Preparation of tax evasion will again be prosecuted

A certain tightening of the "rules of the game" introduced by the applicable amendment to the Criminal Code should not be missed by anyone who deals with tax issues in their activities. Now that punishability of preparation of tax evasion has been introduced, taxpayers may face up to ten years in prison.What was prosecuted until now was only the conduct by which taxpayers directly reduced, or at least attempted to reduce, their duty (e.g. by filing a false tax claim). However, from 1 July even those taxpayers may be punished that prepare tax evasion, for example, by obtaining materials for a false tax claim or by preparing a plan of the intended procedure by which they would gain a fraudulent advantage, either with the intention to enrich themselves by at least CZK 5 million or in collaboration with an organization operating in several states.

The problem of the new legislation for ordinary taxpayers lies in the fact that no clear demarcation has been defined between tax avoidance (which is permitted) and tax evasion. This may increase criminalization of economic entities, because the forms of tax planning that were legal in the past may be considered by state authorities as a criminal offence. The very existence of an entrepreneur can be significantly affected by the mere criminal prosecution, even if it ends up with a favourable judgement.

Therefore, in the future it will be more difficult to achieve tax avoidance that will be entirely in accordance with the law using one's own capacity. However, that does not mean that tax liability cannot be reduced legally. To reduce the risk of crossing the imaginary boundary of preparation of tax evasion, it is more appropriate to consult the situation beforehand with professionals who have, among other things, experience with what is still considered by tax authorities and courts as admissible in practice. The same applies to more complex financial transactions, especially if they cross the borders of the Czech Republic.