Proposed changes to income tax after review

The amendment of tax laws upcoming in 2019 (we informed you about it in March) has passed the external comment procedure and is ready to be debated.

Taxation of natural persons

Some changes were left out of the original proposal. These are progressive taxation, revocation of the super-gross salary and solidarity tax increase, or the possibility to deduct social security and health insurance for self-employed persons. Currently, taxation of natural persons should stay unchanged.

Taxation of legal entities

The amendment affects only corporate income tax through implementation of the Anti-tax Avoidance Directive (ATAD). We informed you about it in our last KempHoogstad Tax News.

New notification duty

According to the current law, tax payers with their seat or residence located in the Czech Republic that pay an income subject to a withholding tax or securing of tax to a foreign entity are obliged to inform the tax administrator about the actual withholding or securing of tax.

The proposed amendment to the Income Tax Act should extend the notification duty to other cases when an income is paid which is subject to a withholding tax or securing of tax but is tax exempt because of the Czech Income Tax Act or a respective double taxation treaty.

This duty will affect payments of profit sharing or dividends exempt in accordance with rules on parent-subsidiary companies, interest incomes that are tax exempt in the Czech Republic based on international treaties on double taxation or income from sale of shares in a company paid to a person from a non-EU country and tax exempt in the Czech Republic based on international treaties on double taxation.

The notification duty will not include income below a total amount of CZK 100,000 in a given calendar month.