete list of possible relieves, since there are other individual legal institutes available, such as the institute of reduction of tax advances, including their total cancellation, postponement of payment of tax liability or set up of payment schedule for tax liability payment as well as applications for pardon of late payment interests or postponement interests. However, it must be remembered that fulfilment of additional conditions may be required for successful application of these institutes (e.g. absence of tax underpayments, good tax morale in the past).

To sum up, emergency situations require individual solutions, so we recommend that you look for the most appropriate solution for each specific situation. We will be more than happy to help you with such search; thus, do not hesitate to contact us.