The 2021 tax experience and news for 2022
The end of 2021 was a very atypical year from a tax perspective: no major last-minute amendments to laws effective immediately from 1 January were adopted. The change of government therefore brought much needed stability in tax law for once. Below is a summary of the key lessons learned from last year's tax changes, along with an overview of what to watch out for in 2022.
Corporate income taxes
Property under the Income Tax Act
- Change in the entry price threshold for tangible movable property from CZK 40,000 to CZK 80,000 from 1 January 2021.
- The same CZK 80,000 threshold also applies to technical improvements of tangible movable property.
- Deletion of the definition of intangible assets from the Income Tax Act as of 1 January 2021. Intangible assets are still defined only by accounting regulations.
- In view of the changes to tangible and intangible assets mentioned above, we recommend reviewing the internal accounting guidelines regarding the amount of the entry price of fixed assets to see if the thresholds are still in line with the company's current requirements.
- Intangible assets classified up to 31 December 2020 are amortised in accordance with the wording of the Income Tax Act effective 31 December 2020. This also applies to the technical appreciation of such intangible assets.
- For tangible assets in depreciation group 1 or 2 acquired between 1 January 2020 and 31 December 2021, extraordinary depreciation may be used to fully depreciate the asset over 12 or 24 months.
Notification of exempt foreign income
- Monthly notifications are no longer required for the full year 2021.
- Annual notices for 2021 must be filed by 31 January 2022.
- The annual notification does not include income that does not exceed CZK 300,000 within a calendar month and the individual type of income.
Lump sum meal allowance
- Different tax setup compared to meal vouchers; for example, this will be reflected in 12-hour shifts and the provision of higher than tax-optimal amounts.
- On the employee's side, this is exempt income up to CZK 82.60 (from 1 January 2022).
- On the employer's side, it is a fully tax-effective expense with no limit on the amount.
Expenditure on COVID testing
- Expenditure on testing which is carried out for the purpose of occupational health protection is tax effective.
- The Department of Health generally considers SARS-CoV-2 testing to be part of occupational health and safety.
Reimbursement of home office expenses to the employee
- The employer has a legal obligation to reimburse the employee for their expenses.
- Reimbursement must be supported by actual expenses or a calculation from actual expenses.
- An exception to this may be lump sum reimbursement of costs for wear and tear on the employee's own tools and equipment in the amount of hypothetical tax depreciation.
Tax rebate for foreclosures that have been stopped
- The new tax credit effective 1 January 2022 is directly related to the change in the Enforcement Code.
- The tax rebate is equal to the amount of the compensation awarded by the executor for the unsuccessfully recovered debt.
- The claims in question are claims of no more than CZK 1,500 that have been unsuccessfully pursued for at least three years.
Publication of financial statements through the tax administrator
- A new option for publishing financial statements.
- It can be used for financial statements with an end of the accounting period not earlier than 31 December 2021.
- Technically, the disclosure is made by attaching the financial statements as an annex to the tax return and indicating the extent to which the financial statements are to be submitted to the Commercial Court.
Adopted interpretations of the National Accounting Council
- Recognition of a Contribution to a Not-for-Profit Entity in the Assets of the Contributor (I-44).
- Impairment of Tangible and Intangible Fixed Assets - Testing and Reporting (I-45).
- Accounting treatment of a released and settled interest in an LLC and a settled interest in a cooperative (I-46).
Personal income tax
- Increase of the discount per taxpayer from 1 January 2021 to CZK 27,840, from 1 January 2022 to CZK 30,840.
- Increase in the tax benefit for the second and additional dependent child and abolition of the limit for the payment of the tax bonus from 1 January 2021. For 2021, it can be claimed through the annual settlement made by the employer or the tax return for 2021.
- The minimum wage (and consequently the guaranteed wage) will rise to CZK 16,200 from 1 January 2022.
- Abolition of the super gross wage from 1 January 2021.
- Introduction of an increased tax rate of 23% instead of the solidarity surcharge, extension of the scope of income to be taxed at the higher tax rate as of 1 January 2021 (newly applied also to non-exempt income from the sale of securities, sale of immovable property or rental income, for example).
- Exemption of income from bonds issued by an EU Member State - effective from 1 January 2021.
- Introduction of a flat-rate scheme for self-employed persons with a minimum flat-rate tax from 1 January 2021. The new government plans to increase the turnover limit for the use of the scheme from CZK 1 million to CZK 2 million. The change will take place in connection with the planned increase of the turnover limit for mandatory VAT registration to CZK 2 million.
- Extension of the time test for the exemption of income from the sale of immovable property from five to 10 years for the sale of immovable property acquired from 1 January 2021.
- Limitation of the amount of the non-taxable part of the tax base for interest on a loan from a construction savings account or a mortgage loan from CZK 300,000 to CZK 150,000 for residential property acquired from 1 January 2021.
- Increased limit for the non-taxable part of the tax base for gifts to 30% of the tax base for the calendar years 2020 and 2021.
Value added tax
One Stop Shop („OSS“) for E-commerce
- The Czech law was implemented late compared to the European Directive. This amendment concerning cross-border business-to-consumer ("B2C") trade came into force on 1 October 2021.
- An aggregate limit of EUR 10,000 has been set for distance selling of goods and cross-border TBE (telecommunications, radio, electronic) services. The taxpayer can fulfil the VAT obligation in another EU Member State through the OSS in the Czech Republic.
- Quarterly tax period, the tax administrator is the Financial Office for the South Moravian Region, Territorial Office for Brno I.
Import One Stop Shop („IOSS“) for E-commerce
- A new institute from 1 July 2021 (or 1 October 2021) for distance sales of imported goods to final consumers (B2C).
- Possibility to declare European VAT by the supplier via IOSS when importing goods from third countries with a value of up to EUR 150 that are directly shipped to a buyer in the EU.
- Monthly tax period, the tax administrator is the Tax Office for the South Moravian Region, Territorial Office for Brno I.
Changes to VAT on travel services from 2022
- As of 1 January 2022, travel services providers can no longer determine the taxable amount in aggregate for the entire tax period but must determine it individually for each customer.
- Travel service providers must now also tax advances received (if the tax rate and the place of supply of the travel service are known). The tax base is the surcharge calculated as the consideration received times the coefficient for calculating the surcharge.
- The exemption for air passenger transport to third countries has been narrowed. The entire transport is no longer exempt from VAT, but part of the transport within the EU is subject to a surcharge.
Abolition of the exemption for imports of low-value goods
- Imports of goods with an intrinsic value not exceeding EUR 22 are no longer exempt from VAT from 1 October 2021.
- The exemption for goods with a value of up to EUR 150 remains.
VAT exemption for energy
- VAT on the supply of electricity and gas or their acquisition from another EU Member State or import.
- Applied to VAT from 1 November 2021 to 31 December 2021.
- It also applied to consideration received before the taxable supply took place, provided the statutory conditions for the declaration of tax on the amount received were met on the date of receipt of the consideration.
VAT exemption for protective equipment
- The Ministry of Finance decided not to extend the VAT remission on filtering half-masks and respirators of protection class FFP2 and higher.
- This waiver expired on 31 December 2021.
- Effective as of 1 January 2022, i.e. it applies for the first time to the January 2022 declaration.
- Significant simplification for reporting units with a turnover for Intrastat between CZK 12 and 20 million (each direction considered separately) if they do not trade in selected commodities. Only one report per year with limited data.
- Extension of the scope of data to be reported for exported goods to include TIN and country of origin.
- Change of transaction nature codes.
- Increase of the limit for small consignments to EUR 400.
- And other changes.
New tax information box, the so-called "DIS+"
- The original tax information box will be discontinued on 28 February 2022.
- Existing authorisations for tax advisors or employees are not transferred to DIS+. DIS+ must therefore be activated and set up completely anew.
- Significant login problems are experienced by foreign members of statutory bodies who are not allowed to log in via data box. So far, the only reliable method in these cases is to collect the special login details in person from the tax office.
Deadline for filing the tax return
- If a tax return is filed within three months of the end of the tax year, from 2021 the tax is assessed at the end of this period, regardless of whether the filing is made by a tax advisor or an audited company.
- In addition to the earlier payment of tax liability, this also results in an earlier refund of overpayments.
- Earlier determination of the tax liability also consequently changes the advance payments of tax. For the tax year, which is a calendar year, the advance tax payments are changed as early as 15 June compared to the practice of 15 September.
- In our experience, the tax authorities have noted these changes and tax obligations are being determined in accordance with the law.
Registration of beneficial owners
- There have been significant changes to the Register of Beneficial Owners as of 1 June 2021.
- A new definition of beneficial owner has been established. This has a major impact especially on Czech companies that have previously had their statutory body registered as the beneficial owner.
- In addition to a monetary penalty, the main sanction for non-compliance is a prohibition on the payment of profit shares.