Starting from 1 January 2018, an amendment to the Tax Administration Act (hereinafter only the “Tax Procedure Code”) was amended and the amendment has caused several legislative changes.
Tax Secrecy
The Tax Procedure Code doesn’t provide an accurate definition of who may be provided with information of tax secrecy nature. State authorities, self-governing authorities and also natural persons are obliged to demonstrate eligibility for disclosing tax secrecy, which will arise from the fulfilment of their tasks according to this Act, a special regulation or based on an international treaty.
Introduction of summary protocol (Section 19a)
The amendment introduces a new section – Section 19a. From January 2018, the Financial Directorate may issue a summary protocol on interconnected transactions of tax subjects that were found to breach or avoid tax regulations.
Compulsory electronic communication with the Financial Administration for all legal persons registered in the business register and for all natural persons – entrepreneurs registered for income tax (effect from 1 January 2018 for legal persons and from 1 July 2018 for natural persons)
From 1 January 2018, there is a wider scope of persons that must communicate with the Financial Administration by electronic means, which also includes all legal persons enrolled in the Business Register and registered for income tax and, from 1 January 2018, also all natural persons – entrepreneurs registered for income tax, i.e. not only VAT payers.
Tax reliability index
The Tax Procedure Code includes a new term from the new year – tax reliability index. It means evaluation of a tax subject – entrepreneur through the fulfilment of its responsibilities towards the Financial Administration based on this Act or other special regulations. Tax reliability index should be of a preventive nature and it should provide special tax regimes for reliable tax subjects. The Tax Authority delivers a notification of special tax regimes, to which a tax subject is entitled, within 30 days.
New list based on income tax returns of legal persons
The Financial Directorate publishes on its website a list of tax subjects with the levied amount of the income tax of a legal person or additionally levied amount of the income tax of a legal person or tax loss of a legal person. This notification is available until the end of each quarter of the calendar year based on income tax returns of legal persons submitted in the previous quarter of the year. For the first time, the list will use the data from the income tax returns of legal persons submitted in the year for the taxing periods starting after 31 December 2016.
List of tax subjects registered for value added tax and excise duty
An amendment related to the list of tax subjects registered for value added tax and excise duty will enter into effect on 1 January 2019. This list published by the Financial Directorate will also include the date from which a tax subject is registered for these taxes and the day on which the type of registration was changed to value added tax.
List of selected financial institutions and regulated persons
After 1 January 2019, a list of selected financial institutions for the 2018 calendar year will be published. This list of selected financial institutions will be provided by the Financial Directorate on its website based on records on payments of special contributions to selected financial institutions.
Based on the amendment, a new list of regulated persons will be published at the end of each quarter based on decisions on accounting of special contributions from entrepreneurship in regulated fields that became effective in the previous quarter. The new list will be published through the Financial Directorate after 1 January 2019 for the contribution period starting after 31 December 2017.
Binding statement
From January 2018, the amounts paid by tax subjects together with an application for statement on the application of tax regulations were decreased.
Based on the change of Section 53c (1), a tax payer will pay, together with an application for binding statement, the amount of:
- a) 1% of the sum of an expected transaction, however, no less than €2,000 and no more than €30,000 if applying for a binding statement on the application of a single tax regulation;
- b) 2% of the sum of an expected transaction, however, no less than €2,500 and no more than €30,000 if applying for a binding statement on the application of two or more tax regulations;
- c) 3% of the sum of an expected transaction, however, no less than €3,000 and no more than €30,000 if applying for a binding statement on the application of tax regulations, where the transactions repeat.
Extension of the period for submitting appeals
One of the positive changes is the extension of the period for submitting appeals. The change of Section 72 (3) of the Tax Procedure code extends the period from 15 to 30 days.
The tax assessment proceedings
The tax assessment proceeding as specified in Section 68 (1) is supplemented so as to include the following situation: If a matter is returned to further tax assessment proceeding, the tax assessment proceeding will be led and the decision on the tax assessment proceeding will be issued by the tax administrator whose decision was repealed. It means that the beginning and the end of a tax assessment proceeding will be performed by the tax administrator that began the tax inspection, regardless of the fact that the administrator has changed.
A change was also made to Section 68 (3) where the period for making a decision is extended to three months. Eventually, in case of extraordinarily difficult matters or other serious circumstances, this period may be extended before its expiration by a second-instance authority.
Inspection of files
According to Section 23, a tax subject or its representative are entitled to inspect the tax subject’s file concerning its tax liabilities. The change caused that this doesn’t apply if the respective member state authority or the respective authority of the state party, which was provided with the information about the tax subject according to a special regulation (e.g. Act No. 442/2012 on international assistance and collaboration in tax administration, Council Directive (EU) 904/2010) stated that it didn’t agree with a disclosure of such documents.
Similarly, an exemption from inspection of files is introduced in form of exclusion of the possibility to inspect documents whose disclosure might frustrate or significantly complicate the tax administration or frustrate and significantly complicate clarification or investigation of a matter according to a special regulation (e.g. Criminal Procedure Code) and to inspect summary protocols. This, however, doesn’t apply if they are used as evidence in tax administration.
Basic tax administration principles
Within Section 3 (6), the wording was amended in respect of the basic tax administration principles as follows: “No legal action(s) or other circumstances made without a proper business reason or another reason reflecting the economic reality, whose at least one purpose is to avoid tax liability or receive a tax advantage which the tax subject wouldn’t be otherwise entitled to, is taken into account in tax administration.”
