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Audit Tax Advisory

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Financial Update

TAX SERVICES

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KPMG - Audit Tax Advisory
KPMG - Audit Tax Advisory

Financial Update – Special Issue

October 2009


Budget cuts package passed

On Monday Czech Parliament passed as emergency legislation a package of measures to reduce expenses in the state budget.

The bill has yet to be signed by the President.

The following is an outline of major changes in taxation, social security and health insurance. The effective date of the proposed changes is 1 January 2010.

Tax

Income Tax

  • The introduction of a 23% tax rate on income in excess of CZK 2 287 200 per year has not been passed.
  • The recent amendment to the Income Tax Act had increased the “percentage deduction of expenses” for trade licence holders and other individuals conducting business to 80% for income from craft trades and to 60% for other income. The new bill has kept the 80% deduction for income from agriculture and income from craft trades; for other trades, the percentage has been reduced to 60%, and for independent professions to 40%. The newly set percentage deductions will only apply from the taxation period of 2010.
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Social security and health insurance premium

  • The maximum assessment base for social security and health insurance premiums has been increased for 2010, from 48 times to 72 times the average wage.
  • The social security rebate for employers, which was introduced this year and was expected to apply in 2009 and 2010, has been cancelled for 2010.
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Value added tax

  • The reduced VAT rate has been increased from 9% to 10%, the basic rate from 19% to 20%.
  • The transitory provision of the Act regulate the application of VAT as regards advances received before the effective date of the new Act, i.e. before 1 January 2010: when settling such payments on the date of taxable supply after 1 January 2010, the tax rate shall be applied as valid as at the origination date of the duty to file a tax return upon accepting the payment.
  • For finance leases concluded before the end of 2008, the tax rate shall be applied after 1 January 2010 as valid before 31 December 2008. Because of the change in VAT application for finance leases concluded after 31 January 2008, no special regulation is needed for these leases (as VAT is paid as on one-off basis).
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Real estate tax

Basic rates of real estate tax have been doubled for buildings and land, except for arable land, hop fields, vineyards, gardens, grassland, and fishponds for intensive fish farming. The law gives the municipalities until 30 November of this year a possibility to issue a mandatory decree increasing the basic tax rate or coefficient.

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Excise duties

Excise duties have been increased as follows:

  • on lead-free gas and its mixtures by CZK 1/l
  • on diesel oil and its mixtures by CZK 1/l
  • on spirits by CZK 2000/hl of ethanol
  • on beer by CZK 8/hl for each full percentage point of the original hopped wort
  • on tobacco products the percentage part is not increased; the fixed part by CZK 0.04/item – i.e. to CZK 1.07/item; for smoking tobacco and other tobacco, the rate has been increased by CZK 60/kg, to CZK 1340/kg.
  • with increased excise duties, the security to be provided by tax warehouse operators, beneficiaries and tax representatives for shipping selected products has been increased accordingly. The law gives the entities liable a period of 60 days from the effective date to provide the additional security. If the manner of securing the excise duty changes, the warehouse operator must file for such change with the Customs Office within 15 days from the effective date of the new Act. Otherwise, the authorisation to operate the warehouse, issued under the previous wording of the Act, shall cease to be valid as of the effective date of the new Act.
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Sickness benefits and wage compensation

  • The rate of sickness benefit insurance premiums to be paid by employers in 2010 shall remain at this year’s level, i.e. 2.3%; employers will still be entitled to deduct from the premium amount paid half of the wage compensation paid for temporary inability to work in respect of all employees, not just disabled employees.
  • On a temporary basis in 2010, the percentage rate for determining the daily amount of sickness benefits has been unified at 60%, abolishing the more advantageous rate for long-term inability to work (quarantine).
  • The maternity benefit amount has been unified with that of other sickness benefits.
  • The same three-day “guard period” has been introduced for benefits paid when caring for a dependent family member (“ošetřovné”), as is now applied to wage compensations (meaning that benefits are not paid for the first three days of sickness/care).

 

The authors of the article:

Petr Toman, ptoman@kpmg.cz, Tel.:222 123 602
Lenka Fialková, lfialkova@kpmg.cz, Tel.:222 123 536

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