Czech Republic: Tax Update 2018

27. 2. 2018

VAT

As of 1st July 2017 an amendment to the VAT Act, which has had various effects, has been in force. This amendment ends the special rules given in the VAT Act for partnerships (not legal persons). These partnerships are very common above all in the construction business where construction companies bconclude such partnerships in order to be able to take part in tenders for building projects. With effect from 1st July 2017 all special rules regarding VAT registration, the application of VAT on supplies for customers, as well as members of the partnerships, have been abolished. Now the standard VAT regulations in the VAT Act apply. The amendments to the VAT Act also brought changes to the input tax deduction. In the case of a supply (sale) of fixed assets, the input tax deduction (if the conditions for this are met) now has to be adjusted in the period when the supply (sale) occurred instead of at the end of the year.

A new approach in the case of unproved losses, damages or thefts of assets and/or stock has been introduced. The amendment puts the Czech VAT Act in line with the EU Directive and specifies that in these cases the original input tax deduction has to be corrected. This provision might lead to some application difficulties for tax payers, which is why the choice of methods should be made carefully.

Legal information for business establishments

As of 1st January 2018 taxpayers have a new possibility to apply for legal information regarding the applicable method for determining the tax base of business premises or subsidiaries of a foreign company in the Czech Republic. This information corresponds to the official standpoint of the tax authorities on the method for determining the tax base. For these individual enquiries there is an administrative fee in the amount of CZK 10,000 (EUR 377).

Personal Income Tax – Business or Rental/Leasing Revenue

The maximum threshold for the application of the flat-rate base was reduced from CZK 2 million to CZK 1 million as of January 1st 2018. Depending on the type of income, a flat-rate amount of 30 / 40 / 60 / 80 % can be applied as operating expenditure, up to a maximum however of CZK 1 million (EUR 37,679).

TPA offers an overview of the most important tax innovations in the following CEE and SEE countries in which we operate: Austria, Albania, Bulgaria, Croatia, Czech Republic, Hungary, Poland, Romania, Serbia, Slovakia and Slovenia. Investing in CEE/SEE 2017

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