Public aid in tax matters will undergo some changes

The framework validity was extended until 2021

Public aid to specific businesses appears in various forms, such as direct payments, loan guarantees or loans themselves, reduction of the tax burden or decreased labour costs. Considering the fact that the rules for receiving the public aid are primarily regulated by EU law, the issuance of a temporary framework of rules for the provision of various aid types in reaction to the COVID-19 pandemic makes it possible for the Czech Republic to implement a whole range of support measures such as COVID Rental, Technology or the Antivirus programme.

The framework validity has just been extended until June (and partly September) 2021. In addition, the COVID-19 pandemic has been declared a natural disaster by the European Commission. Such a statement may have an impact on public aid provision – mainly in the area of taxation.

Public aid in tax matters

Apart from direct payments, public aid can be provided by reduction of tax or related interest and fees. If tax is additionally assessed for a business for any reason, the tax administrator usually also assesses default interest arising from the additionally assessed tax, which may amount to considerable sums as well. In relation to the COVID-19 pandemic, the scope of reasons for which the related interest and fees may be remitted can be expected to be expanded.

Inspections of subsidy provision

An inspection of compliance with the subsidy provision rules can be expected namely when drawing aid from a programme such as Antivirus. Unfortunately, the aid within these programmes can retrospectively be revoked based on even tiny formal errors.

There is also a rule that if the recipient does not refund the aid voluntarily, the so-called fee for a breach of budgetary discipline (in an amount in which the subsidy was to be refunded) along with a penalty of approx. 36% p.a. will be imposed. By refunding the subsidy voluntarily, the recipient avoids the obligation to pay the penalty but loses the possibility of defence against the obligation to refund the subsidy.

However, the new instruction from the General Financial Directorate specifies new reasons for remitting the penalty (mainly in relation to the aid from Antivirus programme). They open the way for recipients to defend themselves against the withdrawal of the subsidy without facing the risk of having to pay the penalty (which will be remitted according to the instruction).

Since the amount of the subsidy withdrawn has to correspond to the seriousness with which the rules for the subsidy provision have been broken, it can be expected that many decisions on subsidy withdrawal based on tiny formal errors could be reversed. In short, it is reasonable to defend one´s interests in case of an inspection of subsidy provision, now without running a risk of having to pay a penalty.

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