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We have another amendment to the Income Tax Act

According to available information, a "small clarifying" amendment to the Income Tax Act (ITA) is in the works. This amendment should be submitted in the framework of the discussion of the Parliamentary Press 570 - i.e. the amendment to the Investment Companies Act (HERE).

Investment funds - valuation differences and nature of liabilities

The main focus of this amendment was originally to specify the tax treatment of valuation differences and selected liabilities for investment funds. However, this part has somehow "stalled" and is not in the current version of the draft amendment. We shall see how this topic develops further.

Among other topics, the version of the draft available to us contains, for example, the following:

• Valuation of the non-cash benefit of the use of a preschool - In accordance with the announced information of the General Financial Directorate (HERE), a special provison is newly proposed for the valuation of the non-cash income of an employee in the form of the use of a preschool childcare facility (by a family member of the employee) - two options for the valuation of such benefit are provided, either at the price customary at the place and time for the use of a kindergarten established by the listed public founders (State, region, municipality or voluntary association of municipalities) or at the maximum monthly payment for the use of such a facility according to Decree No. 14/2005 Coll, on pre-school education (the current monthly amount is CZK 1 512 according to the explanatory memorandum). The choice between these two valuation methods is made by the employer. In this case, the employee's non-cash income is calculated as the difference between the amount of the valuation and the reimbursement paid to the employer. This non-monetary income is then counted towards the limit of exempt income under Section 6(9)(d) of the ITA (if it is a non-tax deductible expense on the part of the employer).
• Meals for former retired employees - The new proposal is to exempt income of a former employee who worked for the employer until his retirement (or certain disability pension) - namely income in the form of meals (i.e. in-kind) provided by the employer for direct consumption at the employer's workplace or at a facility operated by another entity - up to 70% of the upper limit of the meal allowance.
• Relief for exemption conditional on the expenditure of income on the securing of housing - It is proposed to modify the conditions for the exemption of income conditional on the expenditure of the funds received on the securing of one's own housing and timely notification to the tax administrator. As regards this notification - it is proposed to transform the substantive condition for the exemption of the income received into a mere notification obligation.
• Clarification on non-cash income from participation in social events of the employer - It is proposed to amend the provisions of Section 6(9)(g) of the ITA to provide that non-cash income from participation in social events organised by the employer, including (but not limited to) those with a cultural or sporting element, is exempt from income tax. Similarly, the link to the provisions of Section 25(1)(h) of the ITA has been modified.
• Clarification of the exchange rate differences exclusion regime - The provisions of Section 23i(3) of the ITA are amended so that when a taxpayer switches to another accounting functional currency, it ceases to be a taxpayer in the exchange rate differences exclusion regime - thus, the switch to another accounting functional currency should result in taxation of the excluded exchange rate differences.
• Effectiveness - The effectiveness of each of the proposed provisions is defined in a rather complicated way, with some provisions that should be applicable throughout 2024.

If this is an area of interest to you, please contact the authors of the article or the advisory team you usually work with.

Authors:

Lucie Říhová

Radek Matuštík

Michaela Felcmanová

Adam Linek