How to get off the unreliable payer list or become a reliable payer again

Who is an unreliable payer

An unreliable payer is a VAT payer who has been found by the tax administrator to be in serious breach of his tax administration obligations. It is therefore neither an exceptional misconduct nor a one-off delay.

As soon as the decision becomes final, the unreliability status is publicly visible in the VAT register and is reflected in the liability of customers for unpaid tax in transactions with such a taxpayer.

What is a serious infringement according to the tax administration

The VAT Act states that if a taxpayer is in serious breach of his obligations, the tax administration will decide that he is an unreliable taxpayer. The decision can be appealed within 15 days (normally with suspensive effect), butin exceptional cases suspensive effect may be excluded to prevent further damage to tax collection.

Examples of compelling reasons include situations where:

• vAT has been assessed or levied by means of an aid (i.e. without the taxpayer’s participation) in the amount of at least CZK 500,000;
• a freezing order has been issued to the taxpayer and has not been paid on time;
• the taxpayer has been in cumulative VAT arrears of at least CZK 500 000 ( excluding accessories) for at least three consecutive months.

At the same time, the tax administrator shall take into account objective reasons worthy of special consideration (e.g. natural disaster, serious illness, proven insolvency beyond the taxpayer’s control). This is therefore an individual assessment according to the circumstances of the particular case, not an automatic rule.

The road to unreliability

There are several steps in the process:

1. First, the tax administrator assesses the breaches and their seriousness, bases them on the file and issues a decision that the taxpayer is unreliable.
2. The decision can be appealed within 15 days. Normally, the appeal has suspensive effect, so the unreliability is not disclosed until after the legal effect. Only in exceptional cases (where there is a particularly serious threat to tax collection) may the tax administrator exclude the suspensive effect and the taxpayer becomes unreliable by service.
3. After the legal effect, the information is reflected in the VAT register and is available to anyone online.

Where you can see the unreliability and how to check it

The public VAT register on the MY Taxes portal shows for each entity whetherit is an unreliable taxpayer and a list of published bank accounts. Businesses should therefore check the register before paying major invoices to a partner and save the output to prove that they have acted with due care in the event of a liability dispute.

Some unofficial websites offer a list of unreliable VAT payers in a clear form, but the official VAT register is always decisive – the data there is up-to-date and legally relevant.

Why you don’t want to be an unreliable payer

The designation “unreliable payer” has direct commercial consequences: customers can be liable for the VAT of the supplier. The tax authorities and the courts have therefore repeatedly stressed that unreliability should be treated in a proportionate manner. Cooperation on the part of the payer and ongoing verification on the part of the customers is all the more important.

How to become a reliable VAT payer again

First, get all your obligations in order

Start by taking stock of your obligations to the state: pay VAT arrears (or arrange for deferrals/payments), supply all missing returns and control statements, respond to the tax authorities’ requests on time, and disclose bank accounts used for economic activity so that they are visible in the VAT register.

The tax administration primarily considers objective circumstances, compliance with obligations and cooperation (e.g., proper filing and payment of taxes, compliance with payment schedules, etc.) when deciding on unreliability and its revocation.

Keep a “clean year”

The law has a simple benchmark for getting rid of unreliability: you can apply no sooner than 1 year after the legal validity of the unreliability decision (or the legal validity of a previous rejected application), provided that you have not been in serious breach of your VAT obligations throughout that year.

What this means for practice: during the “clean year”, make sure that no new serious misconduct (e.g. recoverable arrears, non-compliance with control reports, ignoring notices, etc.) occurs. This will open the door to a successful application.

Apply for a decision to withdraw the VAT non-compliance status

Formally, you are asking the tax office for a decision that you are not an unreliable taxpayer (or person). In terms of content, it is a free document with the general requirements of the Tax Code. This means that the form is not prescribed. You can submit the application electronically via the online tax office (DIS+), by data box or in writing to the office of the local tax office.

What must be in the application:

1. Identification of the applicant (company name, VAT number, registered office/address), representative if applicable, and scope of power of attorney.
2. Description of what is requested: ‘I request a decision that the applicant is not an unreliable payer of value added tax’
3. Brief description of the grounds – that you have not been in serious breach of your obligations to the VAT administration throughout the year and that the reasons for which the status was imposed have been remedied.
4. Evidential annexes – see below.
5. Date, signature (for electronic submissions, depending on the method of submission).

What evidence is worth attaching to make the application viable:

1. Confirmation of payment of previous arrears or decisions on arrears/repayments and compliance.
2. Receipts and filing slips for duly filed returns and control statements for the last 12 months.
3. Internal arrangements: brief description of how you have set up the processes (responsible persons, control mechanisms, payment workflow, etc.).

The current status (i.e. whether or not you are unreliable) is then published in the VAT register. Once the application is successful, the warning label will no longer appear in the register and you will once again appear as a reliable VAT payer in the eyes of the market.

What to do if your application is rejected?

If the tax authority rejects your application, the law allows you to reapply up to one year after the legal validity of the rejection decision. It is therefore worth analysing the reasons for the refusal right away (e.g. arrears, repeated offences in a “clean year”) and adding evidence or setting up stricter internal controls (timely filing of returns and control statements, ongoing verification of published accounts, etc.).

Summary

The status of unreliable VAT payer means that the business has seriously and repeatedly breached its obligations towards the tax administration, for example by long-term non-payment of tax, failure to file control reports or ignoring notices. This status is published in the VAT register after the decision becomes final and has serious business implications – customers are liable for unpaid tax, partners may limit cooperation and banks or insurance companies may reconsider terms and conditions. It is therefore worth checking the reliability of a business partner directly in the official register before any major transaction.

An unreliable taxpayer can become reliable again if the business rectifies all deficiencies, pays the arrears (or has agreed instalments), completes returns and control statements on time and does not commit serious tax delinquencies for at least one year after the decision becomes final. Thereafter, he or she may apply for revocation of the status with evidence of remedial action. In the case of a refusal, it is possible to reapply after one year, the key being to remove the reasons for the previous failure. By successfully removing the unreliability, the business will once again appear on the register without a warning label and regain credibility in the marketplace.