Financial statements are a set of documents that an entity prepares primarily as of its balance sheet date. Article 18 of Act No. 563/1991 Coll. on Accounting (hereinafter referred to as the “AA”) defines the content and scope of the financial statements and, as a rule, the larger the entity, the more information it needs to include in its financial statements. The financial statements include in particular the basic documents that must be prepared, namely the balance sheet, the profit and loss statement and the notes to the financial statements. In order for an accounting entity to meet its legal obligation, it is necessary to know what kind of entity we are, when preparing the individual financial statements. The size of the entity, and therefore the related obligations in preparing the financial statements, are determined by the category of the entity (micro, small, medium and large). The criteria for the classification of the size (category) of a company are set out in article 1b of the AA. The values monitored are assets (net value), annual net turnover and the average number of employees during the accounting period.
Accounting entities are obliged to publish their financial statements to the extent required by article 18 paragraph 4 of the AA, i.e. in full or in abridged form, including a report verified by an auditor, if the entity meets the criteria for the obligation to have its financial statements verified by an auditor.
By when do I need to publish my financial statements?
The financial statements of audited companies must be published within 30 days after two conditions have been met: they have been audited and approved by the general meeting or the sole shareholder. For example, if the company has prepared financial statements as of 31 December 2021, the auditor’s report on the audited financial statements for that period was issued on 15 June 2022 and on 30 June 2022 they were approved by the general meeting (sole shareholder), the financial statements should be submitted to the registry court for publication in the Collection of Deeds within 30 days. In this case, the financial statements should be sent to the competent court by 30 July 2022.
However, a situation may arise, where the general meeting (sole shareholder) does not decide to approve the financial statements. Even in this case, the financial statements must be published (despite not having been approved) no later than 12 months after the balance sheet date, i.e. financial statements compiled as of 31 December 2021 should have been filed in the Collection of Deeds no later than 31 December 2022.
The obligation to disclose is fulfilled by the accounting entity when the documents are submitted to the registry court in the prescribed form (for example, the document must be in the Czech language, unencrypted, undamaged and in PDF format).
How to publish the financial statements?
Possible methods of publication:
- Data box – sending to the competent court of registration
- Podatelna web application
- By email with electronic signature
- Disclosure through the tax administrator
The options in (a) to (c) have been available for some time and entities use all of them. A new feature that could be used in 2022 for the first time is the publication of financial statements through the tax administrator. This option is stipulated in article 21b of the AA. This option is available to companies whose accounting period began no earlier than 1 January 2021 and ended no earlier than 31 December 2021.
However, this method of disclosure is particularly suitable for micro and small accounting units without an audit obligation, because these entities provide the tax authorities with all the documents related to the financial statements as part of the income tax return. Only by means of a request (which is part of the tax return “form” itself) do they ask the tax administrator to submit the attached documents to the financial statements for publication in the Collection of Documents. If the entity meets the conditions for the audit obligation, we believe that it cannot use this option because it is not only obliged to publish the financial statements, but also the annual report (which includes the financial statements) and the auditor’s report (opinion).
The filing with the tax administrator must include information on the extent, to which the financial statements are to be submitted to the registry court, and the financial statements must be filed in the prescribed form and format specified in the Code of Tax Procedures.
In practice, disclosure through the tax administrator means that the company files a corporate income tax return and attaches the state reports with the notes to the financial statements, and the tax administrator forwards them to the registry court in the submitted structure and format (if they comply with the requirements set out in the Tax Code).
What happens if I do not publish my financial statements?
If an accounting entity fails to publish its financial statements in the scope and within the deadline set by the statutory regulations, it may be fined by the tax administrator according to article 37a of the AA, the fine reaching up to 3% of its net assets. In practice, we have so far encountered fines reaching the thousands of crowns, but the maximum fine is set at the given percentage.
However, the tax authority is not the only institution that can impose a fine for failure to publish financial statements. The accounting unit is also subject to a penalty for non-disclosure by the Registry Court under Act No. 304/2013 Coll., on Public Registers of Legal and Natural Persons, which provides for a fine of up to CZK 100 thousand. At the same time, the Act states the possibility of initiating proceedings for the dissolution of the company, if the financial statements for two consecutive periods are not submitted for publication and the entity does not respond to the requests of the registry court to remedy the situation.
Failure to disclose financial statements may thus result in substantial fines. Accounting entities should not forget their individual obligations, including the publication of the financial statements, in order to complete all the necessary steps to close the accounting period. We know from experience that entities tend to not have disclosure of financial statements in their internal procedures and therefore this last step is usually forgotten. The “good” news is that the institutions controlling the publication of the financial statements first call on the company to remedy the situation and if, despite the recorded call, no remedy is made, a sanction is imposed or further steps are initiated (see above the possibility of dissolution of the company).
If you have any questions about the publication of the financial statements and possible sanctions, please do not hesitate to contact us.
Author: Kateřina Vavrečková, Karolina Vernerová