Latest News, July 2019

HOME NEWS IN BRIEF

• On Monday 1 July 2019, an amendment to the Labour Code entered into effect abolishing, yet again, the waiting period (karenční doba), i.e. the first three days of a temporary inability to work for which no compensation was paid. Under the amendment’s transitional provisions, the old rules will apply to temporary inability to work that originated before July 2019, meaning that employees who became unable to work on 28 June 2019 will still not be entitled to compensation for the first three days of sickness. The amendment was originally planned to enter into effect together with an amendment to the Sickness Insurance Act introducing e-sick notes, which aims to give employers better control over whether their employees on sick leave observe the prescribed regime. However, the effective date of this amendment has been postponed to 2020.

• The government has submitted for comments a draft government decree stipulating the maximum number of applications for visas for stays beyond 90 days for the purpose of conducting business, applications for long-term residence permits for the purpose of investing, and applications for employee cards that can be filed at Czech Republic’s representative offices abroad.

• The Chamber of Deputies passed an amendment to the Act on Local Fees responding to the dynamic development of the sharing economy and setting a level playing field for short-term accommodation market. The amendment introduces a fee to replace existing fees for spa or recreational stays and accommodation capacity fees. The new fee will apply to short-term stays provided for consideration regardless of location and purpose; it will considerably extend the range of facilities that are subject to local fees.

• The Chamber of Deputies passed an amendment to the Act on Electronic Reporting of Sale as proposed by the government. The originally expected date of launching the last stages of ERS, i.e. 1 July 2019, has already elapsed, and 1 January 2020 is not realistic either. If the Senate returns the bill to the Chamber with proposed changes, or if, as expected, they vote it down altogether, the deputies will have to vote on the draft amendment again. The amendment is thus likely to be promulgated in the Collection of Laws in the autumn, and the last waves of ERS are to be launched (and some taxable supplies reclassified to the 10% tax rate) six months after the law has become valid.

• On 27 June 2019, the financial administration provided access to the electronic filing of notifications on income flowing abroad under Section 38da of the Income Tax Act, replacing the taxpayers’ notification of income tax withheld. Taxpayers have the duty to notify tax administrators of income from sources in the Czech Republic paid to tax non-residents from 1 April 2019, while the new duty also applies to cases where the income is tax exempt or is not subject to tax on the grounds of double tax treaties.

WORLD NEWS IN BRIEF

• The European Commission has published the draft Council Implementing Decision authorising the Czech Republic to apply a general reverse charge mechanism. The proposal is to be debated by the Council, and unanimous consent is required to pass it. It is not yet clear at which council session the proposal will be debated. The Czech Republic has applied for authorisation to apply a general reverse charge regime from 1 January 2020 to 30 June 2022 to transactions in excess of EUR 17,500 (approximately CZK 450,000). 

• The European Commission has been requested to clarify certain issues of electric car charging, including, for instance, whether it should be treated as a provision of services or as a supply of goods (electricity). Electric car charging is also dealt with in light of the conclusions formulated in the CJEU’s Auto Lease Holland and VEGA International judgements, dealing with the purchasing of goods using fuel cards.

• India has become the 28th country to deposit with the depositary (the OECD) its ratification documents for the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI). It will thus become valid for India on 1 October 2019. From this date, India shall apply the adopted measures in its tax treaties vis-à-vis the 22 countries that have also been applying MLI. On the Czech part, the ratification of MLI is still waiting to be approved by the Chamber of Deputies. An interactive database containing changes to individual double taxation treaties arising from MLI, including those not yet ratified or in effect, is available on the OECD website.

• The Court of Justice of the EU issued two judgements clarifying the rules for deducting losses by non-resident subsidiaries and entities owned by them (C-607/17 Memira Holding, and C-608/17 Holmen AB).

• The Bulgarian parliament discussed in the first reading the introduction of compulsory transfer pricing documentation (local and mater file); the deadline for submitting the documentation to the tax administrator should be March of the following year. Failure to meet the duty will be penalised.

• The Polish government submitted to parliament a draft amendment to the VAT Act. The existing VAT return format is to be replaced by a single audit file format. At the same time, the requirements for records kept for VAT purposes will be limited. If passed, the amendment is to enter into effect on 1 January 2020.

• The Slovak government has approved an amendment to the Income Tax Act. Among other things, it implements the rules of taxation of hybrid mismatches with third countries (ATAD 2) and introduces new tax incentives for the automotive industry. The amendment is to enter into effect on 1 January 2020.

• The Slovak government has approved a bill to implement Council Directive (EU) 2018/822 of 25 May 2018 (DAC 6), as regards the mandatory automatic exchange of information in the field of taxation in relation to reportable cross-border arrangements. The bill is based on the directive and stipulates sanctions of up to EUR 30,000 for duty breaches. Its expected effective date is 1 July 2020.