Aktualizace Pokynu D-22 k uplatňování některých ustanovení ZDP

Update to Guideline D-22 on the application of certain provisions of the ITA

The Ministry of Finance published in the Financial Bulletin No. 19/2022 the Guideline GFD-D-59 on the uniform procedure for the application of certain provisions of the Income Taxes Act. The new wording of the Guideline is effective as of 1 January 2023 and can be applied for the first time for tax periods beginning in 2023.

In particular, the following main changes have been made in the area of corporate income tax:

• The rules for determining the minimum value of a gift that a taxpayer can claim as a qualified charitable deduction from tax base have been defined in more detail. When determining the value of a gift, the method of donation must be taken into account. In cases where the taxpayer undertakes to make a qualified gift with a value exceeding CZK 2,000 and pays for the gift in instalments, the gift can be claimed regardless of the amount of the instalments. Conversely, regularly recurring gifts to a single entity which individual value does not exceed the CZK 2 000 limit cannot be claimed, even if their aggregate value exceeds the limit.
• The new Guideline specifies the periods for which the tax administrator may grant exemption from withholding tax in case of royalties and interest payments. According to previous case law, it was also possible to apply for exemption from withholding tax  retrospectively. This opinion of the Supreme Administrative Court has been incorporated into the new wording of the Guideline. The new Guideline explicitly states that the exemption can also be claimed retrospectively for periods for which the time limit for assessment has not expired.
• In the case of buildings, the moment when the depreciation can start has been specified. Buildings for which the Construction Authority granted a trial run may be put into use if they are completed in accordance with the design documentation and their functionality is verified. Buildings in early use are not fully completed and thus cannot be depreciated.
• The concept of cost of meals for the purpose of providing meals to staff has been clarified. The price of a meal is not set by the value of the meal voucher but by an internal directive of the employer. Multiple meal vouchers may be provided for a single meal. Meal vouchers may also be provided retrospectively according to the actual shifts worked, which must be at least three hours in length.
• The rules for the taxation of a controlled foreign company have been specified. Tax paid in the foreign controlled entity cannot be claimed as a tax-deductible expense to the extent that it could not be used to set off against the tax liability in the domestic country.
• It has been confirmed that the tax assessment period is not affected by the inability to claim a loss deduction from the tax base due to material changes in the composition of the persons directly participating in capital or control. Failure to meet this condition does not constitute an absolute prohibition on the claiming of a tax loss deduction, but makes its utilisation conditional on other conditions being met. The key whether the tax assessment period is or is not prolonged is not whether the tax loss was utilised but only whether it could be utilised.
• The rules for determining the tax base in the event of failure to comply with the obligation to collect or withhold tax in the case of withholding tax (so-called gross-up) have been added. The basis for calculating the withholding tax is the amount of tax that would have been left after withholding and that has been paid by the taxpayer to the income recipient . This provision does not apply to profit shares arising from the difference between the agreed price and the normal price.

The above changes are merely illustrative. If you have any questions about other changes in the new Guideline or to assess your particular situation, please contact the authors of this article or the EY tax team with whom you regularly work.

Authors:

Ladislava Zamazalová

Lukáš Nitka