Náročné prokazování daňové báze dlouhodobého majetku

The Supreme Administrative Court has confirmed the long-term trend of a strict approach to substantiating tax-deductible expenses. In the given case, the acquisition cost of land taken over in a merger at original accounting values without revaluation.

The taxpayer recorded the land in its books at CZK 42 million and reflected this amount as a tax-deductible expense upon its sale. During a tax audit, however, the taxpayer submitted only internal documents, which led the tax authority to challenge the deductibility of the cost. Only at the appeal stage did the company provide a purchase agreement, which, however, stated a slightly higher acquisition price of approximately CZK 43 million. The discrepancy between the accounting records and the contract raised doubts of the tax authority, which requested clarification. The taxpayer failed to satisfactorily address these discrepancies.

It was only in the proceedings before the Regional Court that the company claimed that the difference in the purchase price was due to the use of different exchange rates. However, this argument was raised too late and could therefore not be considered by the courts.

The Supreme Administrative Court emphasized that a discrepancy in amounts does not in itself necessarily lead to the disallowance of the entire cost. However, if the taxpayer fails to clearly explain such a discrepancy upon request by the tax authority, the authority may deny the tax deductibility of the full amount. This may apply even in a situation where the amount stated in the contract is higher than the amount claimed by the taxpayer in its accounts (!).

The judgment confirms that the very high evidentiary standards for substantiating tax-deductible expenses also apply to fixed assets. Particularly in the case of real estate, increased attention should therefore be paid to the retention of relevant documentation throughout the entire holding period, until disposal or full depreciation. The judgment also confirms the importance of being proactive already during the tax audit – postponing arguments until the stage of administrative courts may not pay off.

Author:

David Kužela