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Czech Republic: Tax proposals expected in 2020 tax package

Czech Republic: Tax proposals expected in 2020

The 2019 tax package entered into effect last month. While most changes to income taxes will only affect taxpayers starting from the next accounting period, some new reporting obligations will apply immediately (e.g., the duty to report tax-exempt income such as interest, dividends or royalties paid to tax non-residents). The tax authorities have issued waivers of this reporting obligation to some entities; however, their approach to the scope of such waivers seems rather cautious.


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The Ministry of Finance is already busy preparing a 2020 tax package. The Ministry of Finance disclosed draft amendments to tax laws for 2020, generally with a goal of increasing revenues. Changes would primarily affect:

  • Insurance companies that would be taxed on a one-off basis, the difference between recorded technical provisions and provisions under the EU Solvency II rules. According to the draft, only technical provision amounts determined pursuant to the EU Solvency II directive would be tax deductible. At present, insurance companies must calculate their technical provisions in compliance with the EU directive for the purpose of reporting to the Czech national bank, and only technical provisions in the amounts reported in the accounting books tax are deductible. In terms of their value, provisions under the EU Solvency II rules tend to be significantly lower than technical provisions under accounting regulations.
  • Taxes on cigarettes and tobacco, spirits, and gambling that would increase. The draft amendment would substantially increase excise taxes (duties) on spirits, cigarettes and tobacco with a 10% increase on cigarettes and tobacco and approximately a 13% increase on spirits. Similarly, the amendment plans to increase the tax on gambling, especially on lighter forms of gaming such as lotteries and bingos (an increase of 7 percentage points). Lastly, gas used in residential homes boiler rooms / heating systems would no longer be exempt from the tax on natural gas.

Digital tax

The Ministry of Finance is planning to submit a digital tax proposal by the end of May 2019. According to the ministry’s estimate, this would generate additional annual revenues of CZK 5 billion. There would be a new 7% tax on placing targeted advertising on digital interfaces by corporations with a global turnover exceeding €750 million. There are also plans to impose tax on the use of multilateral digital interfaces and the sale of collected user data. The amendment is proposed to become effective from mid-2020.

Read a May 2019 report prepared by the KPMG member firm in the Czech Republic

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