CZECH REPUBLIC – Update 9th September
Anti-Crisis Tax Package in the Czech Republic
On 1 July 2020 an anti-crisis tax package came into force in the Czech Republic to mitigate the adverse economic impacts of the coronavirus pandemic on entrepreneurs and companies. The anti-crisis tax package was approved by the Czech Chamber of Deputies on 16 June and published in the Collection of Laws of the Czech Republic on 30 June. In our article we summarise the main tax relief measures introduced by the anti-crisis tax package.
Retroactive application of tax losses enabled
The main element of the anti-crisis tax package: loss carry-back
A significant part of the Czech anti-crisis tax package deals with the long-discussed introduction of “loss carry-backs” in the field of income tax. The concept of a tax loss carry-back was brought about Liberating Package II in March 2020, and enables both natural and legal persons to retroactively apply their 2020 tax losses to their 2018 and 2019 tax returns. In other words, both individuals and legal entities are free to amortise their losses incurred in the two previous tax years.
Taxable persons and entities can apply loss carry-backs in their additional tax returns by setting off the 2020 loss against the positive tax bases of 2018 and 2019. The tax authority will refund the excess income tax.
This measure can be applied after the 2020 tax return with a tax loss is filed, i.e. not before the beginning of 2021.
Please note that the deadline for tax assessment for the tax years in which the tax base was reduced by the tax loss shall be extended in the case of a loss carry-back.
Application of reduced VAT rate to selected services
According to the anti-crisis tax package, selected services subject to the first reduced VAT rate (15%) shall be shifted to the second reduced VAT rate (10%). These include:
- provision of accommodation services;
- admissions to sports and cultural events, museums, botanical gardens and zoos, natural reserves and national parks;
- use of sports facilities for sporting purposes;
- hammam and sauna services and similar selected facilities;
- passenger transport by ski lifts.
The second reduced VAT rate has been applicable in the cases listed above since 1 July 2020.
Another important element of the Czech anti-crisis tax package is the reduction of road tax on trucks. The road tax for trucks with a maximum permissible weight exceeding 3.5 tonnes shall be reduced by 25% with retroactive effect from the beginning of 2020. This measure will manifest itself in a retroactive reduction of advance tax payments to be paid in 2020.
If taxpayers did not take advantage of the “general pardon” to defer the obligation to pay road tax advances, and paid the advance in the original amount, the difference between the old and new amount shall be used to pay the remaining advances in 2020.
Extension of exemption from real estate tax
Until now, municipalities in the Czech Republic were only able to exempt real estate from real estate tax that was affected by natural disasters (such as flooding, storms, extreme droughts). Henceforth, this exemption is also allowed in the event of a pandemic, an emergency measure under the Crisis Act, or industrial accidents.
This exemption can also be applied with retroactive effect. In fact, municipalities have to define the exempt real estate in generally binding ordinances effective until 31 March of the year following the tax year in which the emergency occurred. The exemption shall be applied in the form of an ordinary or additional tax return.
Source Credit – wtsklient.hu
CZECH REPUBLIC – Update 22th June
Czech Parliament Approves COVID-19 Package Including Loss Relief and VAT Rate Reduction
On 16 June 2020, the Czech parliament approved a package of tax measures aimed at mitigating the adverse economic effects of the COVID-19 pandemic. The two main measures of the package include the following:
- Companies and individual entrepreneurs are allowed carry back losses incurred in 2020 for offset against taxable profit in 2018 and 2019, which is capped at CZK 30 million; and
- The 10% reduced VAT rate is extended to accommodation services, admission to cultural events and sporting events, admission to sports grounds (including lift tickets), and admission to saunas and other similar facilities.
Further to the above, a temporary waiver of social security contributions if provided for employers with 50 employees or less. This applies for the months of June, July, and August 2020, provided that the number of employees has not been reduced by more than 10% compared to March 2020, and the remuneration paid in each month is at least 90% of the remuneration paid in March 2020.
Source Credit – Orbitax
COVID-19: Extension until 31 July 2020 of the waiver of VAT in respect of certain gratuitous supplies
Ministry of Finance Announces Additional Measures The Ministry of Finance recently announced further measures in connection with the COVID-19 pandemic.
The measures, which were published in the Financial Newsletter on 10 June 2020, include the following:
– the general deadline for filing the 2019 corporate and individual income tax return is 1 April 2020 (1 July 2020 for taxpayers subject to a financial audit or whose tax return is filed by a registered tax adviser).
However, no penalty and late payment interest will apply, as long as the tax return is filed by 18 August 2020, i.e. within 3 months of the end of the state of emergency. The measure does not apply to taxpayers registered with the Specialized Tax Office (i.e. large taxpayers);
– an extension until 31 July 2020 of the waiver of VAT in respect of certain gratuitous supplies in connection with the COVID-19 pandemic. In particular, the VAT waiver applies to gratuitous supplies of goods and services to health service providers, the Integrated Rescue System, the Army of the Czech Republic, as well as social services facilities. The waiver applies to supplies to these institutions, as well as their employees, clients or volunteers working for them. To reduce the administrative burden, it is assumed that the gratuitous supplies made to these institutions during the state of emergency are part of measures to stop the spread of COVID-19. For prior coverage, see Czech Republic-1, News 17 April 2020;
– no penalty and late payment interest will apply for the late filing of real estate acquisition tax returns, as long as the returns are filed by 31 December 2020 (initially, 31 August 2020 – see Czech Republic-1, News 25 March 2020′). The extension of the initial deadline should be considered in the context of plans to abolish the real estate transfer tax (see Czech Republic-1, News 1 May 2020);
– a waiver of various administrative fees for applications filed in the context of the COVID-19 pandemic
Source Credit – ibfd
CZECH REPUBLIC – Update 15th June
Reduction of VAT, road tax rates (COVID-19
The Chamber of Deputies (lower house) passed an anti-crisis tax legislative package—one that provides tax relief in response to the coronavirus (COVID-19) pandemic.
The legislation is pending consideration by the upper house.
The legislation reflects various tax relief measures, including a proposed reduction of the value added tax (VAT) rate that is imposed on certain services as well as a reduction of the rate of the “road tax.”
- A reduction of the VAT rate to 10% (from 15%) would apply to accommodation services, entrance fees for cultural and sports events, and sports centres (including ski lift passes), saunas, and other similar facilities.
- For agricultural businesses, the deadline for filing a claim for refund of overpaid excise tax on “green diesel oil” would be shortened.
- Concerning the road tax, the rates applicable to cars with a maximum permitted weight higher than 3.5 tons would be reduced by 25%.
Source Credit – KPMG
CZECH REPUBLIC – Update 2nd June
Czech Republic Allows Electronic VAT Submissions
The Czech Republic General Financial Directorate confirmed this week that while it will not be providing an extension on the 13th Directive deadline for Non-European businesses, it will allow for VAT refund submissions to be sent through electronically.
The Czech tax authorities said that if the postal service between Czech Republic and countries has been interrupted or completely grounded than electronic submissions will be allowed. However, email submissions will not be accepted.
Businesses have two options to submit their claims electronically either through the Czech republic’s tax portal (Which is only in the Czech Language) or via a Data Box.
Tax Portal (- available only in the Czech language):
The Czech authorities stated that If harmonized measures are adopted at an EU Community level, then the tax administration of the Czech Republic will respect and follow them too.
The EU commission has still not confirmed whether it will propose a blanket extension to the 13th Directive deadline which is 30 June 2020.
A handful of member states have granted their own extensions and easements. For example, France and Monaco have extended their 13th Directive deadlines by 3 months while Germany and Slovakia have granted some easements and provisions on late submissions.
Source Credit – VATit
CZECH REPUBLIC – Update 25th May
Czech Republic Confirms 10% VAT Rate for E-Books from May 2020
The Czech Ministry of Finance has issued a release regarding the VAT rate for books. The release notes that the VAT rate for books is 10% in the Czech Republic and confirms that this rate has been extended to electronic books with effect from 1 May 2020. As previously reported, the extension of the 10% reduced rate was approved in October 2019 and also applies for electronically supplied newspapers, magazines, periodicals, etc., as well as certain other supplies.
Source Credit – Orbitax
CZECH REPUBLIC – Update 24th April
VAT Exemption on Gratuitous Supplies for COVID-19
The Czech Ministry of Finance has announced a VAT exemption on the gratuitous supply of goods and services made to the Integrated Rescue System, the Army of the Czech Republic, health service providers, and social services facilities for COVID-19. For the purpose of the VAT exemption, supplies made to such institutions are assumed to be for COVID-19 in order to reduce the administrative burden. A general VAT exemption is also provided on gratuitous supplies of good to mitigate the spread of COVID-19, including personal protective equipment, respirators, disinfectants and raw materials for their production.
The VAT exemptions apply retroactively from 12 March 2020 for the entire duration of the emergency.
Source Credit – Orbitax
CZECH REPUBLIC – Update 23rd April
VAT relief for gratuitous medical supplies
The Minister of Finance issued a decision on VAT relief for gratuitous medical supplies. The General Financial Directorate published an overview of situations qualifying for duty free treatment. The CJEU focused on the aspects of rules for exempting collective investment funds management services.
VAT relief for gratuitous medical supplies
Pursuant to a March decision of the Minister of Finance, VAT payers have been released from the VAT duty in respect of gratuitous supplies of selected medical products that have been (or will be) realised during the state of emergency. The Minister of Finance proceeded in line with Section 260 of the Tax Code, applying the tax relief to a broad array of products that, however, have one thing in common: they are necessary for medical needs in relation to combating the coronavirus spread (such as facemasks, gloves, diagnostic test kits, ventilators, etc.). Although we consider the legal regulation of the respective VAT relief rather insufficient, we believe that a failure to pay VAT on the above-specified supplies will be unconditionally tolerated in practice.
In mid-April, the Minister of Finance extended the VAT relief to include any gratuitous supply to selected entities, such as healthcare providers, the fire brigade, Police of the Czech Republic, Armed Forces of the Czech Republic, social service facilities, etc. In this respect, the Minister of Finance once again selected rather questionable VAT relief under Section 260 of the Tax Code.
Information of the General Financial Directorate (GFD)
The GFD published a comprehensive overview of applying duty free treatment, or also VAT exemption if relevant, to imports of goods from third countries. In most situations, this has to involve charitable gratuitous imports; nevertheless, imports in return for payment may also qualify provided that certain conditions have been met.
The Advocate General of the Court of Justice of the EU (CJEU) described the aspects of rules for exempting collective investment funds management services. The Advocate General also examined whether the exemption may also apply to situations where the respective services are simultaneously used for other purposes (management of other funds). He concluded that in such a case, the management services should be fully taxed.
Source Credit – Deloitte
CZECH REPUBLIC – Update 17th April
Currently, there is no postponement for the filing date and deadline for VAT returns. However, if the submission of a return be delayed or payment made late, it is possible to apply for a waiver of penalties that are imposed as long as the business can demonstrate that the delay was due to Covid-19 and its impact on the business.
Source Credit – Accordance VAT
CZECH REPUBLIC – Update 16th April
Delay of submission of Control Reports until 31 July 2020
Tax payers may delay the submission of Control Reports until 31 July 2020. VAT returns and payments must still be processed on time unless the taxpayer can prove substantial issues created by the COVID-19 crisis.
Source Credit – Richard Asquith (Avalara)
CZECH REPUBLIC – Update 10th April
Czech Republic Tax Agency Clarifies VAT Exemption Conditions for Goods Imported Due to Coronavirus
The Czech Financial Administration clarified on 7th April VAT exemption conditions for goods imported due to the coronavirus pandemic. In order to be exempt from VAT the goods must be imported for 1) governmental, charitable or philanthropic organizations; 2) the benefit of disaster victims; 3) assistance in medical treatment, diagnosis, or research; or 4) maintaining international relations.
The exemption applies between 30th January and 31st July 2020.
Source Credit – Bloomberg Tax
CZECH REPUBLIC – Update 9th April
VAT and duty exemption on goods imported to CZ related to SARS-CoV-2 pandemic
The Czech Republic asked the EU Commission to issue VAT and duty exemption decision on goods imported in favour of corona virus victims. Only state institutions or charity organisations will be able to make use of this exemption and if they distribute the goods for free to the pandemic victims (masks) and also rescue units that will use them for their activities (medical equipment).
This measure will not relate to the goods acquired in the EU or purchased in the Czech Republic.
If the EU Commission grants CZ request it will be possible to apply the exemption retroactively.
Source Credit – financnisprava.cz
CZECH REPUBLIC – update 7th April
Possible waiver of penalties
The Ministry of Finance has not extended the deadline for the submission of VAT reports or payment of VAT liability as such. In terms of VAT, the following measures apply:
- A general waiver of the CZK 1,000 penalty for failure to submit a control statement, only if the liability to settle such a penalty arises in the period from 1 March 2020 to 31 July 2020.
- If the VAT payer is able to prove the failure is in any way related to the COVID-19 outbreak (typically an illness or quarantine of accountants or other key employees whose absence made it impossible to fulfil VAT obligations; a substantial drop in revenues due to the outbreak), the following measures apply:
- A waiver of the late payment interest.
- A waiver of the interest connected to the deferral of VAT payment or VAT payment instalment schedule.
- An automatic waiver of the sanction for the late submission of the VAT return if the tax office grants one of the two above waivers as well.
- A waiver of other sanctions for the late submission of the control statement (all sanctions from CZK 10,000 to CZK 50,000). This applies to cases when the appeal is issued within the period of 1 March 2020 to 31 July 2020.
- A general waiver of administrative fees for the filing of the respective requests.
All sanctions can be waived only after the related VAT liability is paid and the respective control statement(s) are submitted.
There is a waiver of VAT payment for the free-of-charge delivery of selected medical supplies to mitigate the effects of the corona virus outbreak. These include, for example, respirators, masks, gloves, face shields, or disinfectants and raw materials for their manufacture. The exact definition of the goods is given in the Financial Bulletin. The waiver covers the period from 12 March 2020 until the end of the state of emergency.
Source Credit – PWC
CZECH REPUBLIC – Update 31st March
- Deadline for corporate income tax return for year 2019 is effectively extended until 1. July 2020 instead of usual 1. April 2020.
- Waiver of the late payment interest; of the interest connected to deferral of VAT payment or VAT payment instalment schedule; automatic waiver of the sanction for late submission of the VAT return if the tax office grants one of the two above waivers as well; and waiver of other sanctions for late submission of the control statement (all sanctions from CZK 10,000 to CZK 50,000). This applies on cases when the appeal is issued within period of 1 March 2020 to 31 July 2020.
- General waiver of administrative fees for filing of the respective requests.
- (All sanctions can be waived only after the related VAT liability is paid and respective control statement(s) submitted.)
- Remission of default interest and interest on the deferred amount in line with the Decree of the General Financial Directorate D-44.
- The obligation to pay advance payments for CIT due by 15 June 2020 is waived (i.e. advanced payments do not have to be paid and the tax authorities will not assess sanctions). This concerns the second advance payment for quarterly payers and first advance payment for semi-annual payers.
- Possibility to apply a tax loss created in 2020 (for a tax return submitted in 2021) retrospectively in the tax returns for 2019 and 2018 (“loss carry back”). This concerns both legal and natural persons. This measure will require an amendment to the Income Tax Act.
Source Link here
CZECH REPUBLIC – Update 25th March
- Waiver of penalties (returns for the 2019 tax period with an original filing deadline of 1st April 2020).
- Businesses with taxable periods other than the calendar year need to apply for a waiver separately.
- Waiver of penalties for late filings of VAT ledger statements.
Source Link here