A new windfall tax has been published in the Chamber of Deputies Print No. 254 in the form of the Czech Minister of Finance’s amendment to the 2023 tax package, which is expected to take effect on 1 January 2023. Let us summarise who might be affected by this amendment, and how it will be calculated and paid.
The full wording of the Finance Minister’s amendment to the 2023 tax package can be found on the Chamber of Deputies website.
- The Specialized Tax Office will be the administrator of the windfall tax.
- The tax will be declared on a special windfall tax return.
Banks – under the following conditions:
- for the first reporting period ending on or after 1 January 2021, the bank achieves annual net interest income of at least CZK 6 billion;
- and at the same time, in the period of application of the windfall tax (i.e. calendar years from 2023 to 2025), it achieves annual net interest income of at least CZK 50 million.
- if, for the first reporting period ending on or after 1 January 2021, the taxpayers themselves, or together with all members of the consolidated group, have generated the relevant income of at least CZK 2 billion from the following relevant activities:
– mining and refining of hard coal, extraction of oil and natural gas;
– production of coke and refined petroleum products;
– generation, transmission, and distribution of electricity (with certain exceptions);
– production of gas, distribution of gaseous fuels via networks;
– wholesale of liquid and gaseous fuels and related products;
– pipeline transport by oil or gas pipeline;
- and, at the same time, in the period of application of the windfall tax (i.e. in the calendar years from 2023 to 2025), the taxpayer’s sole relevant income from the above-mentioned activities amounts to at least CZK 50 million.
Stricter conditions apply to mining companies and companies engaged in the production of coke and refined petroleum products. They become subject to the windfall tax if:
- in the windfall tax period (i.e. calendar years from 2023 to 2025), they have an aggregate income of at least CZK 50 million from these selected activities;
- and, at the same time, the income from those activities for the first reporting period ending on or after 1 January 2021 accounted for at least 25% of their annual aggregate net turnover.
The relevant income, which is the basic parameter for becoming subject to the windfall tax, is:
- the annual net turnover derived from the above-specified relevant activities;
- and, at the same time, domestic income that is taxable in the territory of the Czech Republic.
However, the relevant income does not include income from intra-group supplies of electricity and gas for own consumption (as a material input) of other members of the group.
Windfall tax period
- The windfall tax will be payable for the calendar years 2023 to 2025, or the taxable periods that fall within that time frame.
Windfall tax base
- The tax base will be calculated as follows:
the average of the adjusted tax bases for the years 2018 to 2021 will be deducted from the adjusted current tax base.
- The windfall tax base is based on the adjusted ‘general’ tax base, the new tax will therefore apply to windfalls from all activities of the taxpayer.
Windfall tax rate
- The windfall tax rate will be 60%.
How will the windfall tax be paid?
- The windfall tax will be paid within the same deadlines as the corporate income tax, based on the general tax base.
- There will be a special arrangement for prepayments of the windfall tax which is to apply already during 2023.
Further amendments and third reading in the Chamber of Deputies
During the second reading on 25 October 2022, further amendments were tabled by both government and opposition MPs, mainly concerning the tax rate and changes in the range of taxpayers who should be subject to the windfall tax. According to Finance Minister Zbyněk Stanjura, the third reading, in which the individual amendments will be voted on, is expected to take place on Friday, 4 November 2022.
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This article is solely based on information that is generally available at this time (25 October 2022).