Accounting bill and related tax changes awaiting discussion by new deputies

The previous government approved the bills at the end of November. The newly established chamber of deputies will now decide whether and when to discuss them, as they are not yet on the agenda for the session beginning on 13 January 2026.

We have been providing ongoing information about the proposed changes in Daňovky (e.g. here).

We now summarise selected changes resulting from the accompanying law, particularly from the income tax perspective. At the same time, we highlight what the transition from the current to the new regime means for each individual change.
 

Simplification of tax depreciation

• Depreciation groups are to be abolished; a fixed asset’s tax value should be the new decisive factor.
   
• The limit for tax depreciation is to increase to CZK 100,000.
   
• Three basic tax depreciation periods are to be introduced:
  • 60 months – movable assets and immovable assets up to CZK 2 million
  • 360 months – other immovable assets
  • 180 months – goodwill.
     
• Depreciation is to be applied on a monthly basis. It has been proposed to abolish the straight-line and declining depreciation methods as well as the option to suspend depreciation. 
   
• For technical improvements, a new term is being introduced: a tax additional improvement to an asset, which will occur whenever its cost for the taxable period exceeds CZK 100,000 or 10 per cent of the asset's value. Any improvement exceeding CZK 10 million will always be considered a tax additional improvement to an asset. Under the safe harbour rule, repairs and maintenance may also be considered a tax additional improvement to an asset if the taxpayer so decides.
   
• If an asset is subject to an additional improvement during the period of its depreciation, the depreciation charge remains unchanged, but the tax depreciation period will be extended. However, the extended depreciation period should not exceed the minimum depreciation period. If it exceeds this period, the monthly tax depreciation charge will be recalculated so that the undepreciated value of the asset, increased by the additional improvement, will be depreciated over this minimum period (e.g., 60 months for movable assets).
   
• To assess whether an asset acquired before the new law’s effective date should be depreciated for tax purposes, the decisive factor will be its increased input cost under the original wording of the law, i.e. the acquisition cost including any technical improvements (this value must be higher than CZK 100,000).
   
• After the new law’s effective date, if the tax value of an asset does not exceed CZK 100,000 (with the exception of assets where accounting depreciation is used for tax depreciation purposes), that asset will no longer be depreciated, and a one-time expense equal to the asset’s tax residual value will be charged to expenses in the first taxable period after the new law comes into effect.
   
• The tax depreciation period for assets acquired before the new law’s effective date is equal to the remaining depreciation period under the original law. If this period is longer than the newly set minimum period, it may be shortened to this minimum period.
   
• For intangible assets depreciated for tax purposes under the current law (usually intangible assets acquired before 1 January 2021), the new regime will apply from the effective date of the new law, and the tax value will be determined based on the book value of the asset on that date (with the exception of intangible assets whose depreciation continues from before, e.g. those acquired by contribution). In the first taxable period, the result of operations will be adjusted by the difference between the tax and book values.
   
• For taxpayers who use IFRS, all assets are depreciated only for accounting purposes, and accounting depreciation charges are treated as deductible expenses for income tax purposes if all conditions are met. For these purposes, goodwill arising other than from the purchase of a business is not an asset for income tax purposes, and therefore no expenses associated with it are tax deductible.
   

Use of International Financial Reporting Standards (IFRS)

• The result of operations under IFRS can be used as the basis for determining the tax base.
   
• IFRS will be mandatory for banks, insurance companies, investment companies, pension companies, funds and corporations that have issued investment securities accepted for trading on a EU regulated market and other entities defined by law.
   
• IFRS may be used voluntarily by entities administered by the Specialised Financial Authority or entities included in consolidated financial statements prepared in accordance with international accounting standards.
   
• The transition to determining the tax base under IFRS is considered a change in the tax method. The law defines rules to ensure that the transition to a different system is tax neutral in the long term. Differences in the tax value of assets and liabilities under the original and the new method will be reflected in the tax base over a period of ten years.
   
• IFRS are considered to be the standards defined by Commission Regulation (EU) 2023/1803 of 13 September 2023, adopting certain international accounting standards in accordance with Regulation (EC) No 1606/2002 of the European Parliament and of the Council, as amended.
   

New concept of finance leases

• Under the new Accounting Act, a finance lease will be treated as a purchase (the lessee will include the asset in their balance sheet and account for it, including its depreciation). This concept is also adopted for tax purposes.
   
• The new rules for finance leases will also apply to assets acquired before the new law comes into effect. On the first day of the new law's effectiveness, the tax value of these assets will equal the sum of payments that could affect the tax base if the current law were applied, increased by certain other items such as the agreed purchase price at the end of the finance lease. The tax depreciation period for an asset acquired before the new law comes into effect will equal the tax depreciation period for that asset under the new law, reduced by the period during which the asset was provided for use before the new law came into effect.
   

Next steps

The wording approved by the government builds on previous versions published during the preparation of the new accounting bill and accompanying law. The latest version does not include any changes in the approach to the tax deductibility of contractual penalties and social and health insurance paid after the end of the taxable period, which should continue to be linked to their payment.

If the legislative process is allowed to continue, businesses will need to assess how the new legislation will affect their accounting and taxation, both in terms of the new rules and the transition to them.

The new legislation also opens up opportunities that are not available under the current legislation. Most significant among them is the possibility to keep accounts for statutory purposes under international accounting standards and to use these accounts also for calculating income or top-up tax. However, this new possibility and its implications must be evaluated against the existing approach.