The so-called package against the rising fuel prices presented by the Government was published on 8 June 2022 in the Collection of Laws under no. 68/2022 Coll., coming into effect as of 1 July 2022. In the area of taxation, the subject of the road tax is thus substantially reduced and there are also other minor modifications to the Income Tax Act with the objective of supporting electro-mobility.
Amendments to the Income Tax Act
The amendments to the Income Tax Act are primarily aimed at the aforementioned supporting of electro-mobility, which should contribute to the meeting of the commitments set by the Czech Republic to itself in the area of emission reduction. The first novelty is the amount of employees‘ income the employer has to tax additionally if the employees are provided with a motor vehicle for business and private purposes free of charge. Until now, employees were taxed additionally 1% of the entry price of the provided vehicle in general. Now, if an employee is provided with a low-emission vehicle, i.e. an electric car or hybrid vehicle, only 0.5% of the entry price will be additionally taxed in the payroll agenda. This preferential regime will apply for the whole of 2022.
The second change which should support the construction of the infrastructure necessary to increase the demand for electric cars is the reclassification of components for charging electric cars from the third to the second depreciation group. The change applies to the so-called wall-boxes and separate charging stations, if they are individual movable assets, i.e. they are not, for example, accessories to the acquired car or an integral part of a building. These items will therefore be depreciated over five years instead of the current ten and this regime can optionally be applied even for assets acquired before 1 July 2022.
Restrictions on the subject of the road tax
The amendment to the Act on Road Tax is, according to the Ministry of Finance of the Czech Republic, part of the response to the conflict in Ukraine which has caused several secondary impacts on both business and non-business entities; especially the considerable increase in fuel prices. Entities operating in the transport sector thus incur increased transport costs which are adversely reflected in higher prices of services and goods. The Ministry of Finance attempts to support taxpayers at least partially by amending the Act on the Road Tax and reducing this tax, including the associated administration.
The Act on the Road Tax and its entire concept has thus changed very radically not only in the subject of the taxation, although the subject is, without a doubt, the most significant change, as it results in many taxpayers not being subject to the new road tax at all. However, there are also other substantive and parametric changes to the functioning of the road tax, primarily in the context of the obligatory implementation of the Eurovignette Directive. Taxpayers will thus experience novelties in, among other things, registration and payment obligations, too.
Therefore, the essential information for practice is that only lorries with the maximum permissible weight of more than 3.5t, i.e. only heavy lorries (vehicles of N2 and N3 categories and their subcategories) for which this is required by the current wording of the Eurovignette Directive, will newly be the subject of the tax. Heavy lorries are, under the Eurovignette Directive, also trailers of O3 and O4 categories. Most businesses using passenger cars or buses in their businesses thus will no longer be subject to the road tax.
It must be noted that the new road tax legislation will apply retroactively to the 2022 taxation period, which means that passenger cars and other vehicles that are not lorries with a maximum permissible weight of more than 3.5t or trailers with a maximum permissible weight of more than 3.5t will no longer be subject to the tax. For the 2022 taxation period, no tax will be declared, assessed, or paid on these vehicles. If the taxpayer has paid the road tax resp. road tax prepayment, they incur an overpayment whose refund can be requested from the Tax Office. In this context, we remind you that the obligation to pay road tax prepayments for the 2022 taxation period was waived by the decision on the waiver of tax accessories and tax prepayments due to an extraordinary event ref. no. MF-118/2022/3901-2 published under No. 10 in the Financial Newsletter No. 6/2022.
Registrations for the road tax done before 1 January 2022 will be automatically cancelled by operation of law without any issuance of a decision on the cancellation of registration. For sake of completeness, we note that the aforementioned amendment was also accompanied by information from the General Financial Directorate, publicly available on the website of the Financial Administration.
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