27.04.2011
According to the information published in Hospodářské noviny on 14 February 2011, financial authorities started to impose penalties on those companies that fail to publish reports on their economic results in the Collection of Deeds kept by the Commercial Register. The verification whether the company provides such data and the potential imposing of a penalty have become an integral part of the inspection of income tax. Rutland ježek, advokátní kancelář, attorneys in Prague therefore believes it is necessary to briefly inform mainly its clients about such obligation.
DEPOSITING THE DOCUMENTS INTO THE COLLECTION OF DEEDS AND THEIR PUBLISHING
Companies subject to registration in the Commercial Register are obliged to deposit inter alia the following financial statements into the Collection of Deeds, no later than 30 days after the same have been verified by an auditor and approved by the general meeting:
- Annual reports;
- Annual, extraordinary and consolidated financial statements, provided they for not form a part of the annual report;
- Proposals for profits distribution and their final form, or proposals for coverage of losses, provided they do not form a part of the annual financial statements;
- Auditor's reports on the verification of financial statements; and
- Reports on relationships between related entities pursuant to § 66a (9) of the Commercial Code.
As concerns the form of depositing the statements into the Commercial Register, it is governed by Decree No. 562/2006 Coll., on the digitalisation of the Commercial Register, which sets out that the deeds which do not substantiate facts stated in an application to make or change an entry in, or to delete an entry from, the Commercial Register, are to be filed only in their electronic form in the PDF format. In practice, the filing is made as follows: the signed financial statements and annual report are scanned together with all of their annexes, and are sent in the PDF format on a CD or via e-mail to the applicable register court. The register court does not return the data media, and discards the same after the expiry of 6 months from their delivery.
The obligation to publish such accounting records is fulfilled by depositing the same into the Collection of Deeds kept by the Commercial Register. The obligation to deposit the annual reports and auditor's reports on the verification of financial statements, into the Collection of Deeds also applies to companies subject to a statutory obligation to have their financial statements verified by an auditor. The obligation to deposit the financial statements, proposal for profits distribution and its final form, or the proposal for coverage of losses, and the report on relationships applies to all companies registered in the Commercial Register.
SANCTIONS FOR A FAILURE TO PUBLISH AND DEPOSIT THE DOCUMENTS
The Act on Accounting grants the applicable financial authority a right to sanction an accounting unit, which fails to publish the financial statements or annual report in the manner set out by the cited Act, by imposing a penalty of up to 3 % of the total value of the assets of such accounting unit in that accounting period, in which the breach of the legal obligation occurred. If it is impossible to ascertain such aggregate value of assets, the amount of assets established from the financial statements applicable to an immediately preceding accounting period will be used. If the total value of assets cannot be established even using the above procedure, it will be determined then by the body which deals with the breach of the legal obligation, using a qualified estimate.
Inspections monitoring the compliance with the obligation to publish financial statements and the imposing of penalties for failure to do so fall within the jurisdiction of local financial bodies and inspection bodies. Proceedings on the imposing of a penalty may be commenced within one year of the date on which the applicable body, which is authorised to impose such penalty, has learnt of such a breach of obligation, however no later than three years from the date on which such a breach of obligation has occurred.
According to the statement of the General Director of the General Financial Directorate, a penalty imposed for a first breach will only be in a reasonable amount. However, one cannot exclude that an administrative or judicial body will justify the imposing of a higher sanction, when exercising "its sole discretion" available to it under the law, and that such higher sanction will be found to be grounded within remedial measures and potential court action. Nevertheless, the imposing of a penalty and its amount must always be duly justified.
