News

IB Grant Thornton: Amendment of Income Tax 2011

On the basis of post-election coalition negotiations and the government policy statement Czech Ministry of Finance elaborated the amendment of the Income Tax Act...

On the basis of post-election coalition negotiations and the government policy statement Czech Ministry of Finance elaborated the amendment of the Income Tax Act. The government submitted the amendment to the Chamber of Deputies for authorization on 7 October 2010 and at the same time it recommended the authorization within the first hearing so the amendment would become effective from 1 January 2011.

Apart from smaller legislatively technical changes and taxation of the allowance of the state autority representatives, service and accommodation benefits for soldiers and security corps so much discussed in the press, the amendment contains of few other more important changes:

• Reduction of the basic tax allowance on taxpayer by CZK 1.200 a year (current allowance CZK 24.840 new allowance CZK 23.640).
• Cancellation of income tax exemption for pension, if the summary of all other pensioner’s income (payroll, independent gainful aktivity and lease income) exceeds the amount of CZK 840.000 per year.
• Extension of the definition “income from other independent gainful activity” by income from lease of the property registered as business property. With this income 30 % expense allowance shall be used.
• Giving the possibility of tax deductible depreciation of receivable with balance value more than CZK 200.000 at the moment of origin by omission of the essential condition for depreciation, which is the possibility of making adjustments to the receivable according to the Reserve Act. However there is an 
• addition as well saying that it is not possible to depreciate the receivable of related party.
• So called motivation benefits that will be based on the contract provided to those students preparing for the practice with the tax payer (motivation benefit paid to the university student up to CZK 5 .000 per month, in other cases up to CZK 2.000 per month) can be included in tax deductible expenses.
• Tax allowance in the amount of one half of the tax liability, that can be claimed by legal entities – employers in case that more than 50 % of the employees are handicapped, is being cancelled.

We will for sure inform you about the final approved version of the amendment of the Income Tax Act.

During the same government talks the amendment of Saving for Building Purposes Act was also approved together with another related amendment of Income Tax Act. The amendment principle is:

State support of saving for building purposes, that will be put to account of people saving for building purposes in 2011, will be subjected to tax of 50 %.

Interest on deposits from saving for building purposes including the interests on state support will not be exempt from income tax any longer, it means that interests put by building society to its clients accounts after 1 January 2011 will be subjected to the tax of 15% (the tax will be deducted and transferred by building savings.

Ing.Olga Krnáčová
IB Grant Thornton
Na Bojišti 18
CZ-120 00 Praha 2
T +420 296 152 111
F +420 296 181 483
E o.krnacova@ib-gtpraha.cz