Although the new government has not yet been appointed, let's take a look at its plans in the area of taxationfor the next four years.
The government declares a stable tax policy with a commitment not to increase any taxes and at the same time to strengthen the country’s economic sovereignty. Instead of increasing the tax burden, the cabinet wants to improve the efficiency of tax collection, reduce the grey economy and focus on savings in the state administration. In the area of monetary policy, the government explicitly undertakes not to adopt the euro and not to seek its introduction. At the same time, it plans to propose the enshrining the Czech crown in the Constitution, as well as the right to hold and use cash.
In relation to the business sector, the government aims to increase investment activity and maintain profits in the Czech Republic. It plans to reduce corporate income tax rate back to 19%. A significant area of interest is the issue of transfer pricing. Multinational groups will be requiredto have transfer pricing documentation prepared in advance. Support for innovation is to be reflected in the introduction of faster tax depreciation of investments and simplification of the R&D tax deduction, including an extension of the period for its application. The start-up sector is to get a new legislative framework allowing for broader tax reliefs and more flexible remuneration for employees. Investment incentives are to be revised to provide more support to local businesses with higher added value. Special incentive and tax relief schemes are also to be created for long-term investors in affordable rental and cooperative housing, which is in line with the government’s goal of supporting housing affordability.
In the area of personal income taxation, the government declares a return to the previous tax reliefs that were limited or abolished in the past. The pre-school fees tax credit, the spouse tax credit and the student tax credit are to be reinstated. The most significant measure is to be an increased tax credit for the fourth and each subsequent child. At the same time, the government plans to abolish the limit on employees’ leisure benefits.
For self-employed individuals, the government confirms that there will be no increase in the assessment base for social contributions, which will remain at 35% of the average wage. The administrative burden is to be reduced, among other things, by abolishing the obligation to report employees working under an agreement to perform work.
In the area of VAT, the government is planning measures to make it easier to do business, improve the cash flow of companies and reduce their administrative costs. A significant increase in the limit for mandatory VAT registration above the current CZK 2 million is intended to simplify business, especially for small sole traders. At the same time, the current six-month period for debtors’ obligation to return a previously claimed input VAT on unpaid tax documents is to be shortened to three months.
The changes will also affect VAT rates. Prescription medicines are to fall under the zero rate, and catering services and the serving of non-alcoholic drinks are to be reclassified to the 12% rate. The government justifies the maintenance of zero excise duty on still wine and the rejection of carbon taxes by protecting households and businesses from rising costs.
In the case of real estate tax, the government plans to abolish automatic indexation through inflation coefficients.
The modernisation and digitalisation of the tax administration is one of the key priorities of the government. It is to introduce the so-called digital tax cobra, which will use artificial intelligence and advanced analytical tools to combat tax evasion, fictitious invoicing and illegal tax optimization.
The policy statement also envisages the implementation of the EET 2.0 system, which is to be more technologically advanced, less administratively demanding and supplemented with free financial administration software. The completion of the online tax office is expected to bring a user-friendly environment, including a mobile application.
The crucial point is the establishment of a single collection point, which will combine the collection of taxes, health insurance and social security contributions. Although this system has been discussed under previous governments, it has never been put into practice.
Inspection activities are to be focused mainly on foreign e-shops and employment agencies, with an emphasis on the fight against illegal employment and non-compliance with insurance obligations. The powers of the Customs Administration are also to be strengthened, especially in the area of excise duties and gambling regulation.
So we will see which of the above plans the new government will be able to implement and what the impact of these changes will be on taxpayers and the state budget.
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