News in Brief, February 2024

DOMESTIC NEWS

• The Ministry of Finance has published an infographic and explanatory notes on the long-term investment product on its website.
• An amendment to the Act on the Right to Digital Services has been published in the Collection of Laws and introduces the possibility of obtaining digital copies of ID cards to serve the same purpose as physical documents, i.e., proving their holders’ identity and the facts stated in ID cards. Such digital IDs will have the same legal effects as the proof of identity with a physical document, except for instances of proving one’s identity to entities that are not public authorities and do not have an obligation to require proof of identity by means of a document prescribed by a legal regulation; unlike with the physical document, these entities will have the right but not the obligation to accept a digital copy.
• On its website, the financial administration explains its approach from January 2024 to be applied to the taxation of company day care provided by employers as a non-financial benefit to their employees. The tax treatment will be based on the fees charged for municipal kindergartens in the relevant locality. If the normal fee for a municipal kindergarten at a relevant place and time is CZK 1,500 per month and the employee pays CZK 500, CZK 1,000 shall be included in the limit for the exemption of this non-financial benefit from income tax. If the employee pays CZK 1,500 or more, nothing will count towards the limit. In the coming months, a legislative and technical amendment will be adopted to the Income Tax Act and this rule will be explicitly enshrined in the law.
• The financial administration has issued a notice to sellers using digital platforms. If a natural or legal person sells goods, provides personal services, leases real property or provides a means of transportation through a digital platform, such a person is required to provide necessary assistance to the reporting platform operator to fulfil their relevant reporting obligations under DAC 7 (reporting obligations for digital platform operators regarding sales made on these platforms).
• The Ministry of Finance has launched a comment procedure on an extensive amendment to the VAT Act with a comment deadline of 1 March 2024. The amendment includes both changes associated with the transposition of EU legislation (VAT treatment for small businesses and adjustment of tax rates already started by the consolidation package) and non-transpositional changes. These changes include the following areas: the right to deduct VAT upon the registration of a VAT payer; construction; tax base corrections; irrecoverable receivables; tax refunds; and the abolition of the specific treatment of internally produced fixed assets. Most of the provisions of the act are proposed to take effect on 1 January 2025, with the exception of the tax exemption for the export of goods and tax refunds to travellers from third countries (1 July 2025) and the abolition of the limitation on claiming part of the right to deduct VAT for selected vehicles (1 January 2027). The most negative impact on the state budget is expected for the change concerning irrecoverable receivables, which will cost several billion of Czech crowns per year.
• The Ministry of Finance has initiated a comment procedure on the amendment to the Excise Duty Act with the deadline for comments of 9 February 2024. The amendment proposes substantive changes based on application practice and case law (inter alia, a conceptual change to the regulation of small independent breweries, changes in the area of handling of waste oils, and a change to the procedure of setting prices of cigarettes for final consumers). The main objective is to streamline the process of excise duty administration, reduce administrative costs, and increase legal certainty for the entities concerned. The amendment is proposed to come into effect on 1 January 2025.

FOREIGN NEWS

• During its six-month EU presidency, Belgium plans to update the list of non-cooperative jurisdictions and continue working on the UNSHELL Directive (artificial use of entities that exist only formally, i.e., shell entities), the SAFE Directive (regulation of the activities of tax enablers), and the FASTER Directive (uniform procedural approach to withholding taxes). For indirect taxes, it will continue with the preparation of the ViDA Directive (VAT in the Digital Age).
• The EU Public Country-by-Country (CbyC) Reporting Directive is expected to apply for taxable periods starting on or after 22 June 2024. Information on the implementation status in individual member states can be found here.
• The EU Minimum Tax Directive (Pillar 2) should apply in the EU in taxable periods starting on or after 31 December 2023. For an overview of its implementation in the individual member states, click here.