Czech Republic

New tax rules for 2014 still unclear… What next?

Will Thursday the 12th become another unlucky day for Czechs in addition to Friday the 13th?

Thursday, 12 September 2013, the Senate dismissed the tax laws accompanying the new Civil Code (“NCC”). As we have informed you in our newsletters, the laws were to become effective along with the NCC on 1 January 2014. While the NCC will take effect on 1 January 2014, dismissing the tax laws will, in our opinion, bring major complications to the business community as well as the general public and public administration. The proposed amendment to the tax laws incorporates a number of fundamental changes related to the NCC. The amendment to the Income Taxes Act alone includes 900 points amending the existing law.

What next?

Given the fact that private law recodification and its effect are independent of whether or not the set of accompanying laws is adopted and that the NCC can be expected to cause difficulties in practice, this will have to be resolved by other measures. According to the Ministry of Justice, one of the solutions available now after the dissolution of the Lower House of Parliament is the adoption of a statutory measure. A statutory measure is a special legal regulation similar to a statute and with similar legal force. However, unlike a statute, the validity of a statutory measure is only conditional and temporary. The measure is subject to additional approval by the new Chamber of Deputies and, therefore, depends on the results of the elections in October. If not passed, the validity of the measure will expire upon publication of a Chamber of Deputies’ resolution not adopting the statutory measure in the Collections of Laws. Until then, or if passed, the statutory measure will have the force of a statute. Statutory measures create space for proposing new amendments that will not undergo the proper legislative process and comment procedure. Therefore, it is highly likely that this may lead to a very sub-standard piece of legislation.  However, it can be assumed that the measure will address issues directly related to the NCC, as contained in the original draft of the accompanying laws. In our opinion, examining the previous laws is, therefore, not a bad idea at all. But the question is, again, when we will actually know what the new tax rules applicable in 2014 are. Will it again be just before New Year’s Eve or even in January 2014?