Chamber of Deputies passes tax package – highlights

The maximum amount of expenses that can be claimed as a percentage of income from self-employment and lease will increase as follows:

 

• CZK 1 600 000 instead of CZK 800 000 for income from agricultural production, forest and water management, and handicrafts;

• CZK 1 200 000 instead of CZK 600 000 for income from trade;

• CZK 800 000 instead of CZK 400 000 for other income from independent activities;

• CZK 600 000 instead of CZK 300 000 for income from the lease of assets, whether business or private.

 

The percentages of these expenses (80%, 60%, 40%, and 30%) remain unchanged. Entrepreneurs find themselves back in 2016 and 2017, when the maximum amounts of expenses claimed as a percentage of income corresponded to a gross income of CZK 2 million. The new maximum limits will be applied already for the taxable period in which the amendment enters into effect. 

 

In connection with an increase in the income decisive for mandatory participation in sickness insurance of employees to CZK 3 000 monthly from 1 January 2019, the limit of income from dependent activity (employment) up to which withholding tax is applied will also increase. This change will become effective on the first day of the calendar month following the month in which the amendment enters into force. 

 

Concerning VAT, an amending proposal was passed that will hopefully soothe the heated discussion regarding expected changes to the regime of limited liability company statutory representatives. The existing legal regulation under which the activities of persons taxed as income from dependent activities (employment) do not represent independent economic activities remains applicable. 

 

In addition, a proposal to cancel changes to the concept of subsidies was also passed. And finally but importantly, lease companies may celebrate, as the newly defined principles and concept of finance lease arrangements (deriving from the Court of Justice of the EU’s case law) should not enter into effect in Czech legislation earlier than on 1 January 2020. This should give lease companies sufficient time to prepare for this change.

As certain provisions of an amendment to the VAT Act derive from EU legislation whose implementation is mandatory and the implementation deadline of 1 January 2019 was not met, the GFD issued its Information on the Application of a Direct Effect of Council Directive (EU) 2017/2455 and Council Directive (EU) 2016/1065.

This mainly involves changes in provisions regulating the place of supply when providing telecommunication services, broadcasting services and electronically-rendered services to persons not liable to VAT and when registering for a special (non-EU) Mini One Stop Shop regime by non-EU persons liable to VAT and changes in the treatment of vouchers. See the report on the financial administration’s website.