Corporate income tax

The Czech recovery package would increase the standard income tax rate from the current 19% to 21% and extend the extraordinary depreciation for electric vehicles purchased between 2024 and 2028. Regarding the deductibility of tax costs, the Czech recovery package proposes to introduce a limit for the tax deductibility of costs for acquisition of company cars of category M1 to CZK 2 million (roughly EUR 85,000) from the price of the car. This limit will also limit the increase of the entry price at technical appreciation. The tax deductibility of still wine as an advertising item (gift) up to CZK 500 (roughly EUR 21) would be abolished.

Personal income tax

According to the proposals of the Czech recovery package a progressive tax rate of 23% will apply to monthly income of employees exceeding three times the average wage instead of the current four times. Also a general limit of CZK 50,000 (roughly EUR 2,110) per year for the exemption of other income of the same kind will be introduced.

Several tax exemptions will be abolished, such as:

• discount for a student;
• discount on child placement (the so-called kindergarten fee);
• deduction of expenses for trade union membership fees and examinations verifying the results of further education;
• the exemption from the provision of meals in a non-monetary form (meal vouchers, canteens) above the set limit;
• the exemption of non-cash benefits provided to employees.

Following tax exemptions will be limited:

• exemption of income from the sale of securities or shares in a company upon meeting the time test of possession of three or five years to the amount of CZK 40,000,000 (roughly EUR 1,690,000) per year per taxpayer;
• reduction of the wife/husband discount, which will now only be available to a spouse caring for a child under the age of three years;
• restrictions on the exemption of income from raffles and gambling.

Social security 

The Czech recovery package would increase the levy burden for self-employed persons by setting the assessment base at 55% of the tax base compared to the current level of 50% of the tax base. Also the minimum assessment base for calculating insurance premiums for self-employed persons would be increased from 25% of the average wage to 40%.

The proposal would reintroduce the health insurance for employees at 0.6% of the assessment base and change the conditions for participation in insurance for employees working under a work performance agreement (DPP).

Value added tax 

As part of the simplification of the VAT system the Czech recovery package would align the first and second reduced VAT rates (15% and 10%) into one reduced rate of 12%. Most goods and services currently subject to one of the reduced rates will be subject to the 12% rate under the proposal. However, some items will be reclassified.

In particular, the following are to be subject to the reduced rate of 12%:

• food;
• newspapers and magazines;
• medications;
• selected construction works;
• irregular public bus transport of passengers.

In particular, the following will be reclassified to the basic rate of 21%: 

• alcoholic and non-alcoholic beverages with the exception of tap water;
• hairdressing services;
• repair of footwear, clothing and bicycles;
• household cleaning services;
• delivery of cut flowers.

At the same time, the Czech recovery package proposes to introduce a 0% VAT rate on books. 

Real estate tax 

According to the proposal the real estate tax rates increase up to double and an indexation mechanism will be incorporated to allow the tax to be increased in line with the current inflation.

With the above-detailed Czech recovery package the government aims to reduce the public deficit from 3.5% of GDP this year to 1.8% of GDP in 2024 and 1.2% of GDP in 2025.

If you have any queries about the Czech recovery package or need to adapt to the new rules, the experts and advisors of WTS Alfery, the exclusive representative of WTS Global for the Czech Republic will be happy to provide you with professional support.

A The Czech recovery package bejegyzés először WTS Klient Hungary | tax | accounting | payroll | advisory | HR services | digital solutions | state aid-én jelent meg.

The main element of the anti-crisis tax package: loss carry-back 

A significant part of the Czech anti-crisis tax package deals with the long-discussed introduction of “loss carry-backs” in the field of income tax. The concept of a tax loss carry-back was brought about Liberating Package II in March 2020, and enables both natural and legal persons to retroactively apply their 2020 tax losses to their 2018 and 2019 tax returns. In other words, both individuals and legal entities are free to amortise their losses incurred in the two previous tax years.

Taxable persons and entities can apply loss carry-backs in their additional tax returns by setting off the 2020 loss against the positive tax bases of 2018 and 2019. The tax authority will refund the excess income tax.

This measure can be applied after the 2020 tax return with a tax loss is filed, i.e. not before the beginning of 2021.

Please note that the deadline for tax assessment for the tax years in which the tax base was reduced by the tax loss shall be extended in the case of a loss carry-back.

Application of reduced VAT rate to selected services 

According to the anti-crisis tax package, selected services subject to the first reduced VAT rate (15%) shall be shifted to the second reduced VAT rate (10%). These include:

• provision of accommodation services;
• admissions to sports and cultural events, museums, botanical gardens and zoos, natural reserves and national parks;
• use of sports facilities for sporting purposes;
• hammam and sauna services and similar selected facilities;
• passenger transport by ski lifts.

The second reduced VAT rate has been applicable in the cases listed above since 1 July 2020.

Road tax

 Another important element of the Czech anti-crisis tax package is the reduction of road tax on trucks. The road tax for trucks with a maximum permissible weight exceeding 3.5 tonnes shall be reduced by 25% with retroactive effect from the beginning of 2020. This measure will manifest itself in a retroactive reduction of advance tax payments to be paid in 2020.

If taxpayers did not take advantage of the “general pardon” to defer the obligation to pay road tax advances, and paid the advance in the original amount, the difference between the old and new amount shall be used to pay the remaining advances in 2020.

Extension of exemption from real estate tax 

Until now, municipalities in the Czech Republic were only able to exempt real estate from real estate tax that was affected by natural disasters (such as flooding, storms, extreme droughts). Henceforth, this exemption is also allowed in the event of a pandemic, an emergency measure under the Crisis Act, or industrial accidents.

This exemption can also be applied with retroactive effect. In fact, municipalities have to define the exempt real estate in generally binding ordinances effective until 31 March of the year following the tax year in which the emergency occurred. The exemption shall be applied in the form of an ordinary or additional tax return.

Should you have any questions or require any further assistance regarding the application of the Czech anti-crisis tax package, please feel free to contact WTS Alfery, the exclusive representative of WTS Global for the Czech Republic.

A Anti-Crisis Tax Package in the Czech Republic bejegyzés először WTS Klient Hungary | tax | accounting | payroll | advisory | HR services | digital solutions | state aid-én jelent meg.