Tax laws amendments in connection with coronavirus

The Czech Republic is entering into next phase of the fight against the consequences of large-scale measures in connection with the Covid-19 pandemic, which affect many entrepreneurs and companies. To mitigate the negative economic impacts, Tax laws amendments are prepared (hereinafter referred to as the “Anti-Crisis Tax Package”). The Anti-Crisis Tax Package should be valid on 1 July 2020 at the latest.

Tax loss carryback is newly implemented into the Corporate Income Tax Act and practically it means that tax loss arises in a tax period may be used as an item decreasing tax base of two previous tax periods up to the limit of 30 mio. In case of taxpayers with tax period of calendar year, tax loss arises for 2020 may be used as an item decreasing the tax base for tax period of 2019 and 2018.

Especially for the tax period of 2019 amount of the tax loss arises in 2020 may be estimated (before the end of 2020) and such estimated tax loss may be used as an item decreasing the tax base of 2019. Subsequently, the estimated tax loss has to be corrected via additional corporate income tax return in case finally assessed tax loss for 2020 (after the end of 2020) is lower than estimated amount of tax loss. In this cases we would like to point out that the interest on late payment could be assessed by the Czech tax authority. Nevertheless, the request for waiver of the interest on late payment may be submitted by the Czech tax authority.

Large-scale measures set by the Czech Government in connection with Covid-19 has huge impact,

in particular, on reducing the income of entrepreneurs and companies doing business in the field of tourism or operating cultural and sports facilities. To mitigate these negative effects, the Anti-Crisis Tax Package reduces the VAT rate to 10% for the following taxable supplies:

• Accommodation services (it will mainly concern hotels, hostels, etc.);
• Land public transport
• Entrances to cultural events (includes e.g. theatres, cinemas, concerts, zoos, etc.);
• Entrances to sporting events and sports facilities (includes eg swimming pools, sports grounds, saunas, etc.).

10% VAT rate for selected taxable supplies will be applicable from date of effective of the law´s amendment.

Furthermore, Anti-Crisis Tax Package reduces road tax rates for vehicles with a maximum permissible weight of more than 3.5 tonnes. The new rates will be applied for the whole tax period of 2020.

Other expected changes in tax laws

A highly expected change in the area of tax laws is the abolition of real estate transfer tax. The relevant amendment is still in the legislative process.

In case of purchase of a real estate, the abolition of real estate transfer tax will be effective for transfers of real estates registered in the real estate cadaster from 1 December 2019 and later.