Real Estate Tax Act

In practice, perhaps the most important amendment is that in the future, it should be clear from the Real Estate Tax Act that, for the purposes of determining land tax, the type of land registered in the land register is decisive, regardless of whether it corresponds to the actual state. There has been a long-standing uncertainty in practice as to how to proceed in such a case. In the proposal, the Ministry explains that this is a confirmation of existing practice and that the importance of the information contained in the land register should be strengthened. Therefore, it seems to be time to revise whether the information in the land register in relation to your company is up to date.

Furthermore, the amendment to the Real Estate Tax Act provides for the possibility for municipalities to set a local coefficient not only exclusively for the whole municipality, as has been the case so far, but also to establish a local coefficient for part of the municipality in order to distinguish the conditions in individual areas. The new legislation thus gives municipalities the opportunity to take into account the conditions of a particular municipality area, such as the location of part of the municipality, the level of public facilities in the given area, transport accessibility, etc. As a result, some areas may pay less in the future and some will pay more in real estate tax.

Income Taxes Act

The most discussed amendment in the area of income tax is undoubtedly the meal allowance provided by employers to employees in monetary form. In the proposal, the cash meal allowance for employees is exempt up to 70% of the upper limit of the meal allowance for business travel lasting 5 to 12 hours per shift, which is CZK 72.10 for 2020. Such an allowance up to the prescribed limit shall not be subject to social security and health insurance. For the employer, it is a tax-deductible expense. The tax regime for non-monetary forms of catering (i.e. meal vouchers, canteen, etc.) remains unchanged. The cash allowance for meals is therefore proposed as an alternative to non-monetary forms of catering. However, it is important for the employer to keep in mind that employees can only be exempted from one type of contribution, i.e. monetary or non-monetary, not both of these contributions at the same time.

Another expected amendment is the simplification of the notification obligation which concerns income that is sent abroad. Unfortunately, the proposal did not narrow the scope of the reported income, while it would help the taxpayers the most to exclude from the notification obligation, for example, income from services provided in the Czech Republic. The scope of notification has therefore not changed, but the frequency of notification and the exemption limit for certain types of income have been adjusted. According to the existing rules, notification takes place on a monthly basis and if the income of a non-resident is exempted or not taxed in the Czech Republic according to the relevant double tax treaty in the aggregate amount not exceeding CZK 100,000, then this type of income does not have to be reported. Two amendments are then proposed in the area of this notification exception. Firstly, the limit amount increases from the current CZK 100,000 to CZK 300,000 per calendar month. Secondly, income exempt or not subject to taxation in the Czech Republic, which exceeds this limit, will no longer be reported on a monthly basis, but once a year, always by the end of January of the following year.

During the holidays, the Ministry of Finance also announced that the draft amendment for 2021 would include parliamentary amendments concerning reliefs in the area of tax depreciation of assets. The currently discussed proposal is similar to extraordinary depreciation, as was the case for assets put into use between 1 January 2009 and 30 June 2010. This historical concept, which the Ministry is about to reuse, was once also used to respond to an economic crisis. This accelerated depreciation should now apply to assets in the 1^st and 2^nd depreciation groups put into use between 1 January 2020 and 31 December 2021. Furthermore, increasing the limit amount for classification in the category of tangible assets and their technical improvement is again being considered, namely from CZK 40 thousand to CZK 80 thousand. Last but not least, the abolition of the special tax amortisation for intangible assets is also under discussion, and these assets would now be amortised in the same way for tax purposes as for accounting purposes.

The abolition of the super-gross salary and the introduction of a progressive taxation at a rate of 15% and 23% should also be proposed in the form of a parliamentary amendment. The tax base subject to the rate of 23% should then be an income exceeding 48 times the average salary, i.e. for 2020, an amount exceeding CZK 1,672,080 per year. However, official parliamentary proposals in these areas are not yet available.

We have described above the most discussed amendments to the Real Estate Tax Act and the Income Taxes Act, which will affect a wide range of taxpayers. However, many more amendments are proposed, for example in the area of taxation of income from bonds, etc. We will therefore see in what form and whether they go through the legislative process at all. We will keep you informed you about further developments.