Case law on waiver of default interest

19. 12. 2022
Case law on waiver of default interest

The Supreme Administrative Court, in its judgment no. 4 Afs 311/2021-33, expressed its opinion on the issue of waiver of default interest, specifically for an entrepreneur – VAT payer that was assessed default interest due to the incorrect application of VAT regulations.

In this particular case a German company incorrectly assessed the facts concerning VAT and mistakenly paid VAT in Germany instead of correctly paying tax in the Czech Republic. However, the company realized its mistake retrospectively and, without being summoned to do so by the tax administrator, corrected its erroneous conduct. It registered for VAT in the Czech Republic, filed additional VAT returns and paid the resulting tax liability to the tax authorities. The German company subsequently applied for a waiver of the default interest that had arisen due to late payment of VAT.

The tax administrator, however, did not grant the request for a waiver of default interest because, in its opinion, the tax entity had repeatedly broken the law. However, the Supreme Administrative Court agreed with the taxpayer’s reasoning in view of the fact that a waiver of default interest should be granted to taxpayers that cooperate with the tax administrator honestly, fairly and decently. The court argued that the German company’s conduct cannot be equated with companies that repeatedly and deliberately fail to cooperate with and obstruct the work of the tax administrator.

The court therefore granted the taxpayer’s request for waiver of default interest as, in its opinion, only a single instance of misconduct can be claimed to have occurred, and not a repeated violation of tax liabilities.

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