Czech Tax Package 2019
The recent changes of Czech tax law includes various changes of income tax, VAT, flat-rate expenses for private entrepreneurs, new rules against abuse of the tax regime
On 27 March 2019, it was published in the Collection of Laws Act No. 80/2019 Coll., amending certain tax laws and some other laws with general effect as of April 1, 2019.
For further information on the individual changes, it is possible to use, among other things, information prepared by the Ministry of Finance, which published on its website material containing the wording of this Act with a special part of the explanatory memorandum and the reasons for amendments adopted at the Chamber of Deputies Czech Tax Package 2019.
In particular, the Czech tax package 2019 amends the following tax regulations:
- Czech Income Tax Act
- Czech Act on gambling tax
- Czech Act on VAT
- Czech Insolvency Act (related to the tax base correction and subsequent reduction of the tax deduction at the debtor)
- Czech Excise Tax Act
- Czech Customs Act
- Czech Tax Code
- Czech Act on International Cooperation in Tax Administration
- Czech Financial Administration Act
- Czech Customs Administration Act.
Establishing a general rule against abuse of the tax regime in Czech Tax Code
In Section 8 of Act No. 280/2009 Coll., Tax Code, as amended, a new paragraph 4 was added, which transposes the general rule against abuse of the tax regime set out in Article 6 of the ATAD Directive and, like other European states, explicitly lays down the general rules against abuse in the area of taxation, and is designed in such a way that the prohibition of abuse of rights is applied in principle in the same way for all types of taxes, fees and other similar monetary benefits. The new general prohibition affects both abuses and circumvention.
"(4) Tax administration shall not take into account legal proceedings and other matters relevant to the administration of taxes, the overriding purpose of which is to obtain a tax advantage contrary to the meaning and purpose of the tax legislation.".
In connection with the new Section 8 (4) of the Tax Code, a new point (a) was added to Section 92 (5) of the Tax Code. f), which expressly stipulates the tax administrator's obligation to provide proof of the purpose of legal action and other legal facts, which is to obtain a tax advantage contrary to the purpose and purpose of the tax legislation. It will therefore be up to the tax administrator to prove the abuse of the law or the circumvention of the law.
Tax administrator demonstrates ...f) facts relevant to the assessment of the purpose of the legal action and other facts relevant to the administration of the tax, the predominant purpose of which is to obtain a tax advantage contrary to the meaning and purpose of the tax legislation."
New reporting duty of income derived from sources in the territory of the Czech Republic to a non-resident taxpayer
The Czech tax package introduced a number of new reporting obligations, including (i) a notice of intent to deduct R&D deductions from the tax base and (ii) notifications of income abroad for the relevant form of the Notice on Exempt Income pursuant to Section 38v of Act No. 586/1992 Coll., on Income Taxes, as amended. The notice applies to a taxpayer who is a payer of income derived from sources in the territory of the Czech Republic to a non-resident taxpayer, from which the tax is withheld in accordance with a special tax rate, even if the tax is exempt or international contract states that it is not taxable in the Czech Republic. Revenue accruing abroad is not reported if their aggregate value does not exceed CZK 100,000 in a given calendar month.
Increasing the limit of flat-rate expenses for Czech private entrepreneurs
The tax package increases the limit of flat-rate expenses for private entrepreneurs, doubling the current level and returning the expense limits to the level of year 2016. The amount of the flat-rate expenses for private entrepreneurs s is set as follows:
- 80% of income from agricultural production, forestry and aquaculture and income from the trade business
craft, up to a maximum of CZK 1,600,000,
- 60% of the income from the trade business, but no more than CZK 1,200,000,
- 30% of the income from the lease of assets included in business assets, up to a maximum of CZK 600,000,
- 40% of other income from independent activities, with the exception of income under paragraph 1 (a). (d) and (6), but not more than
apply up to CZK 800,000.
The limit will be applied for the first time in 2019, ie in the tax return filed in 2020.
Limitation of eligibility of excessive borrowing costs
The new Section 23e of the Income Tax Act, in connection with the transposition of the ATAD Directive, includes a reduction in the deductibility of interest from the tax base of CZK 80 million or 30% EBITDA. In accordance with this provision, the income or difference between the income taxpayer and the income tax expense is increased by an amount corresponding to the positive difference between the excess borrowing costs and the eligibility limit of the excess borrowing costs
(a) 30% of tax profit before interest, taxes and depreciation, or
(b) CZK 80,000,000.
Excessive borrowing costs for income tax purposes are borrowing costs that are expenditure incurred to achieve, hedge and maintain taxable income, after deducting taxable borrowing income for the tax period or tax return period.
Taxation is also made with the same purpose to relocate property without changing ownership abroad, taxing controlled foreign companies or rules against abuse of tax system mismatches.
For more information, contact us at:
JUDr. Mojmír Ježek, Ph.D.
ECOVIS ježek, advokátní kancelář s.r.o.
Betlémské nám. 6
110 00 Praha 1
About ECOVIS ježek advokátní kancelář s.r.o.
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