We would like to inform you about the currently discussed draft bill on extraordinary waiver and extinction of certain tax debts, proposed by the Ministry of Finance. This proposal follows up on the previous “Merciful Summer I and II" projects in 2021 and 2022, which involved the forgiveness of accessories of debt owed to certain public authorities by bailiffs, provided that the principal was paid under specified conditions. However, debtors, who have been subject to tax enforcement or have voluntarily been repaying their debt, have not been able to take advantage of the Merciful Summer and this situation should change with the intended proposal.

The draft bill regulates:

1.    extraordinary waiver of tax accessory,

2.    extraordinary extinction of certain tax arrears and tax accessory arrears (these are so-called small tax debts, the recovery of which is not efficient and economical). 

The draft bill assumes that it will apply to arrears (tax, fee or other similar monetary transaction) administered by the authorities of the Financial or Customs Administration of the Czech Republic or the Finance Ministry. On the contrary, the bill will not apply to arrears of customs duty and its accessories. 

The so-called “grace period” will be the period from 1 July 2023 to 2 October 2023.

EXTRAORDINARY WAIVER OF TAX ACCESSORIES

WHO DOES IT APPLY TO

The extraordinary waiver of the relevant tax accessory will be intended only for natural persons, regardless of whether they are entrepreneurs or not.

WHAT DOES IT APPLY TO

The proposed waiver will apply only to the tax accessory collected, namely:

• late-payment interest or its equivalent under any other law;
• interest on the deferred amount;
• enforcement costs, excluding cash expenses; and
• the costs of the proceedings.

Thus, only the accessories resulting from the non-payment of the tax are to be waived. On the other hand, it is not desirable to waive accessories which are punitive in nature (penalties, fines, etc.). 

CONDITIONS OF THE WAIVER

The extinction of the selected accessory as a result of waiver will occur if the following conditions are met:

• the tax accessory has not yet been paid (tax accessory already paid will not be refunded),
• the accessory is linked to tax arrears arising up to 30 June 2022,
• the tax arrears will be paid in full during the grace period from 1 July 2023 to 2 October 2023, 
• and at the same time the debtor requests waiver of accessory during the grace period. 
• In order for the payment of tax arrears to be made, in respect of which waiver of accessory is requested, the request for waiver should be submitted no later than the date of payment of the arrears. For the sake of simplicity, no formal decision will be taken on the requests, the debtor will only be informed, if it is not possible to comply.

As an alternative to paying the arrears by the end of the grace period, it will be possible to request payment of the arrears in four fixed instalments (due on 2 October 2023, 2 January 2024, 1 April 2024 and 1 July 2024). The first to third instalments should be ¼ of the arrears, and the fourth instalment should be the remainder of the underpayment. 

The condition of allowing the payment of the arrears in instalments: 

• applying for an instalment plan during the grace period,
• the arrears will not be claimed in a tax enforcement,
• it will not be an underpayment, for which a tax deferral or payment in instalments has already been granted,
• the amount of the individual arrears will exceed CZK 10,000,
• it will not be an underpayment of advance tax.

As regards the enforcement costs, according to the proposal, they will cease only if all the arrears, for which the tax enforcement was ordered, are paid or extinguished. 

EXTRAORDINARY EXTINCTION OF CERTAIN TAX ARREARS AND TAX ACCESSORY ARREARS

WHO DOES IT APPLY TO

The extraordinary extinction of certain tax arrears and tax accessory arrears will apply to all taxpayers (natural persons and legal entities).

WHAT DOES IT APPLY TO

Only minor arrears incurred up to the operative date of 30 June 2022 will be subject to extinction.

CONDITIONS OF EXTINCTION

On the date of entry into force of the draft bill, the following should be extinguished: 

• outstanding tax arrears or tax accessory arrears incurred up until 30 June 2022,
• arrears individually reaching less than CZK 200,
• in the case of real estate tax arrears less than CZK 30,
• in the event that the debtor has several small underpayments, the sum of these arrears with one tax administrator must not exceed CZK 1,000,
• the extinction of arrears in this case will occur ex lege, without a request, on the effective date of the law.

The draft bill is expected to enter into force on 1 July 2023. We will, of course, keep you informed about any further development. 

Author: Jaroslava Půtová, Lenka Kočerová