Interest income in the Czech Republic
December 6, 2012 | 25,00 EUR | answered by Michael Herrmann
Letter from the tax office dated 23.11.2012:
"According to the information provided, you received interest income from foreign payers in 2007......
Please submit your response by 17.12.2012..........."
In our tax returns (myself and my wife), we did not declare interest income from Czech Republic because it was already taxed there (at 15%). The interest earned in CZ was always lower than the interest achievable in Germany.
The bank accounts (Euro and CZ accounts) were opened there for personal reasons: dealing with elderly in-laws, as well as managing an inherited single-family house. The taxation of the property (belonging to my wife) was handled by a tax advisor in Prague.
Due to time constraints, the requested breakdown of all income from capital assets for 2007 and 2008 is not available, as we do not have the annual tax certificates. A request would need to be submitted in person for a useful breakdown.
Questions:
- Should we ask the tax office to create a revised tax assessment based on your information; initially for 2007 and 2008
- Could there be a penalty for not fully paying taxes on income according to Directive 2003/48/EU?
Best regards,
M. Freiman
Dear inquirer,
First of all, thank you for your inquiry, which I would like to answer based on the information provided and in the context of your initial consultation. The response will be based on the facts presented. Missing or incorrect information about the actual circumstances can affect the legal outcome.
The tax office has received notification, due to European reporting requirements, that you have earned capital income in the Czech Republic. Since you have your residence in Germany, you are considered unlimited here, which means that your entire income, no matter where it is earned, is subject to income tax. In your German income tax return, you must declare all income, including foreign income. It does not matter whether a withholding tax has already been levied in the Czech Republic.
You do not need to request a revised income tax assessment from the tax office. A change will be made based on the information provided. However, to avoid further disadvantages, a thorough and comprehensive disclosure of the facts is necessary. If obtaining the necessary documents promptly is not possible, it is strongly recommended to discuss this with the tax office.
Whether a fine or criminal proceedings are initiated depends on the severity of the offense. Criminal proceedings, for example, are initiated in cases of gross negligence and intent. The amount of tax evaded is irrelevant in this regard.
From the information provided, it appears that you may also receive rental income from the inherited single-family house in the Czech Republic. This income should also be declared in your German tax return.
It is advisable to seek comprehensive advice locally regarding the initiation of a fine or criminal proceedings in order to achieve the most favorable solution, including the possibility of a self-disclosure for any errors that have not yet been discovered and for previous years. The situation is too complex for online consultation regarding the potential consequences and the development of a sensible action strategy.
I hope that these details have provided you with a sufficient overview of the situation in the context of your inquiry and this initial consultation.
Sincerely,
Michael Herrmann
Dipl.-Finanzwirt (FH)
Tax consultant
