Konsolidační balíček – pozměňovací návrh k pozměňovacímu návrhu

Consolidation package - amendment to the amendment

We will keep you informed about the significant tax changes in the so-called consolidation package.

Last week, we informed you about the published text of the extensive amendment proposal of the coalition parties (more details HERE). And after a week or so, we have another amendment to this amendment (more details HERE).

Below is a brief summary of selected proposed changes contained within these latest amendments so far, compared to the version we commented on last time.

Corporate income tax/accounting

Functional currency - As we have already informed you, the possibility of keeping accounting records in a currency other than the Czech currency is newly introduced through the new institution of the accounting currency, which may be the Czech koruna, the euro, the US dollar or the British pound if this currency is also the so-called functional currency of the accounting entity. This should be the currency of the primary economic environment in which the entity operates.

The accounting currency of the accounting entity - the corporate taxpayer - was originally intended to be the same as the currency of the corporate income tax calculation. In the latest version of the amendments, this assumption is modified somewhat to take account of the technical possibilities of the tax administration system. Our understanding is that the general starting point for the latest set of these modifications is that, while it will not be possible to use foreign currency directly for the calculation of income tax, it will nevertheless be possible to use it in the defined sub-steps necessary for the calculation of income tax (i.e. the conversion of aggregate items).

Personal income tax/employment

Employer-organized events - It is proposed to specifically provide that income derived from the participation of an employee (or family member) in a sporting or cultural event organized by the employer is exempt from tax. According to the Explanatory Memorandum, these should be events (i) of a "non-public" nature, (ii) which employers usually organise for employees in a given form and scope, (iii) organised "occasionally" (e.g. Christmas parties, company anniversary celebrations or children's days), (iv) which are "usual" or "reasonable" in the context of the circumstances. According to the Explanatory Memorandum, the criterion of frequency is not met by events held on a regular basis (e.g. weekly parties) and the criterion of reasonableness is not met by, for example, holding a Christmas party in an exotic destination or in other quite excessive circumstances.

According to the Explanatory Memorandum, because of this special exemption, employers will not have to keep track of which employee (and possibly his family member) attended the event and how much he consumed at the event in order to quantify his income from such an event, as the exemption applies to all such income without limitation as to the amount.

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

Authors:

Lucie Říhová

Michaela Felcmanová

Hana Cicvárková