Six months and enough, or when does the obligation to pay a fine for failure to file an inspection report expire?

Have you ever had the tax administrator fail to issue a payment order on time? Such a payment notice is illegal and you do not have to pay the penalty. The Supreme Administrative Court has confirmed that the six-month period for imposing a penalty for failure to file an audit report begins to run when the statutory deadline for filing the report expires - not after the tax administrator has issued a notice. This interpretation fundamentally changes the game in favour of taxpayers.

Author of the article: ARROWS (Mgr. Filip Ondřej, office@arws.cz, +420 245 007 740)

What role does the filing deadline play? The SAC has laid down a firm rule

The Supreme Administrative Court (SAC) in its judgment of 5 December 2024, No. 1 Afs 35/2024-43, has set the record straight on a key question - when does the six-month limitation period begin to run, after which the possibility of imposing a fine for failure to file an inspection report expires?

The obligation to file a control report arises for a VAT payer under the VAT Act within 25 days after the end of the calendar month, as follows from the provisions of Section 101e(1). It is from this date that the six-month limitation period under Section 101i(3) of the VAT Act is calculated.

If you do not file your report on time, the tax authority has exactly six months to issue a payment order - otherwise its chance ends because of the limitation period.

A major advantage? The calculation of the time limit is not at the discretion of the tax authority, but the six-month time limit is calculated from a clearly defined point in time - i.e. from the date on which the infringement occurred.

The law protects taxpayers from accumulating penalties

The legislature gave the tax administrator six months - and no more. According to the Supreme Administrative Court, this time limit is not only to guarantee a fairer approach to taxpayers, but also to prevent late and mass imposition of penalties. A long delay can destroy the deterrent effect of a fine - and that is precisely what the law seeks to prevent.

The tax authorities have no choice but to react in accordance with the principle of speed. This mechanism increases the legal certainty of taxpayers and makes administrative authorities more accountable and efficient.

The onus of activity is on both sides. The tax administration must follow the legal deadlines and act proactively. Taxpayers can then react in a timely manner and defend their rights if the time limit has been exceeded.

A challenge within the alternative deadline?

In the dispute, the Appellate Tax Directorate argued that the six-month time limit only starts to run when the replacement period for filing the control report under Section 101g of the VAT Act expires, as stated in the methodological instruction of the General Tax Directorate. However, the SAC rejected this concept as unlawful. The penalty is always linked to the primary obligation to submit the control report within the prescribed time limit, and the notice within the alternative time limit only underlines it.

The Supreme Administrative Court accepts that it may be difficult for the tax administrator to decide on the obligation to pay a fine in a specific amount within six months of the expiry of the deadline for filing the control report. However, this is the intention of the legislator, who preferred speed and the prevention of the accumulation of fines for several periods.

If the court were to adopt a contrary interpretation, the tax administrator would have virtually unlimited time to call on the taxpayer to complete the report pursuant to the provisions of Section 101g(1) of the VAT Act - and thus postpone the start of the limitation period, since it is up to the tax administrator when to call on the taxpayer to complete the control report. However, this step does not affect the running of the six-month limitation period.

What does this mean for you?

The ruling of the Supreme Administrative Court brings a major shift in the protection of taxpayers, now that

• the taxpayer knows with certainty when the six-month period starts,
• the taxpayer can object to the limitation period if the tax authority has not issued a penalty in time, and
• in general, the taxpayer has more effective protection against the accumulation of penalties and enhanced legal certainty.

Unsure whether the penalties imposed on you will actually stand up? The SAC decision shows that the tax administrator must follow the rules set by the legislator, even though these rules may be strict.

Protect your rights in a timely and effective manner. If you have been fined for failing to file an audit report and more than 6 months have passed since the statutory deadline expired without a payment notice being issued, this may be an unlawful penalty.

Today is the last day you will have to deal with this problem on your own!

Contact us - we'll review the legality of the tax authority's action and evaluate your chances of successfully raising a preemption objection, quickly and efficiently.