Tax Administration: Do you know when you might be audited by the tax office?

Quick Overview

Not sure what to do during a tax audit? First, verify which taxes and time periods the tax authority is auditing, and prepare the required documents. Keep track of any correspondence you receive and meet the specified deadlines. Your basic rights and obligations during a tax audit include the obligation to cooperate, as well as the right to present evidence, refute the tax authority’s suspicions, and inspect the case file under the conditions prescribed by law. An audit in and of itself does not mean that you have done anything wrong or that the tax authority will automatically assess additional taxes against you.

Have you received a notice of a tax audit or a request that you do not understand? Contact our attorneys —we will assess the tax authority’s demands, explain your options, and help you prepare a response.

What exactly is the Financial Administration?

The term “Financial Administration of the Czech Republic” refers to a system of agencies responsible for the collection, administration, audit, and enforcement of taxes and fees. It operates under the Act on Financial Administration and is also governed by the Tax Code. In practice, this means that the Financial Administration, as one of the state’s key administrative bodies, ensures that the state has the resources it needs to function. In other words, it is the administrator of public finances.

Its activities include, among other things:

• collecting taxes from citizens and businesses,
• verifying that taxes are correctly calculated and paid,
• issuing decisions (e.g., additional tax assessments),
• collecting tax arrears,
• registering taxpayers,
• as well as providing information and guidance on tax matters.

The History of Tax Administration: From Tax Offices to Digital Transformation

Although the modern tax system in the Czech Republic was not established until after 1989, the foundations of tax administration date back to the Austro-Hungarian Empire. Even then, there were so-called tax offices, which served a similar function to today’s tax authorities—they oversaw tax collection and ensured the accuracy of tax calculations.

After the establishment of the Czechoslovak Republic, tax policy and administrative structures were gradually unified. In the 1990s, the system moved closer to the model common in European Union countries—regions were established, and with them a new structure for tax offices. A significant milestone was the introduction of the Tax Code in 2011, which replaced the old Act on the Administration of Taxes and Fees.

In recent years, the tax administration has undergone digitization—today, most tax returns can be filed online via the Moje daně portal, communication can take place through a data box, and taxpayers can use the tax information box to view their personal tax records.

How is the tax administration organized?

You might picture a “tax official” checking your VAT. But the tax administration is much more than just a clerk behind a counter. It has a three-tier structure:

1. General Financial Directorate (GFŘ)

The General Financial Directorate is the head of the entire system. It leads and methodically manages the other components of the tax administration. This is where methodologies are developed, interpretations are provided, and more complex cases are coordinated. It is headquartered in Prague.

2. The Appeals Financial Directorate (OFŘ)

The Appeals Financial Directorate serves as a “second level” of review—if you appeal a decision by a tax office, the case file is forwarded here. It verifies the legality of procedures.

3. Tax Offices

Tax offices are the best-known part of the system, the one most of us come into contact with—they are located throughout the Czech Republic. There are 14 regional tax offices and one special office, known as the Specialized Tax Office for Large Companies.

The Financial Administration does not operate in isolation— it frequently cooperates with the Customs Administration, the police, and the Financial Analytical Office, particularly in cases involving suspected money laundering, tax evasion, or VAT fraud. On an international level, it participates in the exchange of information with tax authorities in other countries.

The Specialized Tax Office oversees the largest companies with revenues exceeding 2 billion CZK or complex structures. It ensures consistent and expert oversight.

What exactly does the tax office do?

They say the tax office never sleeps. While that’s an exaggeration, its scope of activities is truly broad. For the average person, it’s most often relevant when:

• you file a tax return,
• you request a tax refund (e.g., for a mortgage),
• or you receive a request to provide additional information or to undergo an audit.

A tax administrator may initiate a tax audit even without specific suspicion of irregularities. However, a mere request to explain information or provide supporting documents does not necessarily mean that a tax audit has begun—it may be another procedure under the Tax Code.

Tax Authority: Who Are They and What Can They Do?

A tax administrator is an official or agency that manages your tax affairs on behalf of the state. This term refers to an institution, not a specific person, even though a specific official will be communicating with you.

The tax administrator has relatively broad powers; for example, they can request that you provide accounting records, have the right to initiate an audit even without prior notice, and can impose a fine for failure to comply with obligations.

But be aware— the tax administrator also has obligations. For example, they must act impartially and in accordance with the law, are bound by a duty of confidentiality regarding all information, and must not place an undue burden on the taxpayer.

How a Tax Audit by the Tax Office Proceeds and What to Prepare

A tax audit begins with the delivery of a notice informing you of what the tax authority will be examining. The tax authority then reviews the supporting documents, requests explanations, and evaluates the evidence. Be sure to have not only your accounting documents ready, but also—depending on the subject of the audit—contracts, purchase orders, or proof of actual delivery of goods and services. The audit concludes with the delivery of a notice of its completion, accompanied by a tax audit report.

Digitization and the “Moje daně” Portal

In recent years, the tax administration has been moving into the online world. The “Moje daně” portal was created, allowing you to clearly track your tax history, fill out and submit tax returns electronically, and communicate with the tax office online.

You can use a data box, citizen ID, or even a bank ID to log in. This means that most communication with the government can be handled from your desk without having to visit a tax office in person.

What if you disagree with the authorities?

The tax authorities are not infallible. If you believe a mistake has been made, you have the right to file an appeal, or you may file an objection to the tax administrator’s actions, a complaint against an official, or, in exceptional cases, an administrative lawsuit. It’s a good idea to have someone on your side who understands tax laws. Our attorney can help you draft objections, appeals, and other filings.

Summary

The Financial Administration of the Czech Republic is responsible for the collection, administration, and audit of taxes and has broad powers—ranging from the registration of taxpayers to the issuance of decisions, tax audits, and the collection of tax arrears. It is organized into three levels: the General Financial Directorate, the Appeals Financial Directorate, and regional tax offices, including the Specialized Tax Office for Large Companies. The basic statute of limitations for tax assessment is three years and generally begins to run from the expiration of the deadline for filing a regular tax return. The law governs cases of extension, restart, or suspension of this period; the general ten-year limit has statutory exceptions. Failure to file a tax return does not in itself mean that the period will not begin to run. If a dispute arises, you have the right to file an appeal, an objection, a complaint, or an administrative lawsuit. Thanks to digitization, most matters can now be handled online through the Moje daně portal.