After its meeting on 23 August 2023, the government coalition issued a statement, which was subsequently confirmed on the website of the Ministry of Finance, presenting the proposed changes to the Consolidation Package. These amendments are expected to be incorporated into the legislative process in the form of a joint amendment by all coalition parties.
The statement of the government coalition with a complete overview of the changes in the Consolidation Package is available on the website of the Ministry of Finance of the Czech Republic.
One of the most important changes announced is the introduction of a “functional currency” in accounting. This new feature was originally intended to be part of the new Accounting Act, but instead, it is coming now so that it can become effective from 1 January 2024.
The government proposes that accounting entities should be able to keep the books not only exclusively in Czech crowns but also in other currencies, namely EUR, USD, and GBP. However, this option applies to situations where the entity meets the conditions for using the functional currency, i.e. the currency in which the taxpayer carries out most of its transactions.
As of now, it is not yet clear whether and how the introduction of a functional currency will affect all taxes. Preliminary discussions suggest that there will be no change in the area of VAT, for instance.
Other Proposed Changes Worth Your Attention:
- Employee Benefits – For selected tax benefits, an exemption will be introduced in the aggregate value of half of the average wage, which currently amounts to approximately CZK 41 thousand. However, the details of the actual practice are yet to be discussed.
- Unrealised Exchange Rate Differences – Taxpayers will now be able to tax only realised exchange rate differences, i.e. those arising on the settlement of a payable or receivable in a foreign currency. Unrealised exchange differences, i.e. exchange differences on outstanding payables and receivables at the end of the period, should newly not be included in the tax base.
Even though the specific wording of the proposed changes is not yet available, we will continue to monitor this area and keep you informed of further developments.
If you have questions about the changes contained in the Consolidation Package or if you need any help with your tax agenda, please do not hesitate to contact us. For a complete list of our tax services, please visit our website.