Getting a notice to pay someone else’s VAT in your inbox is not pleasant. In practice, it means that your supplier has issued an invoice with VAT, but has not paid the tax, and the tax office now wants the tax owed by you as the customer. The good news is that the law gives you room to defend yourself.
An unreliable taxpayer is a VAT payer who is in serious breach of its tax administration obligations – typically it has significant and long-term arrears, repeatedly fails to fulfil its obligations, has tax assessed according to aids or has an outstanding security order.
An unreliable person refers to entities that are not VAT payers but have seriously breached their VAT obligations (e.g. identified persons). This status may arise by a decision of the tax authority or directly by law, for example when an unreliable taxpayer becomes an unreliable person after cancellation of registration.
For a quick check, a simple online VAT search will give you a clear overview of the VAT entities.
If you buy something from a VAT payer, you may have to pay the VAT if the VAT payer does not remit the tax. This will happen at a time when you knew, or at least should have and could have known, that the tax would be deliberately not paid. This is also true for advance payments.
So if you see a warning light flash when you do business – e.g. the partner is suspicious, the price is too low, they want money in another account or payment in a crypt – you’d better check. If you don’t, and the supplier doesn’t pay the VAT, the tax office will demand the tax from you.
The published account is the taxpayer’s bank account that the tax administrator has made available in the VAT Register.
Yes, the tax administrator can decide, upon request and after meeting the legal conditions, that the taxpayer is no longer unreliable; the change is then published again in the VAT Register. You can read more about the conditions for removal in our article.
The general legal limit is CZK 270 000. Above that, you must pay cashless.
The principal advantage of a guarantor: you can appeal against the notice and a timely appeal has suspensive effect by law, so that you cannot be subject to tax execution during the appeal procedure. The form is a standard appeal under the Tax Code and must be filed with the tax authority that issued the notice within 30 days of service.
What does suspensive effect mean and what does not? It stops the enforcement against you, but does not prevent interest in the debtor’s original proceeding (interest on the principal debt can continue to accrue and you, as guarantor, are generally liable for it – the exception is that the guarantor does not accrue its own separate interest on the default).
We can help you navigate the law, whether it’s dealing with a specific tax situation, preparing for an audit by the tax authority or defending yourself in court.
An appeal is your formal statement of disagreement with a decision of the tax office. In order to be considered by the tax authorities, it must meet several mandatory requirements:
If your appeal has defects that prevent it from being heard, the authority will ask you to complete it and give you a reasonable time (at least 15 days). If you correct the defects in time, the appeal counts as duly and timely filed. If you do not correct them, the tax authority will stop the appeal.
There is no limit to the scope of objections in a guarantor’s appeal. You can therefore challenge both the existence of the liability itself (e.g. the elements of liability under the VAT Act were not fulfilled – “knew or should have known and could have known”, payment to an undisclosed account, unusual price, etc.) and the correctness and legality of the tax assessed on the debtor as well as the amount of the claimed underpayment.
Once you have been served with the notice, you have the right to inspect the file and to see the documents on which the tax office relies. The guarantor has the status of a taxpayer after notification of the summons. This means that he/she can request copies of the decision, propose evidence and exercise supervisory remedies (renewal, review).
Therefore, in the appeal, be specific in suggesting what evidence the appellate authority should take (contracts, communications with the supplier, pricing documents, payment statements showing payment to the disclosed account, etc.).
Appeals can be complicated for the layperson. Only an experienced attorney can find all the necessary information and strong arguments. So put your case in our hands.
Appealing protects you from recovery but does not stop interest on the main tax from accruing. The Supreme Administrative Court has made it clear that while the surety does not pay its penalty for defaulting on the surety’s notice, it is nonetheless liable for the principal of the debtor’s tax (i.e., the interest that runs on the debtor’s delinquent tax until paid).
Your strategy should therefore be pragmatic: consider payment while continuing to defend. If you are successful on appeal or subsequently in court, the state will refund the overpayment; in the case of an unlawful levy, interest is also due on the tax administrator’s unlawful conduct (if not the full amount, then pro rata).
The Tax Code allows thetax administrator to reinstate a missed deadline for good cause (typically serious illness, natural disaster, etc.). You must apply within 15 days after the reason for the delay has passed. At the same time, the law lists exceptions when a refund is not an option. Therefore, in practice, you must give good reasons for your request (preferably with evidence – e.g. a medical report) and include a missed appeal.
At the same time as or after the defence, you can apply for a stay or for payment to be spread over instalments. The request makes sense if at least one of these situations applies to you:
You should also expect an administrative fee of CZK 400 for each tax to which the application relates.
If your appeal is rejected, you can defend yourself with an administrative action before the Regional Court. The time limit is usually 2 months from the date of service of the decision (unless there is a special time limit). At the same time, you can ask the court to grant you suspensive effect. If the court grants it, this would mean that the enforceability of the contested decision would be suspended until the court decides.
When to turn to the Supreme Administrative Court and how does its decision-making process work in practice? Find out in the next article.
You are liable for the supplier’s VAT if you knew or should have known and could have known that the tax would not be paid deliberately. Indications include, but are not limited to, unreliable taxpayer status, links between persons, an exceptionally low price without reasonable cause, payment to an undisclosed account, payment (even in part) in cryptocurrency, cash in excess of the legal limit or purchase of fuel from an unregistered distributor.
A demand for payment can be appealed within 30 days – this has a suspensive effect (stops enforcement against the guarantor) but does not stop interest on the principal debt from accruing. The appeal must include identification of the Authority and the appellant, a precise identification of the decision being appealed, the grounds of error/unlawfulness, the evidence and a draft judgment. Both the liability itself (e.g. the statutory elements have not been met) and the correctness of the tax assessed and the amount of the arrears can be challenged.
In practice, it is most worthwhile to consider payment while continuing the defence (if successful, the overpayment is refunded). The missed deadline can be renewed for serious reasons (apply within 15 days of the reason passing). It is also possible to apply for a postponement/payment (administrative fee of CZK 400 per tax). If you are unsuccessful in your appeal, you can file an administrative action with the Regional Court (usually within 2 months) with the possibility to request a stay of action.
Yes – you can apply at the same time. This makes sense if immediate payment would threaten your livelihood or business. Expect an administrative fee of CZK 400 for each tax affected.
No – the guarantor does not earn a separate interest on default from the guarantee call. However, the interest on the principal debt runs to the debtor until payment.
The Tax Code grants the guarantor the right to waive confidentiality to the extent necessary for the defence. The tax administrator must therefore make the information reasonably available.
Yes – the guarantor can challenge both the existence of the guarantee itself and the legality and correctness of the tax assessed and the amount of the arrears.
Not sure how to do your taxes correctly so you don’t get it wrong? We can help you navigate the law, whether it’s dealing with a specific tax situation, preparing for an audit by the tax authority or defending yourself in court.
Ondřej is the attorney who came up with the idea of providing legal services online. He's been earning his living through legal services for more than 10 years. He especially likes to help clients who may have given up hope in solving their legal issues at work, for example with real estate transfers or copyright licenses.
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