Czech Republic: Tax Law Changes 2014

The Czech government has approved tax law changes, which will enter into force from 2014 onwards. Below we summarize the most important changes.

Personal Income Tax.

The principal change in terms of the taxation of individuals relates to the extension of the time-exemption test for income from the sale of securities. Shares acquired after 1 January 2014 will only be subject to exemption after three years of holding, instead of six months. The current conditions will still apply to shares acquired this year. On the other hand, the three-year time test will also apply in the event of holding more than 5% of shares whereas to date, the exemption has only been applied after five years of holding. The impact of extending the time test should be mitigated by exempting sales of securities of up to CZK 100,000 (approx. EUR 3,700) from taxable annual income. However, this amount relates to gross income, not the profit (after deducting the related costs).

Social Security.

Although changes in health and pension insurance seem to be rather small, they may have substantial impacts. For instance, within international hiring out of labor, a Czech company might newly be considered the employer for general social security purposes, similarly to some current interpretations of health insurance regulations, based on which the economic employer (i.e. the Czech company) is responsible for payment of the Czech health insurance contributions. Unlike the health insurance legislation, the Czech social security legislation now considers the legal employer to be responsible for the payments in case of any assignment from a country covered by the EU social security coordination regulations. Therefore, it will be necessary to reassess the current registration and payments, always based on the specific situation. In the context of international hiring the exemption related to participation in the Czech system during the first 270 days of performing activities in the Czech Republic was abolished.

Corporate Income Tax.

Certain provisions are for the benefit of the taxpayers. These primarily include the possibility of utilizing the total acquisition cost of land as an expense upon its sale, even the potential loss from the sale of land will be a tax-deductible expense starting from 2014. However, the loss from the sale of land remains to be tax non-deductible, when the land is sold by an individual.

Property Acquisition Tax.

Transfers of the ownership resulting from corporate transformation projects will no longer be subject to property acquisition tax. Moreover, it will now be possible for the property user to apply the exemption in acquiring the ownership title to property based on a finance lease (i.e. only the acquisition of property by the lease provider will be subject to tax). Contrarily, the right to a tax exemption will cease for property contributions to the company’s share capital.

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Barbara Behrendt-Krügelstein

Barbara Behrendt-Krügelstein

Manager | Deloitte Tax
Telefon: +43 1 537 00 7112
Mail: bbehrendt-krueglstein@deloitte.at

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