Changes for corporate income tax returns for 2021
Tax loss carryback
Probably the most significant change within the corporate income tax compliance in recent years is the possibility to claim the tax loss retrospectively. This provides companies the opportunity to optimize the tax base. Nevertheless, the original concept of applying a tax loss in the future is not affected at the same time and also, the possibility of waiving the application of a tax loss was also implemented. Thus, if you expect the tax loss for 2021 and the tax profit was reached two previous years, we recommend considering the above options which may result in significant tax optimization.
For the sake of completeness, there are of course conditions that need to be considered - in particular the impact on the preclusive period, which is significantly affected by the above options. If you are interested in the topic of the loss recovery institute, we recommend our previously published texts here. However, if you are interested in options directly for your company, do not hesitate to contact us.
Tax depreciation
Another big change that will significantly affect the current tax season is the topic of tax depreciation. Basically, three major changes have occurred regarding the tax depreciation:
- reintroduction of extraordinary tax depreciation,
- ncrease of the acquisition price (and technical improvement) from CZK 40,000 to CZK 80,000 and
- the abolition of intangible assets.
These changes were already put in force at the beginning of 2021 and could be used retroactively for the tax return calculation of 2020. However, due to the retroactivity, this was open as a possibility and not as an obligation. In this respect, the full validity was set for the corporate income tax compliance for the year 2021.
The increase of the acquisition price and abolition of intangible assets are well-known information. However, we would like to highlight the possibility of extraordinary depreciation for new assets, as it is possible to apply the extraordinary depreciation, which allows the application of the acquisition price for 12 or 24 months. Of course, there are several conditions, however, if you are considering the possibilities of optimizing the tax base and you have acquired new fixed assets during 2021 that meet the conditions for extraordinary depreciation, we recommend that you at least consider this option. Further, we have also addressed this issue in previous Crowe News here.
Monetary contributions for meals
Meal vouchers are generally among the most popular and widespread employee benefits throughout the Czech Republic without any doubt. However, many employees did not use meal vouchers for several reasons and thus, an alternative in the form of a meal voucher was created.
In short, the value of the meal voucher on the part of the employee is exempt from tax and thus from social and health insurance, regardless of the limit. On the other hand, this is a tax-deductible expense of up to 55% of the value of the meal voucher and up to 70% of the amount of the meal allowance, which was set at CZK 118 for 2022 for the employer. The employee pays the remaining 45%. The employer can also contribute a higher amount and the employee would still have an exempt income. However, for the employer, the above-mentioned limit is a non-deductible expense. It follows that the most optimal value of a meal voucher for 2022 is CZK 150.
Compared to the above-discussed meal voucher, the monetary contribution for meals is different from a tax point of view. On the employee's side, this is exempt income up to CZK 82.6 (70% of CZK 118). The amount exceeding this limit must be delivered on the part of the employee, including social and health insurance. On the other hand, this is always treated as tax-deductible costs for the employer, regardless of the limit. The reduction of administration and the elimination of related fees related to meal vouchers are also great advantages of the monetary contributions for meals. If you would like more information on this topic, please see our Crowe News here.
Donations
Generally, if the conditions are met, it is possible to claim the provision of a gift as an item deductible from the tax base for the calculation of the corporate income tax. Since several events have taken place in recent months which have caused a wave of solidarity, the limit for deducting donations has been raised from the original 10% to 30% of the tax base. However, the border was increased only temporarily in the period from 1 March 2020 to 28 February 2022. For more information, please see Crowe News, where we also addressed this issue here.
The above points give legal entities options on how to reduce the corporate tax base. All options have their pros and cons. If you considering which option from the above would be the best for your company, please do not hesitate to contact us. We will be happy to make comparisons based on specific requirements of your company.
Reminder - small taxes
At least, we would like to mention the so-called small taxes which is including real estate tax and road tax. These taxes are often neglected by the taxpayers (but not by the Tax Authority).
The real estate tax is decided by the ownership as of 1 January 2022 and it is paid “in advance”. Therefore, if there was any change during 2021, the taxpayer is obliged to file the tax return by 31 January 2022. Subsequently, it is necessary to pay the tax by 31 May 2022. Nevertheless, if the tax exceeds CZK 5,000, it might be paid in two payments – the first date is the same (31 May 2022), the second date is on 30 November 2022.
As regards the road tax, please note that the deadline for the period of 2021 is 31 January 2022. By this deadline, it is also necessary to pay the tax underpayment. As the tax advances are usually paid during first the 11 months of the year, the resulting underpayment is basically road tax for December 2021.
If you are worried about taxes, leave them to our tax experts, who will be happy to help you with your problems and questions.
