The relatively extensive amendment to the Income Tax Act (“ITA”) is expected to introduce substantial changes to international taxation and other fields starting from 2019. We note that the amendment is just at the initial stage of the legislative process, with comments being now dealt with by the Ministry of Finance. We will keep you informed about any further development. The amendment has rather overshadowed additional amendments to the ITA that are presently being debated in the Chamber of Deputies. Let us provide you with a summary of the proposed changes:
Proposed limitation of the ‘basic investment fund’ category
The Senate’s amendment is part of the debate within the second reading in the Chamber of Deputies. With effect from 1 January 2019, it proposes narrowing the definition of the ‘basic investment fund’, which is subject to the more favourable five-percent rate treatment.
Restoring the expense charge-off flat rate for sole traders to the original level
Another amendment to the ITA is in the first reading, restoring the limits of expense charge-off flat rates to the level of 2016.
Legislators state that the introduced reduction of expense charge-off flat rates has been incorporated to the bill through an amending motion and as such, the impact of the measure has not been assessed sufficiently. The administrative burden related to the registration of sales, local sales and purchases reporting and other governmental measures introduced for minor businesses and sole traders has increased and thus it would be appropriate not to expand administrative requirements in income taxation.
Taxation of financial compensation for the church
The amendment to the Act on Property Settlement with Churches and Religious Institutions (the “Act”) comprises a related amendment to the ITA. With effect from 1 January 2019, the amendment proposes narrowing the existing provision on the subject of taxation to the extent that the income from gratuitous acquisition of property, except for financial compensation, under the Act by community service taxpayers is not subject to tax. All financial compensation paid out to churches and religious institutions would thus be subject to tax in the future.
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