Tax package 2021 and reliefs in tax payments

Undoubtedly, one of the most fundamental changes is the abolition of taxation of employees from super-gross wages. Taxation at rate of 15% will be newly applied on gross wages. If the annual income exceeds 48 times the average wage (or the monthly income from employment above 4 times the average wage), a rate of 23% will be applied to income above this limit. This second rate thus partially replaces the current solidarity tax, but this higher rate will now apply to the taxpayer's total tax base, not only to income from employment and business activities.

Another change is the increase in the amount of the general tax credit which will be increased from 1 January 2021 from the current amount of CZK 24,840 to CZK 27,840 (for 2021) and CZK 30,840 (for 2022). This increase corresponds to the correction of the increase in the credit by the Senate, which did not support the original proposal of the Chamber of Deputies for a higher increase up to the amount corresponding to the average wage.

Further change brought by the tax package is the introduction of the so-called catering lump-sum as monetary income exempt from income tax. A separate article in Crowe News will address this news in more detail.

Other changes brought by the tax package concern the tax depreciation of assets, which can be used voluntarily for the tax period of 2020. Specifically, it is an increase in the limit for tax depreciation of assets and its technical improvement from CZK 40,000 to CZK 80,000, acceleration of tax depreciation assets acquired from 1.1.2020 to 31.12.2021 and included in the 1st group (depreciation for 12 months instead of 3 years) and in the 2nd group (depreciation for 24 months instead of 5 years) and cancellation of the category of intangible assets in the Income Tax Act, i.e., accounting depreciation of intangible assets will be relevant for tax purposes.

Further reliefs concerning tax payments, namely VAT and road tax, were brought about by the decision of the Minister of Finance published in the Financial Bulletin No. 38/2020 of 21 December 2020.

Based on this decision, all tax payers for which the majority of income comes from activities that were prohibited or restricted in the period from 22 October 2020 to 31 March 2021 are entitled to waiver of interest for late payment of VAT for the tax period of months September 2020 - March 2021, or for the tax period of quarters III.2020 - I.2021. Interest will be waived provided that payment is made no later than on 16 August 2021. A necessary condition for the waiver of interest is the notification of this fact to the relevant tax administrator, stating the resolution of the Government of the Czech Republic which prohibited or restricted activities. The relevant period for which the extent to which the revenues of the entity concerned come from prohibited or restricted activities will be assessed is the period from 1 June to 30 September 2020 when these activities were not restricted.

Under the same conditions and to the same entities, interest for late payment of road tax for the tax period of 2020 will also be waived, as well as the advance on road tax due on 15 April 2021.

However, fines for late filing of tax returns are not waived in any way, so these must be filed within the statutory deadlines.

Further, for all tax payers, the automatic waiver of interest on all taxes incurred until 16 August 2021 will be extended in cases where the tax administrator will individually allow deferral or payment in installments for reasons related to coronavirus.

Last but not least, for all tax payers (regardless of the effect of coronavirus restrictions) there is an extension of the waiver of administrative fees for filing applications with the tax or customs office (application for deferment of tax payment or payment in instalments, application for waiver of interest on arrears, application for waiver of fine for failure to submit a control statement, etc.) submitted by 16 August 2021.

The tolerance period until 16 August 2021 was set for the above waivers with regard to the possibility of paying tax due by transferring any potential overpayment arising from the assessment of income tax for the tax period 2020, which can be expected for some tax entities due to a decrease of income in 2020 caused by a pandemic situation.