In addition to what are called the liberation packages, the last of which again postpones the deadline by which individual and corporate tax payers need to file their 2019 tax returns without any sanctions until 18 August 2020, and the validity of which only required publication in the financial newsletter, there are also some changes which need to pass through a legislative procedure. One of them is the Chamber of Deputies Protocol 874 – the Government’s bill amending certain tax laws related to coronavirus (referred to as the “Anti-Crisis Tax Package”), which now only needs to be signed by the President and published in the Collection of Documents.
The Anti-Crisis Tax Package introduces a minor amendment to the Real Estate Tax Act, adding extraordinary events (including, for example, a pandemic) to the list of circumstances leading to an exemption in the event of natural disasters. However, the continued use of this instrument remains within the competence of municipal authorities and it will only be applied after a decree is issued.
In addition, this Act introduces an amendment to the Road Tax Act, in the form of a reduction of tax rates for trucks over 3.5 tonnes by approximately 25%, and an amendment to the Excise Tax Act, by which the deadline for the refund of green diesel tax is shortened.
Thanks to the Senate, this law will also help strengthen the budgets of municipalities, as they will receive a one-off non-refundable contribution of CZK 1200 per inhabitant.
However, fundamental amendments are to be introduced to the Income Tax Act and the Value Added Tax Act, for which we provide a more detailed comment.
Amendments to the Income Tax Act
All the amendments to the Income Tax Act relate to the introduction of what is called the “tax loss carry-back”, i.e. the retroactive claiming of tax losses from 2020. In addition to the current five-year period for claiming tax losses in the future, the law defines a permanent possibility of claiming tax losses two years back. However, a cumulative limit of CZK 30 million is set for the retroactive claiming of tax losses. In these years, it will be possible to claim tax losses retroactively by filing additional tax returns. Taxpayers will thus be able to claim with respect to a 2020 tax loss retroactively for 2018 and 2019 and collect the tax paid for these years. According to the transitional provisions, it will be possible to accelerate the application and also claim – during the first year of the application for the previous tax period, i.e. for 2019 this calendar year – for a loss not yet assessed and determined in the expected amount. If, however, the actual amount based on the assessment differs from the expected value, it will be necessary to file another additional tax return. On the other hand, if the actual loss is lower, interest on arrears will be applied and we therefore suggest that your make your estimates more conservative or wait until the actual loss is calculated.
The topic of tax losses also affects the tax assessment limitation periods. Unfortunately, the retroactive application of tax losses will extend the deadlines for the fiscal year, generally until the end of the deadline for determining the tax for the last tax period for which the tax loss or part of it could be claimed. However, it will now be possible to waive the right to claim tax losses in the future if the taxpayer waives this by the deadline for filing tax returns for the fiscal year for which the tax loss is determined.
Even with retroactive application, it will still be necessary to follow the criteria for what is called identical activity or substantial changes in the ownership structure, and therefore we suggest consulting experts.
Amendments to the Value Added Tax Act
Within the declared state of emergency, a number of restrictive measures were implemented, with a potentially negative impact on business and with a significant impact on industries such as accommodation, tourism, culture, sports, etc.
Therefore, the second 10% reduced VAT rate should include the provision of accommodation services, admission fees for sports and cultural events, the use of sports facilities (including Turkish baths, saunas and salt caves) and passenger transport by ski lifts. For more details, we refer to the new Annex 2a to the Value Added Tax Act. However, the proposed amendment will not affect accommodation as a purchased tourist service, provided as part of a travel service package.
If you have any questions or need help with any details relating to the above measures, do not hesitate to contact us.