Czech Republic: Interest on retained deductions | KPMG | GLOBAL

Czech Republic: Claiming interest on “retained deductions” (tax remittances)

Czech Republic: Interest on retained deductions

Taxpayer entitlement to interest on “long-retained excess deductions” (tax remittances retained and not refunded by the tax administration) has been repeatedly upheld and confirmed by the Supreme Administrative Court, despite the tax administration’s disagreement. The Czech General Financial Directorate (GFD), however, has agreed with this position. Nevertheless, value added tax (VAT) payers cannot expect that interest on retained deductions generally would be paid automatically.

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The GFD has set 1 January 2015 as the cut-off date for awarding interest on long-retained deductions (overpayments). On claims arising before this date, interest at a rate of more than 14% per annum, pursuant to Supreme Administrative Court case law, is awarded to taxpayers, measured starting from the beginning of the fourth month following the end of the tax period.

KPMG observation

Taxpayers need to be vigilant and apply for application of interest on refund claims. The tax authorities apparently will only make their decisions to pay interest based on applications from taxpayers—thus resulting in difficulties to the taxpayers given certain unreasonably lengthy inspection procedures. The application for interest must always be properly substantiated. If the taxpayer does not file the application within six years of the date when an excess deduction was refunded, the taxpayer’s entitlement to interest will cease to exist. This year, it is still possible to claim interest on excess deductions refunded in 2011.

 

Read an October 2017 report prepared by the KPMG member firm in the Czech Republic

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