Under Section 38v of the Income Tax Act, individuals are obliged to report income exempt from income tax if it exceeds the threshold of CZK 5 million.
Such an obligation may arise, for example, in the case of a transfer for consideration of a share in a business corporation that is exempt from personal income tax because the period between its acquisition and the transfer for consideration exceeds 5 years.
An exempt transaction may be a gift of real estate with a value in excess of that threshold or the acquisition of real estate in inheritance proceedings.
The deadline for notifying the tax office of this fact is the same as the deadline for filing the tax return for the year in which the exempt income occurred.
The tax authorities impose relatively high penalties for breach of this obligation. A penalty of 0.1% of the exempt income is imposed for late filing. However, if the notification is only made following a request from the tax office, the statutory penalty is 10% of the exempt income (15% if the taxpayer fails to comply with this obligation even within the replacement period).
On 2 August 2022, the General Tax Directorate issued Instruction No. D-56, which regulates the possibility of applying for a waiver of the penalty for failure to notify exempt income.
The taxpayer does not violate tax and accounting regulations
He/she files the notification himself/herself late
Must do so within 150 days of the due date for filing the return