Case law
11 December 2018

Super-gross tax base for benefits from third parties – the case continues

In July 2018, the Regional Court in Hradec Králové confirmed the duty to apply the “super-gross tax base” also for benefits provided to employees by third parties. The issue was now dealt with by the Supreme Administrative Court, which did not support the Regional Court’s interpretation, and returned the case for further proceedings.

Mária Marhefková
Iva Krákorová

In the initial proceedings, the Regional Court in Hradec Králové agreed with the tax administrator who had assessed additional tax on income from dependent activity to a company that had provided benefits to the employees of another entity, Česká pošta (Czech mail service company). When performing their work, the employees of Česká pošta also offered the products of the company, based on its contract with Česká pošta. The company then taxed the non-monetary benefits it provided to the employees without increasing the tax base by the employer’s contribution for social security and health insurance (the “super-gross tax base”).

In the subsequent cassation proceedings (No. 1 Afs 162/2018- 40), the Supreme Administrative Court (SAC) disagreed with the Regional Court’s interpretation. SAC argued that to meet the definition of an employer for the purposes of social security and health insurance, the sole existence of taxable income from dependant activity is not sufficient (as is the case under the Income Tax Act), but another condition has to be met: the income must come from “employment”, meaning an activity carried out by an employee for an employer.

The SAC was of the opinion that in the case in question, the tax administrator failed to prove that the company was the employer of Česká pošta’s employees in the meaning of social security and health insurance legislation, or that Česká pošta’s employees carried out any activities for the company concerned. SAC thus vacated the Regional Court’s judgment as well as the Appellate Financial Directorate’s decision and returned the case for further proceedings and proving.

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