News in brief, January 2021
Last month’s tax and legal news in a few sentences.
12 January 2021 In brief
DOMESTIC NEWS IN BRIEF
- The tax package for 2021 was published in the Collection of Laws under No. 609/2020 on 31 December 2020 and entered into effect on 1 January 2021. The package, inter alia, repeals the super-gross wage, introduces two personal income tax rates of 15% and 23%, introduces monetary contributions for meals, increases the basic tax relief per taxpayer, and abolishes the limit for the tax bonus that may be payable to taxpayers if their child credit for the year exceeds their tax liability. Moreover, the package amends the taxation of bonds, introduces accelerated depreciation for selected categories of assets acquired in 2020 and 2021, increases the limit for tangible fixed assets to CZK 80 thousand, and repeals the category of intangible assets for tax purposes.
- The Minister of Finance decided on a general waiver of penalties for the late filing of real estate tax returns for 2021 and road tax returns for 2020 on the condition that such returns are submitted no later than on 1 April 2021 (published in Financial Bulletin 3/2021 on 7 January 2021). The sanction-free period for filing tax returns will thus be postponed from 31 January 2021 to 1 April 2021. For road tax, the waiver also applies to default interest if the tax is paid no later than on 1 April 2021. Any road tax underpayments will also have to be paid by 1 April 2021 at the latest. The date on which real estate tax is payable remains the same: 31 May 2021 and 30 November 2021, primarily owing to the restriction of the tax authorities’ opening hours.
- Regulation No. 589/2020 Coll., amending basic compensation rates for the use of road motor vehicles and meal allowances and determining the average price of fuel for the purpose of reimbursing travel expenses, has been published in the Collection of Laws. The basic compensation rate for 2021 will increase to CZK 4.40 per 1 km driven by passenger car.
- Regulation No. 581/2020 Coll., amending the regulation on the essentials of filings and e-filing forms in insolvency proceedings and the regulation on the rules of procedure for insolvency proceedings, has been published.
- A notice of the Ministry of Labour and Social Affairs disclosing the average wage in the national economy for the first to the third quarter of 2020 for the purposes of the Act on Employment has been published in the Collection of Laws under No. 574/2020 Coll. The average wage for this purpose amounts to CZK 34,611. A similar notice for the purposes of the Labour Code has been published under No. 575/2020 Coll.
- On its website, the Ministry of Finance has updated an overview of effective double taxation treaties, also including treaties in effect from 2021 - with Kyrgyzstan (No. 50/2020 Coll. of Int. Tr.) and Botswana (No. 49/2020 Coll. of Int. Tr.)
- An overview of the Ministry of Labour and Social Affairs’ changes and updates for 2021 has been published on the ministry’s website.
- After evaluating the outputs of the Committee for Fair Pensions, the Ministry of Labour and Social Affairs has submitted three draft amendments to the Act on Pension Insurance for comment procedure, which are as follows:
- A basic proposal of the pension reform amending the architecture of the pension system, involving the transformation of the old-age pension scheme into the zero pillar and the first pillar, i.e. solidarity part and merit-based part of old-age pensions (proposed to be effective from January 2022). The amendment also regulates the mandatory payments by self-employed persons from 1 January 2023 to strengthen the pension entitlements of these persons.
- A proposal to introduce an early retirement option for persons performing demanding professions, who would retire up to 5 years earlier than normal. To cover the increased cost of the earlier payment of old-age pensions, employers of this category of employees should get involved (increasing social security premiums by 5 percentage points). This is proposed to be effective from 1 January 2024.
- A proposal to increase the merit-based part of old-age pensions by the number of raised children, in particular by CZK 500 per raised child (for a maximum of three children). Pensions awarded both before and after the effective date of the law will be increased. This is proposed to be in effect from 1 January 2023.
FOREIGN NEWS IN BRIEF
- The European Union and the United Kingdom have concluded the EU-UK Trade and Cooperation Agreement. The agreement covers measures aimed at ensuring a level playing field in areas such as state aid, tax transparency, VAT, customs and social security coordination. Additionally, both parties have endorsed a Joint Political Declaration on Countering Harmful Tax Regimes.