In its judgment of 12 August 2026, Ref. No. 3 Afs 28/2026-42, the Czech Supreme Administrative Court confirmed the approach taken by the tax authorities in relation to the operator of the Brno-based restaurant Hacienda Mexicana. Due to serious deficiencies in the records of sales, inventory and cancelled transactions, it was not possible to determine the tax liability through standard evidence-taking. The tax administrator therefore proceeded to assess the tax using aids and additionally assessed corporate income tax of CZK 6.1 million, together with a 20% penalty on the additionally assessed tax. The judgment serves as an important warning for the entire hospitality sector, particularly in view of the planned introduction of EET 2.0.

Case summary

HACIENDA MEXICANA s.r.o. operated a restaurant in Brno and also carried out other business activities. During a corporate income tax audit for 2016, the Tax Office concluded that the accounting records and supporting documentation submitted by the company did not make it possible to reliably determine the actual amount of sales.

The tax administrator therefore disallowed the reported tax loss of CZK 228,527 and, using aids, additionally assessed tax of CZK 6,141,370. The company was also required to pay the corresponding penalty. The Appellate Financial Directorate upheld this approach and, following several rounds of court proceedings, the restaurant’s cassation complaint was ultimately dismissed by the Supreme Administrative Court. The deficiencies identified in the accounting and related records were so significant that the accounting records as a whole had effectively been obscured and, according to the tax administrator, the tax could no longer be determined through evidence-taking.

Why the tax administrator switched to an assessment using aids

Under Section 98(1) of the Czech Tax Code, the tax administrator may determine tax using aids if the taxpayer fails to meet its obligations in the evidentiary process and, as a result, the tax cannot be determined on the basis of evidence.

The tax authorities, and subsequently both the Regional Court and the Supreme Administrative Court, identified in particular:

• unclear and unreliable sales records, affected by inaccuracies and unjustified interventions;
• discrepancies between sales records and cash register receipts;
• the absence of complete continuous inventory records and stocktaking;
• unsupported documents used to reduce sales recorded in the cash register system on a significant scale;
• duplicate deductions;
• insufficient evidence of the disposal of expired or spoiled inventory;
• subsequent alterations to certain documents and outputs from the KERBEROS cash register system. 

The Supreme Administrative Court considered particularly serious the finding that some of the outputs submitted from the KERBEROS system had been altered. Moreover, the external system administrator was unable to explain the changes and stated that the outputs, in the form in which they had been submitted, could not have been generated directly by the system.

The tax administrator was able to reliably verify the costs of purchasing ingredients and beverages. However, the restaurant failed to provide credible evidence showing how the purchased inventory had been used and what sales had actually been generated from it. According to the Supreme Administrative Court, a substantial part of the accounting records relating to the company’s core business activity had therefore been effectively “obscured”. Determining sales on the basis of evidence was consequently not realistically possible.

Choice of aids by the tax administrator – determining sales based on comparative calculations

The starting point was the verified cost of purchased ingredients. The tax administrator also relied on recipes, purchase prices, sales price lists and portion weights. Based on these data, it calculated the production cost of individual portions, the mark-ups applied to individual dishes, the average mark-up and, subsequently, the estimated sales generated from food sold.

The average commercial, or calculated, mark-up applied to Hacienda Mexicana was 208.66%. The Court did not consider this excessive. It also emphasised that a taxpayer is not entitled to demand that a particular aid or calculation method be used. The taxpayer may, however, demonstrate that the resulting tax assessment is grossly disproportionate to the actual situation. According to the Supreme Administrative Court, the restaurant failed to demonstrate such disproportionality. An assessment using aids is inherently only a qualified estimate and therefore always involves a certain degree of inaccuracy. However, where the use of such a method has been caused by unreliable accounting records, the taxpayer faces a more difficult evidentiary position when challenging the resulting assessment.

Why EET data for December 2016 were not sufficient

Under the original Electronic Sales Records system (EET), the obligation to record sales for the accommodation and food service sectors did not take effect until 1 December 2016. For the audited year, the restaurant could therefore only have had EET data for the final month of the year, rather than for the entire year.

In its cassation complaint, the company argued that the tax administrator had electronic sales data available at least for December 2016 and could have used them in its calculation. The Supreme Administrative Court, however, found this argument inadmissible because the restaurant had not raised it in its original court action and only introduced it at the cassation stage.

The Court also noted that data for a single month could neither disprove nor bridge the fundamental deficiencies in the accounting records for the entire year. In addition, the company itself acknowledged discrepancies in its EET records, particularly in relation to cancelled transactions, which were allegedly submitted in batches covering certain periods rather than on an ongoing basis.

EET data could therefore have served as one piece of supporting evidence or one of the aids used by the tax administrator. On their own, however, they could not replace reliable sales records, inventory management, stocktaking records and documentation of food disposal for the remaining eleven months of the year.

Typical tax risks in restaurant operations

The judgment clearly illustrates why the hospitality sector is particularly sensitive to the quality of internal records.

1. High number of individual transactions

Restaurants process a large number of payments every day, many of them in cash. Without a reliable link between the cash register system and the accounting records, it may subsequently be difficult to demonstrate that all sales have been properly recorded.

2. Cancellations, discounts and loyalty schemes

A cancelled transaction can be entirely legitimate, for example where an order was entered incorrectly. However, if there is no record of the original transaction, the reason for the cancellation, the time, the employee responsible or approval by an authorised person, the cancellation may appear to be a subsequent reduction of reported sales. Similar risks arise in relation to discounts, loyalty bonuses, employee consumption or items charged “to the house”.

3. Food losses and disposal

Natural wastage, spoiled food and unsold portions are common in the hospitality sector. However, businesses must be able to document these losses. It is not sufficient simply to claim that food products are perishable. Ideally, businesses should maintain ongoing records or disposal reports specifying the type and quantity of goods, the reason and date of disposal and, where appropriate, the persons responsible.

4. Recipes and portion sizes

Recipes can be used to determine how many portions could theoretically have been prepared from the ingredients purchased. Outdated recipes, unrealistic portion sizes or differences between documented recipes and actual kitchen practices can therefore have a significant impact on the outcome of a tax audit.

5. Discrepancies between inventory, cash register data and accounting records

Each individual system may appear credible when viewed separately. The risk arises when purchases of ingredients, stock issues, items sold, recorded sales and inventory differences do not correspond with one another.

What the introduction of EET 2.0 from 1 January 2027 could mean for restaurants

The original EET system was abolished as of 1 January 2023. In 2026, new legislation referred to as EET 2.0 is under consideration.

Under the current timetable, a pilot phase is expected to begin in January 2027. However, the specific obligations and effective dates will depend on the final wording and approval of the legislation. For businesses that maintain proper records, the new system could be helpful. It would create an additional continuous record of sales, make it easier to reconcile cash register data and could strengthen a restaurant’s evidentiary position. At the same time, however, EET will provide the tax administrator with more detailed data for analytical comparisons.

During a tax audit, it may therefore become easier to identify, for example:

• differences between EET data, the cash register system, accounting records and VAT returns;
• frequent, bulk or retrospectively processed cancellations;
• an unusual ratio of cash to non-cash sales;
• discrepancies between the number of items sold and the quantity of ingredients issued from inventory;
• significant fluctuations in sales without an economic explanation;
• high write-offs and inventory disposals inconsistent with the nature of the business;
• differences between individual establishments operated by the same business or between comparable periods.

A discrepancy does not in itself automatically prove tax evasion or underreporting. However, it may raise doubts on the part of the tax administrator and require the business to provide a credible explanation supported by appropriate documentation.

How to prepare for EET 2.0 and a potential tax audit

We recommend that restaurants in particular:

1. Integrate the cash register system, EET, accounting and inventory records. Every item sold should have a traceable impact on both recorded sales and inventory.
2. Establish clear rules for cancellations and discounts. Retain the original transaction, the reason for the adjustment, the time, the employee identification and, where applicable, approval by a manager.
3. Protect original data from subsequent alteration. The system should maintain an audit trail showing who changed a record and when.
4. Keep recipes and portion sizes up to date. Recipes should reflect actual kitchen practices rather than merely historical calculations.
5. Carry out regular stocktakes. Inventory differences should be assessed and explained promptly.
6. Document food losses. Records should distinguish between natural wastage, expired goods, spoiled ingredients, complaints and employee consumption.
7. Regularly reconcile different data sources. It is safer to identify and correct discrepancies internally than to have to explain them for the first time during a tax audit.
8. Separate different business activities and establishments. Catering, restaurant operations, bars, clubs or venue rentals should have analytically distinguishable costs and revenues. 

An interesting point from the judgment: the mark-up applied by the HAVANA restaurant

Hacienda Mexicana attempted to challenge the tax administrator’s calculation by comparing its figures with those of other restaurants in Brno.

However, an addendum to an expert report showed that the HAVANA restaurant applied a calculated mark-up of 250.88% to its nine best-selling dishes. According to the Supreme Administrative Court, this finding tended to confirm that the 208.66% mark-up applied in the case of Hacienda Mexicana was not, in itself, unrealistic.

What does a mark-up of 250.88% mean for the customer? In simplified terms, if the ingredients used to prepare a dish cost CZK 100, applying such a mark-up results in a sales price of approximately CZK 350.88. However, the mark-up should not be confused with the restaurant’s profit. The sales price must also cover wages, rent, energy costs, equipment, unsold and spoiled food, payment processing fees, taxes and other operating expenses.

Conclusion

The Hacienda Mexicana judgment confirms that formally maintained accounting records are not sufficient if a business is unable to establish a clear link between purchased ingredients, their consumption and reported sales. For restaurant businesses, it is therefore essential not only to record individual payments, but also to maintain a complete and reliable evidentiary chain from purchasing, through inventory and kitchen operations, to the cash register.

EET 2.0 may help compliant businesses substantiate their reported sales. At the same time, however, it will increase the tax administrator’s ability to automatically identify discrepancies. Preparations should therefore not be limited to acquiring a compatible cash register system. Restaurants should primarily review their entire internal control framework.

This article is based on the judgment of the Czech Supreme Administrative Court of 12 August 2026, Ref. No. 3 Afs 28/2026-42. Information concerning EET 2.0 reflects the status of the legislative process as of August 2026. This article is intended for general information purposes only and does not constitute tax or legal advice in any specific case.