The Obligation to Prove the Origin of Property Starting 1 December 2016

17. 10. 2016

On 3 October, 2016, an Act on proving of the origin of property has been passed and it is to become effective on 1 December, 2016.

The issue is addressed as a part of the Income Tax Act and it aims to grant the tax administrator the right to request a proof of the origin of the property; the request, however, needs to be substantiated by “justifiable/reasonable doubts” as to the difference of at least CZK 5m in the increase ii the amount of possessions and the income known to the tax authorities.

Persons whose property exceeds CZK 5m need not fear the amendment provided they are able to prove that the increment in their possessions is based on duly taxed or tax-exempt income (i.e. gifts or inheritance within the taxpayer’s family).

Should a person fail to substantiate such an increase, the tax is to be estimated by special measures according to the aids (information and materials). Should such a tax exceed CZK 2m, the tax administrator will be entitled to claim a penalty of either 50% of the assessed tax or 100% if the taxpayer in question refuses to co-operate during the process.

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