At the beginning of July, Act No. 142/2022 amending the Income Tax Act, the Road Tax Act and other laws, came into force in the Czech Republic. According to the explanatory memorandum to this law, its aim is to promote low-emission mobility.
Income tax changes related to low-emission vehicles
The first change of the Czech income tax law concerns employees who use a low-emission car provided by their employer also for private purposes. Their taxable base is now to be increased not by 1% but by 0.5% of the purchase price including value added tax. According to the transitional provisions, this provision is valid for the entire year 2022. Wages for the past periods will not be adjusted in individual months, but the adjustment will be made in a single payment within the annual settlement of advances and tax benefits or in the confirmation of taxable income from employment when it is issued to the taxpayer.
The definition of low-emission vehicles should be defined in a separate legal regulation, namely the Act on the support of low-emission vehicles through public procurement and public services in passenger transport. However, this act had not yet been adopted before the date of legal force of Act No. 142/2022 Coll. For this reason, the term ‘low-emission vehicle’ is also explained in the transitional provisions.
It should refer to a road vehicle in category M1, M2 or N1 whose CO2 emission limit does not exceed 50 g/km and 80% of the emission limits for air pollutants in real traffic as laid down in Annex I to Regulation (EC) No. 715/2007 of the European Parliament and of the Council on type-approval of motor vehicles.
The employer should be able to prove the application of the lower rate for the taxation of the employee’s non-monetary income at any time. If this information cannot be clearly deduced from the registration certificate, we recommend that, as a precautionary measure, the original rate of 1% of the purchase price of the car including value added tax should continue to apply.
Another change is the reclassification of electric vehicle charging equipment from depreciation group 3 to depreciation group 2. This will shorten the minimum depreciation period for this equipment and thus accelerate the application of costs for acquiring these devices as tax expenses.
The transitional provision on the change of depreciation group also allows the application of this rule already for the whole year 2022. If depreciation of such assets started before 2022, it is possible to reclassify such assets to the depreciation group corresponding to the current wording of the law starting from 2022.
Changes in road tax
In order to support even more low-emission mobility in the Czech Republic, the Act also makes changes to road tax for the full year 2022. Only trucks in categories N2 and N3 and their trailers in categories O3 and O4 will now be subject to road tax. Cars and buses will no longer be subject to the tax.
Trucks with a maximum weight of over 3.5 tonnes and truck trailers weighing over 3.5 tonnes remain subject to the tax, but some of them are now zero-rated. For example, no road tax will be payable on trucks with 2 axles with a maximum weight of up to 12 tonnes or on trailers weighing up to 12 tonnes. As a result, only operators of heavy trucks and trailers with a maximum permissible weight of 12 tonnes or more and tractor units will pay road tax for 2022. As the advance payments of road tax for the whole year 2022 have been cancelled by the general pardon of the Czech Ministry of Finance, the road tax will not be due until the end of January 2023.
If you would like to know more about the low-emission mobility supporting tax changes in the Czech Republic or other taxation issues in the country, please do not hesitate to contact the experts at WTS Alfery, the exclusive representative of WTS Global for the Czech Republic.