Tax changes in government’s policy statement

The most significant impact on multinational companies should be the reduction of the corporate income tax rate to 19 percent and the introduction of mandatory transfer pricing documentation. The reintroduction of electronic sales reporting (EET) will have a widespread effect. Several other minor changes to taxation and mandatory insurance in the draft statement are summarised below.
 

Entrepreneurs

Income tax

• introduction of a duty to maintain transfer pricing documentation for multinational groups
• reduction of the corporate income tax rate from 21% to 19%
• creation of an incentive depreciation policy for investors in start-ups
• introduction of faster and more effective tax depreciation of fixed assets
• simplification and enhancement of the attractiveness of research and development allowances, increase in the legal certainty for their deductibility (for example, in cooperation with the Technology Agency of the Czech Republic), and extension of the period during which allowances can be claimed
• investment incentives focusing on regions and economically disadvantaged areas, on local businesses generating added value, and on companies that allocate their earnings back into the Czech economy
• introduction of investment incentives and tax relief for long-term investors in affordable rental and cooperative housing
• preparation of a system of tax-beneficial depreciation for the construction of company apartments for employees
• reduction of costs for active Czech farmers through tax and fiscal measures.
   

VAT and indirect taxes

• increase of the limit for mandatory VAT registration significantly above CZK 2 million (subject to EU approval)
• shortening of the deadline for returning VAT deduction claimed on unpaid invoices, from the current six months to three months
• unification of VAT on catering services and the serving of non-alcoholic beverages at a rate of 12%
• introduction of 0% VAT on prescription drugs
• commitment not to introduce excise duty on still wine and carbon tax on fuels.

Tax credits for individuals

• introduction of increased tax credit for fourth and subsequent children
• reinstatement of: 
• the tax credit for a spouse, in its original form
• the tax credit for students
• the tax credit for placing children in pre-school facilities.

Employees

• removal of the cap on tax exemption of leisure-related benefits provided to employees
• exemption of voluntarily provided gratuity (under defined conditions) to employees in the catering industry from social security and health insurance contributions and from income tax.

Self-employed

• end to increasing the minimum monthly assessment base for social security contributions for self-employed persons for whom self-employment is their main activity, at 35% of the average wage.

Administration and collection of taxes and mandatory insurance premiums

• introduction of electronic reporting of sales from 2027 (with the option of free use of Czech Financial Administration software, no mandatory printing of receipts or permanent online connection, and exemption for small businesses
• and occasional earnings).
• use of advanced analytical tools and artificial intelligence to detect illegal tax optimisation
• stricter inspections of employment agencies, including checks to identify tax and insurance evasion
• establishment of a single collection point combining the collection of taxes, social security, and health insurance
• abolition of mandatory reporting of workers under agreements to perform work outside employment to health and social security registers
• completion of online tax authority project
• examination of tax obligations of foreign marketplaces and e-shops
• simplification of tax and administrative conditions and reporting (small and medium-sized enterprises).

Real estate tax

• end to automatic indexation of real estate tax using inflation coefficients.