Nová interpretace Národní účetní rady I-50

New National Accounting Council Interpretation I-50

The National Accounting Council (NAC) has introduced a new interpretation entitled "I-50 Deferred Tax and Foreign Exchange Differences Excluded from Taxation", which addresses the incidence of deferred tax in the context of the new ability to exclude certain foreign exchange differences from the tax base.

What changes?

Until the end of 2023, exchange differences were reflected both in the profit or loss and in the tax base. However, with 2024 comes the possibility of a change and exclude unrealised exchange differences from the tax base.

Accounting and tax implications

There will be differences between the book and tax values of foreign currency denominated receivables or debts when switching to this regime. The book value is based on the current exchange rate at the time of preparation of the financial statements, whereas the tax value reflects only exchange differences that are taken into account in the tax base. This temporary difference will give rise to deferred tax. If there is a partial settlement of a receivable or debt that relates to the difference between the carrying amount and the tax base, the deferred tax is adjusted proportionately. In the case of a full settlement, the deferred tax is written off.

Example from practice

Let's imagine a taxpayer whose accounting currency is Czech koruna (CZK) and who has decided to use the new regime of excluding exchange rate differences from the tax base. He has receivables in euros, which he revaluates at the balance sheet date and includes any exchange differences in profit or loss but not in the tax base. If the koruna gets stronger, the carrying amount of the receivables will decrease and a deferred tax asset will arise. If the koruna weakens, a deferred tax liability arises. When the receivable is settled, the difference between the revalued amount and the actual settlement is included in the profit or loss, while the difference between the original value of the receivable and the settlement is included in the tax base. At the same time, the related deferred tax is reversed or partially reversed.

The new interpretation provides important guidance for taxpayers that decide to apply the new tax regime and highlights the need to monitor and record the exchange differences arising in detail to correctly account for deferred tax and determine tax base.

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

Authors:

Kateřina Dedková

Terezie Štěpánová