The Final Version of the Tax Package has Been Approved
In general, the changes introduced by the tax package are expected to come into force on 1 April 2019; however, in certain situations, it is necessary to verify whether special effectiveness rules or transitional provisions apply or not.
On 12 March 2019, the Chamber of Deputies voted on the tax package, which had been returned to it by the Senate with a proposed amendment in January. The deputies voted down the Senate’s proposal, thereby approving the tax package in the originally approved wording.
The approved amendment to tax legislation (income taxes, VAT, Tax Code, excise taxes and others) now has to be signed by the President, and it subsequently will be promulgated in the Collection of Laws.
What principal amendments the tax package includes?
- Implementation of principles arising from the ATAD – new principles seeking to limit cross-border tax optimisation schemes. It is a new concept for calculating non-tax deductible excessive financial expenses, introducing exit tax and rules for the taxation of controlled cross-border entities and limiting the use of cross-border hybrid schemes. The Tax Code will also specifically introduce the institutes of the anti abuse rule. For details about the implementation of the ATAD, refer to our earlier article;
- Change in the upper limit of income of CZK 2 million to limit expense flat charge-off rates for the self-employed;
- Introduction of a new obligation to report payments in excess of CZK 100,000 not subject to withholding tax in the Czech Republic to the tax administrator on a monthly basis (payments that are exempt or not subject to taxation in the Czech Republic based on the applicable double taxation treaty provisions). For more details about this topic, refer to our earlier article;
- Change in the rules for preparing research and development projects – for more details refer to the article;
- Possibility of reflecting the impact of IFRS as early as for the 2019 taxation period (financial institutions); and
- Change in the withholding tax limit to the amount decisive in paying sickness insurance.
VAT – the changes are described in greater detail in the following article:
- New guidance on taxing vouchers (single-purpose and multi-purpose vouchers)
- New provisions on the date of taxable supply (ancillary supplies to leases, long-term supplies)
- New rules for delivering tax documents
- Finance lease definition (effective from 2020)
- Lease of real estate and taxation option restriction (effective from 2021)
- VAT deduction adjustment in respect of real estate repairs
- VAT deduction claim upon registration
- Determination of the place of supply on electronically-provided services
The amendment is expected to become generally effective on 1 April 2019; however, the effective date is different for some of the provisions – therefore, we recommend carefully verifying the effectiveness of amendments, if relevant.