The Czech Ministry of Finance is waiving a part of income taxes for 2013 for entrepreneurs affected by floods. The tax will be waived based on the value determined by an expert opinion corresponding to the flood damage caused to property used for business.
In connection with the floods which had dramatically affected the entire Czech Republic in early June, the Ministry of Finance rendered a decision waiving the payment of income taxes and accessions due to this emergency situation. The decision applies to taxpayers from areas in which an emergency was declared, i.e. the regions of South Bohemia, Plzen, Central Bohemia, Liberec, Hradec Králové, and Ústí nad Labem, and Prague.
The damage incurred by a taxpayer must be substantiated with an opinion prepared by the insurance company, provided that the damaged property is insured. If the property is not insured, the damage must be substantiated by an opinion prepared by an expert. The opinion must be submitted along with the corporate income tax return or personal income tax return.
The amount of waived tax should be proportional to the actual damage incurred to a taxpayer’s property as a result of the emergency situation in the region where such emergency was declared. According to the information from the Czech Financial Directorate General, actual damage means damage of a material nature, i.e. destruction of, or damage to, a taxpayer’s property resulting from an emergency situation. Therefore, there is no loss of profit.
Loss of profit may not be calculated and claimed when quantifying the damage for these purposes. Unfortunately, for some companies, this could be a considerable amount (e.g. they had to suspend operations as a consequence of the floods, which could reduce their profits). As a result, the expert opinion should only quantify the actual damage incurred to the property of a taxpayer (such as damage to vehicles used for business purposes, damage to manufacturing machinery or office equipment).
The Valuation Institute of RSM TACOMA is qualified to prepare opinions on the quantification of damages, and we have many years of experience in this area. Please contact us if you have any questions. We would be happy to advise you.