On Friday, 2 December, 2022, the 2023 tax package, which amends the Income Tax Act, the Value Added Tax Act and other related laws, was published in the Collection of Laws.
A brief overview of the most important changes follows.
A new 60% tax on profits in excess of 120% of the average tax base over several previous tax periods will be imposed from 2023. It only applies to selected entities in the energy, banking and mining industries. We informed you about the introduction of this tax here.
Extraordinary depreciation also for assets acquired in 2022 and 2023
For tangible assets acquired between 1 January 2020 and 31 December 2023, extraordinary tax depreciation can be applied, specifically within 12 months for assets classified in group 1, and within 24 months for assets classified in group 2.
The previous regulation allowed for extraordinary tax depreciation for assets acquired in 2020 and 2021 only.
Clarification regarding immovable cultural monuments
Depreciation of immovable cultural monuments and their technical improvement is subject to specific rules. However, ambiguities persisted regarding the definition of a cultural monument: since 1988 only a monument officially declared or entered in the government list of cultural monuments can be considered as such, while before that, it was sufficient for it to meet the characteristics of the Cultural Monuments Act applicable back then. An amendment to the Income Tax Act clarifies the definition for tax purposes and allows taxpayers who have essentially been violating the current regulations to decide how to proceed in the 2022 tax period, i.e. whether they will continue to employ the definition according to the regulations prior to 1987, which, however, has not been applicable since 1988, and treat the relevant monument as an immovable cultural monument for tax purposes, or whether they will depreciate it as ordinary immovable property.
Changes related to the VAT control statement
As of 2023, the five-day deadline (which is often excessively tight) for filing a VAT control statement based on a tax administrator’s request will no longer apply. The time limit will now be based on the date of delivery of the notice to the data box (not its acknowledgement), and it will be 17 days. Furthermore, the amendment reduces the fine for failure to file the VAT control statement in selected cases.
Turnover for compulsory VAT registration increased to CZK 2 million
Instead of the current threshold of CZK 1 million for compulsory VAT registration, CZK 2 million will apply from 2023. Under the transitional provisions, businesses that have exceeded a turnover of CZK 1 million in November or December 2022 are not obliged to register for VAT. The transitional provisions also allow businesses with a turnover not exceeding CZK 2 million to apply for deregistration even in cases not anchored in the normal provisions if they do so within 5 days from the date of entry into force of the transitional provision, i.e. by 8 December 2022. This option may be advantageous for individual entrepreneurs who have exceeded a turnover of CZK 1 million during 2022 and want to make use of the flat tax from 2023.
Changes to the flat-rate scheme for individuals
A relatively simple flat tax regime has been in effect since 2021. This regulation allows individual entrepreneurs who are not VAT payers and do not have significant income from other sources to avoid the need to file annual tax returns and reports for health insurance companies and to pay contributions to three different accounts. With the amendment, the system will be more complex from 2023 due to the introduction of three income brackets, but it will now be possible to enter the flat-rate scheme with annual income of up to CZK 2 million. For 2023, the flat-rate regime can be entered until 10 January 2023 if the statutory conditions are met (the person must not be a VAT payer as of 1 January 2023).
Changes to income tax returns
The amendment also increases the income threshold for the obligation to file a personal income tax return from 2023. Employees with other income up to CZK 20,000 (the current limit of CZK 6,000 still applies for the 2022 return) or persons with income not exceeding CZK 50,000 (as of 2022, the limit is CZK 15,000) will not have to file a return.
Persons who will be provided with a data box by law should make sure they file their tax returns electronically.