Seriál Dodatečné daňové přiznání: Úrok z prodlení a jeho prominutí

Supplementary tax return series: interest on late payment and its waiver

In the first part of the series on supplementary tax returns, we introduced you to the moment when the obligation to file such a return arises. Filing a supplementary tax return for a higher tax liability also entails an additional burden on taxpayers. Therefore, in today's alert we will focus on interest on late payment and its possible waiver.

Interest on late payment

When a taxpayer files a supplementary tax return for a higher tax liability than the one which was assessed in the regular tax return, the taxpayer is obliged to pay interest on the amount by which the newly determined tax is higher for each day of delay.

The interest on late payment arises from the fourth day following the day on which the tax was originally due and expires on the day on which the amount is credited to the tax administrator's account (Section 252(2)(a) of the Tax Code).

Example: A taxpayer filed a regular tax return for 2021 on 1 July 2022. The supplementary tax return for the higher tax liability was filed on 30 June 2023 and the amount by which the new tax is higher was paid by the same deadline. The interest on late payment in this case begins 5 July 2022 and expires on 30 June 2023. Please note that interest on late payment arises from the fourth calendar day, not the fourth business day.

The percentage amount of interest on late payment is regulated by the Government Regulation No. 351/2013 Coll. and corresponds to the annual repo rate set by the Czech National Bank for the first day of the calendar half-year in which the late payment occurred, increased by 8 percentage points.

Example: As of 1 July 2023, the repo rate was 7 %. The interest on late payment for the second half of 2023 is therefore 15 %. As of 1 January 2024, the repo rate was 6.75 % (reduced on 21 December 2023), the interest on late payment for the first half of 2024 will therefore be 14.25 %.

Until the end of 2014, the Tax Code stated that interest on late payment would be applied for a maximum of five years of delay. Unfortunately, there is no similar limitation in the current version of the Tax Code. 

Application for waiver of interest on late payment

A taxpayer has the right to request the tax administrator to waive part or all of the interest on late payment. When assessing the request, the tax administrator examines three basic criteria, namely the justifiable reason for the delay, the economic or social circumstances of the taxpayer and the frequency of breaching of tax obligations. The waiver of interest is described in more detail in Guideline GFD-D-58.

For illustrative purposes, we attach a few examples of justifiable reasons for delay, but this does not represent an exhaustive list:

1. The original tax payment is made by the tax debtor by mistake to a different variable symbol or to a different account of the tax administrator, while at the same time it is not an unclear payment. (100% waived)
2. Interest on late payment arose on the tax assessed on the basis of a supplementary tax return submitted by the taxpayer without a request from the tax administrator. (20 % waived)
3. The delay in the payment of the tax, to which the waiver of interest on late payment is requested, was no more than 15 calendar days from the date on which the tax was originally due.

The Tax Code also defines the possibility of waiving interest on late payment even if the payment of the interest has already been made. This means that the payment of the interest does not constitute an obstacle to its possible waiver.

Similarly to other actions, the request for waiver of interest on late payment may be subject to an administrative fee of CZK 1,000. The threshold for payment of this administrative fee is three times the rate of the administrative fee. In practice it means that if a taxpayer requests a waiver of CZK 3,000 or less, the request is not subject to the administrative fee. On the other hand, if the amount exceeds CZK 3,001, then the tax administrator will request the administrative fee in full.

We will be happy to go through your specific situation with you and help you prepare your application for waiver of late payment interest. If you have any questions, please contact the authors of the article or the EY team you are working with.

Authors:

Barbora Výšková

Barbora Ptošková

Lam Uyen Le