Konsolidační balíček - aktualizace

Consolidation Package - Update

A few weeks ago, the government presented a set of intended measures to help consolidate public finances. Subsequently, the paragraph-by-paragraph text of the proposed amendments was published - we have brought you a summary of the main tax changes HERE.

An updated version of this document has now been published and we provide selected observations on the changes from the original draft (more details HERE).

Corporate income tax

• Recognition of benefits for employees' family members - Expenses for employee care in the form of employee benefits will now be assessed by the employer under Section 24(2)(j)(4) of the Income Tax Act (current Section 24(2)(j)(5)). The provision is proposed to be amended so that benefits provided not only to the employee himself but also to his family members are tax deductible.
• Extraordinary depreciation for zero-emission vehicles - The possibility to apply extraordinary tax depreciation is extended for zero-emission road motor vehicles acquired between 1 January 2024 and 31 December 2028 (in the original proposal, this was limited to road motor vehicles using only electricity as fuel).
• Vehicle deductibility limit – Deductible expenditures will only include the proportion of depreciation of an M1[1] vehicle (brought to a state of normal use from 1 January 2024) calculated by the ratio of the expenditure limitation amount for such a vehicle - i.e. 2 million CZK - and the aggregate of the expenditure incurred on such a vehicle - i.e. generally the purchase price (similarly for rent when acquired by means of a finance lease). The intention of the modification seems to be that no more than CZK 2 million can be claimed as an expense through depreciation on an M1 vehicle and that the tax-non-deductible part of the depreciation can no longer be claimed in the tax base (e.g. on sale).

Personal income tax

• Private use of an emission-free car - The non-cash income of an employee who has an emission-free car for business and private use will be only 0.25% of the purchase price of the car.
• Entitlement to exempt meal allowance - The conditions for an employee's performance of work and entitlement to exempt meal allowance (monetary and non-monetary) are being reformulated, whereby the employee's shift and presence at the workplace will no longer be the only link required, but the actual performance of the employee's work for 3 hours will be decisive.
• Taxable exchange gains - If an individual makes an exchange gain on the exchange of money from a foreign currency account that is not exempt from tax, an exchange loss can be claimed as an expense.

VAT

• The tax deduction entitlement for M1 cars is limited to a maximum amount of CZK 420,000. The tax deduction for any technical improvement of such a car will be included in this limit.
• It is specified that the reduced tax rate will apply to the supply of milk and soya-based drinks, including the service of serving such drinks.

We will continue to monitor developments in the amendment of the relevant legislation for you. If you have any questions, please contact the authors of this article or the EY advisory team you are working with.

Authors:

David Kužela

Stanislav Kryl

Michaela Felcmanová

Adam Linek

Jevgenija Bajzíková

[1] The exception applies to ambulances and hearses, vehicles used for the operation of road motor transport on the basis of a concession and vehicles of taxpayers who provide them as the subject of financial leasing.