News

Further loosening of rules for foreigners

On 4 May 2020, the government adopted several resolutions significantly expanding the options for foreign employees to come to work in the Czech Republic, thus at least partially accommodating the needs of employers. The government should resume the process of granting visas, and allow foreign employees from third countries to cross our borders.

Government proposal to abolish immovable property acquisition tax goes to chamber of deputies

At its session on 30 April 2020, the government passed a proposal to abolish the tax on the acquisition of immovable property, with retrospective effect. Individuals will no longer have the option to deduct from their income tax base interest paid on loans taken to acquire real property. The time test for exempting from personal income tax proceeds from the sale of real property other than for an individual’s own housing purposes shall be extended.

Compensation bonus for members of limited liability companies with no employees or only family members

The government has passed an amendment to the Act on Compensation Bonuses, allowing them to be also paid to members of limited liability companies (‘s.r.o.s’) that have no employees and no more than two members, or members who belong to a single family.

COVID-19 and intra-group services – a transfer pricing perspective

Implementing emergency plans, trying to keep a positive cash flow, or monitoring the quick succession of legislative changes adopted in connection with the coronavirus pandemic – these have become corporate management’s daily bread. Remuneration models for intra-group transactions are an important piece in this puzzle.

Ministry of Finance introduces new old-age savings scheme

The Ministry of Finance has prepared a bill introducing a new old-age savings scheme, in form of a long-term investment account. The bill is part of the Czech Capital Market Development Concept for 2019-2023. The new product should work as an alternative to pension insurance or life assurance schemes and should be associated with similar tax benefits.

Amendment to VAT for 2021: e-commerce

From 2021, a special mini-one-stop-shop regime will also apply to the sale of goods by mail order. Under the new amendment, such sales will be taxed in the recipient’s country, potentially excepting small businesses. For harmonisation purposes, the exemption from VAT on the import of low-value shipments will be cancelled. Moreover, new VAT duties will also arise for internet platforms.

Amendment to Tax Procedure Code revisited

The Chamber of Deputies did not pass any of the proposed versions of the amendment to the Tax Procedure Code; the bill thus fell through. Within a week, the Ministry of Finance came up with another bill, drawn up on the same layout as the original one, yet with numerous changes demanded by the opposition and the professional public.

New call to participate in TREND

On 29 April 2020, the Technology Agency of the Czech Republic (TACR) announced the third call within the research and experimental development programme, focusing on the creation of research and development results and their use in one´s own business activities (especially to enhance the effectiveness of production and to implement new products and services). The programme´s main objective is to increase the international competitiveness of businesses. Large enterprises may also apply.

Will tax administrators have to file taxpayers’ financial statements in the Collection of Deeds?

At the end of January, a group of deputies submitted a draft amendment to the Act on Public Registers that introduces the duty of tax administrators to file on behalf of individuals and corporate entities recorded in public registers their ordinary, extraordinary and consolidated financial statements in the Collection of Deeds. This change is proposed to be effective from 1 January 2022.

Permits to mediate employment complicate employment of foreign nationals

Last year’s amendment to the Act on the Residence of Foreign Nationals forbids foreigners with employee cards to change their employers if these are employment agencies, i.e. entities holding a licence for the mediation of employment. These involve “true” employment agencies, entities mediating employment only exceptionally, and also recruitment agencies. This is a significant complication for both foreigners and potential employers.

New duty to provide information on tourism services

Within the measures adopted in response to the COVID-19 pandemic, legislators have passed a legal amendment introducing the duty for tourism services intermediaries (typically Airbnb and similar platforms) to provide information on these services to the trade licensing authority.

Amendment to Civil Code abolishes pre-emptive right

In April 2020, an amendment to the Civil Code that may significantly enhance the liquidity of residential units was published in the Collection of Laws. Although a drop in real property prices is expected in connection with the COVID-19 outbreak, the amendment may be beneficial for both investors and real property owners. The pre-emptive right of real property co-owners will be almost completely abolished from July 2020 and the regulation will return back to its version in effect from 2014 to 2018.

CJEU on consumer credit information

In its judgement in case C66/19, the Court of Justice of the EU (CJEU) held that it was unacceptable for a credit agreement to provide obligatory information merely by referring to a provision of national law that itself refers to other legislative provisions. Under obligatory information the court also included the calculation of the period/time limit for the withdrawal from the agreement.

SAC: proof of tax fraud not sufficient to deny entitlement to VAT deduction

Yet again, the Supreme Administrative Court (SAC) has dealt with a VAT fraud issue, in particular debating under what circumstances it may be concluded that a taxable supply recipient was or should and could have been aware of their involvement in the fraud, and therefore should be denied their entitlement to deduct VAT.

CJEU dealt with assigning of transport in a Czech case

In a Czech case (Herst), the Court of Justice of the EU (CJEU) dealt with assigning intra-Community transport to a transaction in a situation where transportation was arranged by the last entity in a chain, and goods were purchased and resold several times during transportation.

Posting of workers from a VAT perspective

In practice, companies often do not pay enough attention to the possible implications of posting high-ranking managers to the Czech Republic to manage or supervise another group entity. A number of these arrangements meet the definition of a VAT fixed establishment.

News in brief, May 2020

Last month’s tax and legal news in a few sentences.

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