VAT sanctions

Sanctions in the field of VAT

Authors: Barbora Halousková, Andrea Kleinová
VAT sanctions
The area of value-added tax (hereinafter referred to as a “VAT“) includes various obligations as well as – unfortunately – various sanctions in connection with their non-compliance, which can often significantly affect taxpayers. In our article today, we have thus prepared a summary of the obligations and subsequent sanctions that may be imposed by the tax authorities in the event of non-compliance with the said obligations. 

The obligation to register and to notify changes of registration data

The first obligation related not only to VAT is the registration obligation. The obligation is also connected with the change of the so-called registration data that may occur in the course of VAT registration, namely the obligation to notify the tax authority.

According to the Tax Code, the tax authority may impose a fine up to CZK 500,000 in the event of non-compliance with the obligation to register or notification of a change in registration data.

Starting this year, this obligation applies not only to VAT payers but also to identified persons. A change of registration data can be considered also, among other things, the establishment of a new bank account for economic activity purposes.

Correct form of submission

The taxpayer is also obliged to submit the regular and additional VAT return, VAT Ledger Statements and European Sales List in electronic form. The electronic form is also required in the case of registration and notification of changes of registration data. The submission must therefore be made in the prescribed form and structure via a data message using remote access.

If, in the case of registration or notification of a change in registration data, the submission was not made in the prescribed form (i.e. electronically) or was not made in the prescribed format or structure (exact xml format), this may result in a serious obstacle to the tax authority, for which a fine of up to CZK 50,000 may be imposed.

If there is a mistake in the submission of the tax declaration, the tax authority will require the taxpayer to make corrections. Such a defect in the filing is also the situation when the submission is not made in the prescribed form or in the prescribed format or structure. In the event of failure to correct such a defect in the submission following the tax authority’s request, the tax entity is obliged to pay a fine of CZK 1,000.

Obligation to file a tax return and pay tax on time

The tax subject (both the full VAT payer and the identified person) is obliged to file a tax return within 25 days after the end of the tax period. An identified person who was not obliged to declare tax in the tax period does not file a tax return. This obligation is also linked to the taxpayer’s obligation to pay the tax.

Non-compliance with these obligations is sanctioned in the same way as similar “oversights” in another area of the taxes. Detailed information on sanctions of this type can be found in our article here.

There are also significant sanctions for late submission of VAT Ledger Statements. The deadline for submission of the VAT Ledger Statement is generally the same as for submission the tax return, within 25 days after the end of the tax period (or calendar month in specific cases). A subsequent VAT Ledger Statement must then be submitted within 5 working days after the detection of incorrect or incomplete data.

The VAT Act stipulates the amount of such sanction in relation to the seriousness of the violation as follows:

  1. CZK 1,000, if the VAT Ledger Statement is submitted subsequently (and therefore late) without the subject being called to do so;
  2. CZK 10,000, if it is not submitted within the additional period after the tax authority has asked the subject to do so;
  3. CZK 30,000, if it is not submitted on time following a request to amend, supplement or confirm the information given in the submitted VAT Ledger statement, or;
  4. CZK 50,000, if not submitted at all, even within the additional period.

If the taxpayer has not had any other delay in submitting the VAT Ledger Statement in a given calendar year, the taxpayer is not obliged to pay the sanction referred to in point 1 above.

An entity that is requested by the tax authority to remove doubts and fails to change or supplement incorrect or incomplete data through a subsequent VAT Ledger Statement may be additionally fined up to CZK 50,000. As mentioned above, a taxpayer who obstructs or hinders tax authorities may even be fined up to CZK 500,000.  

However, there is also the possibility of a pardon of the fine for not submitting a VAT Ledger Statement. The taxpayer has the possibility to apply for a pardon of fines under points 2 to 4 above, which may be pardoned in part or in full by the tax authority provided that the taxpayer had a justifiable reason for non-submission or for late submission. However, such a request must be well substantiated and submitted within 3 months of the legal effect of the sanction payment order.

Obligation to assess tax properly

In situations where the tax subject has not proceeded in determining (calculating) its tax liability in full compliance with the law and the tax authority discovers this as a result of a tax inspection (or other tax proceedings initiated by the tax authority) and subsequently assesses the additional tax, the subject is obliged to pay a penalty in the amount of:

  • 20% if the tax is increased, or
  • 20% if the tax deduction is reduced.

Individual request for waiver of sanction

The tax authority may pardon certain sanctions based on a request submitted by the taxpayer. These include pardon of penalty, sanction for late submission or late payment interests.

In the case of penalty, the pardon of up to 75% may be allowed, depending on the taxpayer's cooperation in the assessment of the tax ex officio, if the tax assessed has been paid and if the request is made within 3 months of the legal effect of the sanction payment order in question.

If the tax subject has a justifiable reason why the tax declaration was not submitted on time but was nevertheless submitted at least after the deadline, the tax authority may waive all or part of the sanction for a late tax claim. The tax authority may also waive late payment interest in whole or in part if the tax was paid subsequently and if the taxpayer had a justifiable reason for the delay.

In conclusion, this is a very broad topic, and every taxpayer should, in their own interest, have at least a basic understanding of the sanctions that could be imposed on them. However, if you wish to devote your time primarily to your business and leave the management of your tax obligations to professionals in the field, please do not hesitate to contact us.


Contact our expert

Andrea Kleinová
Andrea Kleinová
Certified Tax Advisor

Tax Advisory