Parliamentary Press No. 509 – the government bill on amendments to certain tax acts in connection with increasing public budget revenue, which also amends Act No. 586/1992 Coll., on Income Taxes, as amended (“Income Taxes Act”) – was passed through a third reading in the Chamber of Deputies of the Czech Republic. On 8 November 2019, it was submitted to the Senate of the Czech Republic for further debate. Therefore, the changes that this parliamentary press proposes may pass and become effective on the expected date, i.e. 1 January 2020.
As we have mentioned in the previous articles, this amendment proposes changes mainly related to:
- Restrictions on the exemption of gambling winnings for individuals;
- Taxation of interest income arising from bonds issued before 1 January 2013;
- Methodology of creation and tax deductibility of technical provisions in insurance business; and
- The definition of a parent company – apart from municipalities and voluntary unions of municipalities, other public corporations such as regions and the state, or better the Czech Republic, are proposed to be considered as parent companies.
Over 50 amendments were proposed to the debated parliamentary press. In relation to income tax, however, only amendments related to the taxation of gambling winnings were passed. The original proposal suggested that gambling winnings (including the receipt lottery) over CZK 100,000 should be subject to a withholding tax.
However, the text submitted to the Senate was adjusted in the following way:
- Gambling was divided into the following income categories:
- Lotteries and raffles;
- Fixed-odds betting and totalisator games;
- Technical games;
- Live games with the exception of live game tournament;
- Live game tournaments and small scale tournaments; and
- Other than the above stated types of gambling.
- The winnings from lotteries, raffles and the receipt lottery will be subject to a withholding tax, with the tax base being the gross amount of winnings not reduced by any expenses. Single winning under CZK 1 million will be exempted from the tax. Taxpayers will also be allowed to include the income from lotteries and raffles being subject to the withholding tax in their income tax return and apply the withheld tax in a similar way as a tax advance payment, if such an approach is favourable to them.
- The income from other above stated types of gambling will be taxed in the income tax return of the taxpayer as other income, i.e. it will not be taxed by the game organiser (payer of the tax) through a withholding tax. However, the tax base will be calculated as the difference between the total winnings in the given type of income (see the income categories above) and the total stakes (bet amounts) within the same type of income. If the difference between total winnings and total stakes from all gambling activities in the respective type of income for the whole taxable period does not exceed CZK 1 million, the income from the respective types of gambling will be exempt from the tax. It will not be possible to apply other expenses than the stakes for calculating the tax base.
For the sake of completeness, we would like to add that Parliamentary Press No. 572 – the government bill on amendments to certain acts in connection with the implementation of the EU tax regulations and with the prevention of double taxation – is supposed to affect the Income Taxes Act as well. However, it is still being discussed by the Chamber of Deputies, with the first reading not yet finished. Therefore, it is very likely that the amendments proposed by this parliamentary press will not have completed the legislation process by the end of this year and they will be implemented later than 1 January 2020.