An overview of the most important tax amendments
26 May 2020
The draft of an extensive amendment to the Tax Code, which the Senate returned to the Chamber of Deputies with amendments, was not approved on 22 April 2020 in either the Senate or the Chamber of Deputies. The whole long-prepared amendment thus fell under the table.
The unapproved amendment also included a prestigious project of the Ministry of Finance for the electronic taxation of MY taxes, a significant revision of the sanction system (interest and fines) or the possibility of an advance on the undisputed part of the excessive deduction.
Therefore, on 27 April 2020, the Government of the Czech Republic approved another amendment to the Tax Code, which takes over a number of provisions of the rejected amendment:
- extensive modernisation, simplification and electronisation of taxes, including the establishment of the so-called online tax office (MY Taxes project);
- for taxable persons who submit tax returns electronically, the deadline for submitting income tax returns will be extended by one month;
- simplification of control procedures;
- revision of the sanction system;
- partial refund of excessive VAT deductions in the form of advances already during the control procedure;
- maintaining a tolerance period of five working days for late submission of tax returns.
The new government proposal introduces:
- the possibility of an individual waiver of a fine for late tax claim, which is not possible today;
- double interest on incorrectly secured or recovered tax if it is unjustifiably recovered from taxable persons in the context of a seizure;
- a tolerance period during which interest on arrears does not accrue; it should have been deleted in the rejected amendment, it is now proposed at three calendar days (currently four working days apply);
- the format of the so-called form submissions will be determined by a decree of the Ministry of Finance;
- the deletion of the original extension of the deadline for returning the excess deduction from 30 to 45 days (remaining 30 days).
The effectiveness of the government's tax code amendment is proposed for 1 January 2021 and according to the proposed transitional regulations, it would be possible to use a one-month extension of the deadline for filing electronic income tax returns for tax returns filed for 2020.
Income Tax Act
The Ministry of Finance introduced an amendment which should affect selected provisions of the Income Tax Act with effect from 2021. Among the most important changes proposed are:
- extension of the time test liberation of revenue from real estate, from the current five years to 15 years;
- introduction of meal allowance in cash as an option, which would be a tax expense on the part of the employer without restriction; for employees it would be exempt income of up to 70% of the meal allowance;
- abolition of the exemption for interest income from bonds issued by Czech companies or the Czech Republic to non-residents of the Czech Republic; this income would be subject to withholding tax;
- change in the taxation of bond income - the subject of the tax will no longer be the difference between the nominal value of the bond paid upon its redemption and the issue price, but the difference between the nominal value and the acquisition price of the bond. In addition, this income will no longer be subject to withholding tax, but will be taxed under the sub-tax base as income from capital assets;
- change in the frequency of reporting of exempt income flowing abroad, once per calendar year, with a deadline of the end of January of the following year (instead of the current monthly reporting if the obligation arose in a given month);
- increase of the limit on the obligation to report exempt income paid abroad, from the current CZK 100,000 to CZK 300,000;
definition of jurisdictions that do not cooperate in tax matters, with all revenues of controlled companies from this list being included in the tax base of the Czech controlling