Proving source of property may be requested by tax authorities in Czechia

Beginning from December 2016 the Tax Authorities may under certain circumstances request a tax payer to prove source of property. Undeclared income may be taxed at double of regular tax rate.

New regulation gives the tax authorities power to audit volume of property of tax payers. Request for disclosure of source of income can be issues provided the tax authorities find out after some preliminary review that the difference between declared income and increase in property or consumption exceeds CZK 5 million. In case the tax payer fails to provide relevant evidence and at the same time it will not be possible to determine income tax in regular way, the tax authorities will assess tax by estimate or will negotiate it with the tax payer. Penalty from overdue tax can reach up to 100% of tax. Failure to comply with the new regulation can be penalized by a sentence of up to 6 month to 3 years in jail or by a monetary penalty.

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