At the expert conference Tax Administration held at the Faculty of Law, Charles University, we initiated a discussion on the legal ambiguities regarding the procedure the trustee must follow upon the termination of a trust fund, specifically in relation to tax obligations.
The Tax Code, in connection with individual tax laws, recognizes the trust fund as a taxable entity and simultaneously stipulates that the trustee holds the same rights and obligations as the trust fund itself. Thus, the trustee carries out all procedural and substantive tax duties towards the tax authorities on behalf of the trust fund. These duties can be compared to those of a legal entity as a taxpayer during the creation and existence of the trust fund; however, this analogy does not fully apply upon its termination.
The current tax legislation does not specify a clear procedure for the trustee when the trust fund terminates—such as deadlines for filing the final tax return, payment of any due taxes, or rules regarding the transfer of tax liability from the terminated trust fund. Consequently, the specific tax obligations connected to the termination must be interpreted from the law, where a unified interpretation is crucial for the legal certainty of trust funds as taxable entities, their trustees, and tax authorities alike. The aim of this article is, through qualitative methods including analysis, linguistic and logical interpretation of relevant legal provisions, to evaluate the existing tax regulations related to the termination of trust funds and to outline the possible form of the trustee’s duty to submit the trust fund’s tax return upon its termination.
Due to fundamental differences between the concept of a trust fund and a legal entity, as well as the differing modes of their termination, the special provisions applicable to the termination of taxable legal entities cannot be applied to trust funds. The necessary application of general rules for tax assessment and payment, however, leads to many uncertainties and creates inequality in the rights and duties among terminating taxpayers of various legal forms. The article concludes by highlighting the insufficiency of the current tax legal framework regarding trust fund termination, which perpetuates ongoing legal uncertainty for taxable entities.
