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Lenka Kočerová | May 30, 2023

Merciful summer for tax and social security debtors

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Merciful summer for taxes

The Chamber of Deputies has approved the bill on extraordinary waiver and extinction of certain tax debts and submitted it to the Senate. The aim of the proposal is to give tax debtors the opportunity to get rid of outstanding debts on penalties, interest and other tax accessories, as well as minor arrears. The so-called merciful summer will probably last for a period of 5 months from the expected entry into force of the law, i.e. from 1 July to 30 November 2023.

The Act applies to taxes, fees or other similar payments administered by the Financial or Customs Administration of the Czech Republic, or by the Ministry of Finance, as well as by the courts and the Prison Service (so-called judicial fees). If a municipality or a region so decides by its resolution, the Act shall also apply to local fees or levies for breach of budgetary discipline, which are under their administration. On the contrary, the law does not apply to arrears of customs duties and their accessories.

To whom does the waiver apply?

All individuals (entrepreneurs as well as non-entrepreneurs) can apply for waiver of tax accessories.

What does the waiver relate to?

The extraordinary extinction by waiver will apply to specified tax accessories, namely:

  • late-payment interest or its equivalent under any other law,
  • interest on the deferred amount,
  • penalty,
  • fines for late filing of taxes,
  • the costs of the proceedings, including the costs of enforcement.

There is also the condition that the designated tax accessory:

  • has not yet been paid (any tax accessory already paid is not refundable),
  • relates to tax arrears arising by 30 September 2022 (the so-called reference date); according to the explanatory memorandum, the underpayment must have become final by the decisive date.

The waiver is, on the other hand, excluded in the case of tax accessories recovered by a bailiff or under the Act on International Assistance for the Recovery of Certain Financial Claims.

What are the conditions of the waiver?

The extinction of an accessory occurs when two conditions are cumulatively met:

  • The key condition for the waiver is the payment of the principal amount of tax due by 30 November 2023 at the latest.

Alternatively, the Act provides for the possibility of spreading the payment of the arrears over twelve monthly instalments (the first instalment due as of 30 November 2023 already), if the following conditions are met:

  • applying for an instalment plan during the reference period,
  • the individual arrears, for which instalments are requested, must exceed CZK 5,000,
  • it is not an underpayment, for which deferral or repayment has already been granted in the standard way under the Tax Code,
  • it is not an underpayment of advance tax.
  • The second condition is the formal submission of a request for extraordinary waiver of accessories. The application must be submitted between 1 July 2023 and 30 November 2023 (the reference period). Request may be submitted using all standard methods, and the possibility of submitting the application by e-mail is also being considered, which proved to be effective with the compensation bonus.

Automatic cancellation of minor arrears

On the date the Act enters into force, automatic extinction of small tax arrears or tax arrears for all tax debtors (i.e. not only individuals, but also legal entities) is envisaged in the event that:

  • it is an underpayment accruing up to the reference date of 30 September 2022;
  • the individual arrears do not reach CZK 200 at the time the Act comes into force, or CZK 30 in the case of arrears of tax on immovable property or its accessories;
  • the sum of individual arrears registered with the same tax administrator must not exceed CZK 1,000.

Merciful summer for insurance

A bill on the extraordinary waiver of penalties on social security contributions, state employment policy contributions and enforcement costs has also been passed on to the Senate. In relation to social security debts, a similar system will apply as in the case of tax arrears.

  • Waiver of penalties and enforcement costs will be conditional on payment of the outstanding premiums recorded in the accounts of the Czech Social Security Administration as of 30 September 2022 by 30 November 2023 at the latest (by the end of the reference period), or an instalment scheme may be requested.
  • If there are no outstanding premiums on the books of the Czech Social Security Administration as of 30 September 2022, or if the outstanding premiums are paid before the beginning of the reference period (by the end of June 2023), unpaid penalties and unpaid enforcement costs are waived ex officio (i.e. by operation of law). The debtor does not need to report anything to the Social Security Administration.
  • If there are outstanding insurance premiums (from the period as of 30 September 2022) in the reference period (from 1 July 2023), the debtor must notify the intention to pay the outstanding premiums and take advantage of the waiver of penalties and enforcement costs via the ePortal of the Czech Social Security Administration.
  • Waiver of penalties and enforcement costs will apply to all premium payers (individuals and legal entities).

 If you have any doubts as to whether or not the Merciful Summer III event will affect you, please, do not hesitate to contact us and we will be happy to answer your questions.

Author: Lenka Kočerová, Jaroslava Půtová