Tax package becomes effective on 1 April 2019

Tax package becomes effective on 1 April 2019

After a long approval process, an amendment to the tax laws was published in the collection of laws, effective from 1 April 2019. We have informed you about the amendments already, so now we just wanted to briefly mention the substantial changes. We will comment on the impact of the changes in our upcoming news.

Personal income tax

• Increase of maximum amounts of expense allowances for self-employed persons (effective from the 2019 tax period);

• Connection between the amount of claimed withdrawal tax from income from dependent activity of a small scope and the amount decisive for participation in health insurance; up to now, the amount was CZK 2,500 (this will be applied in May 2019 for the first time).

Corporate income tax

• Implementation of the ATAD rules - reducing the tax deductibility of interest, taxation of a foreign controlled company, taxation while moving assets abroad, and treatment of "hybrid discrepancies"

• Notification duty to announce the intention to claim deductions from research and development before starting a project

• Notification duty regarding payments/accounting records of income abroad which is exempt from withholding tax by law or double taxation treaties

Value added tax

• Implementation of the EU directive regarding VAT on vouchers (detailed information on the GFD interpretation is expected);

• Rules treating delivery and correction of tax documents;

• Cancelling the possibility to rounding VAT up to whole crowns and a change to calculating VAT using the total sum as a base

• Extension of the possibility to adjust the VAT amount regarding bad debts

• Obligation to additionally adjust VAT deductions claimed on substantial repairs made to real estate when the real estate is subsequently delivered

• Change to taxation of supplies for electronic services to the final customer - a non-taxable person (within the EU such services are newly taxed in the country of the supplier if the turnover of such services does not exceed EUR 10,000 in a calendar year)

• Changes to applying VAT to some supplies provided by persons not residing in the Czech Republic and without business premises in the Czech Republic

• VAT cannot be applied to renting residential real estate (effective from 2021)

• Extension of the definition of financial leasing to contracts with the option to buy

Tax Code

• A legislative change to the concept of abuse of law means that the tax administrator will not take into consideration such legal acts and other facts whose main reason is acquiring a tax advantage which is contradictory to the sense and purpose of the tax legislation measure