Dodanění cizoměnových dluhů po splatnosti

Overdue foreign currency debts

In today's Alert, we would like to address the issue of the obligation to increase the profit or loss in the tax return by the balance sheet value of debts that are more than 30 months past due or have become time-barred.

The Accounting Act requires that the value of debts should always be recorded in Czech crowns. In the case of foreign currency debts, this means that their value must be converted into Czech currency. As a rule, the conversion takes place first at the exchange rate valid at the date of the accounting event.

If the foreign currency debt has not been settled by the end of the accounting period, the entity is required to revalue the debt at the rate published by the Czech National Bank at the end of the accounting period.

If the exchange rate at the end of the accounting period is different from that at the previous valuation date, the balance sheet value of the debt in CZK recorded on the balance sheet accounts will change.

In this context, a question has arisen whether, if the tax base was increased by the value of an outstanding or time-barred debt in the past, it is necessary to adjust the profit or loss each year for the purposes of determining the tax base by the amount of exchange rate difference arising from the revaluation at the balance sheet date.

This issue was discussed at the Coordination Committee in contribution No 311/08.09.10. The Ministry of Finance agreed with the opinion of the author of the contribution, namely that the profit or loss should not be adjusted in the subsequent years by the amount of the exchange difference arising from the revaluation of the foreign currency debt.

In the case of repayment of foreign currency debts by which value was the tax base previously increased, a similar approach should be followed, i.e. the exchange difference from the revaluation is also disregarded.

For the sake of completeness, we would like to point out that the conclusions of the coordination committees are not legally binding, but tax authorities generally respect them in practice.

At the same time, we would like to stress that the above brief commentary cannot replace a detailed tax assessment of a specific tax situation. We will be happy to help you with these and other tax aspects.

If you have any questions, please contact the authors of this article or the EY tax team with whom you regularly work.

Authors:

Ladislava Zamazalová
Karolína Chládková