Czech Republic: Tax developments in response to COVID-19

This page offers an overview of tax developments being reported globally by KPMG member firms in response to the Novel Coronavirus (COVID-19).

The content will be updated regularly. However, due to the fast-moving pace of change, it may not always reflect the most current developments in a given jurisdiction. Please refer to the date of accuracy and refer to the relevant links, under additional information, for original source information.

The Government of the Czech Republic took measures to support people employed by corporations, deployed Tax-related support for businesses and individuals, and implemented a variety of additional measures to help the economy and inform the population.

Additional Information

General measures

• For businesses  operating in retail, services, restaurants  and other areas where the government restricted or limited activities in October 2020:
  • waiver of income tax advance payments due on between  15 October and 15 December  2020 without the need to apply for a waiver;
  • waiver of advance payments for the road tax due on 15 April 2020, 15 July 2020, 15 October 2020 and 15 December 2020;
  • waiver of interest for a late payment of VAT for September, October and November 2020 and third quarter 2020 under the condition that the due VAT was paid by 31 December 2020.
• General waiver of administrative fees for the submission of various applications in the connection of COVID-19 submitted before 31 December  2020.
• Possibility to request individually remission of late payment interest for late payment of tax (14% p.a.), deferral of tax or payment of tax in instalments (7% p.a.) if taxpayer proves COVID-19 related reasons. 
• If the application is granted the interest for the late payment of tax , deferal of tax or payment of tax installments for the period until 31 December 2020 is forgiven. 
• Waiver of VAT on free of charge supply of products, or free of charge  supply of materials used to make the product. There is an exhaustive list of products covered, these products are generally used to fight coronavirus (medical supplies etc.).
• Suspension of the obligation to apply the electronic registration of sales until the end of 2021 (valid for all entities). 
• “Loss carry-back” mechanism has been introduced. Taxpayers with a tax liability for 2018 or 2019 who anticipate a tax loss for 2020 would be able to deduct this loss from their tax bases for 2018 and 2019. The change is permanent also for future years (two years carry back). The estimate of tax loss can be deducted against 2019 tax base  in the regular or supplementary  2019 tax return.
• Governmental proposal promoting investments through accelerating tax depreciation of certain fixed assets must still be approved by the Parliamentnt. These measures would apply to eligible fixed assets acquired after 1 January 2020:
  • tangible assets in the first depreciation category would be depreciated without interruption over 12 months, on a straight-line basis, and up to 100% of the input cost;
  • tangible assets in the second category would be depreciated over a period of 24 months: the first 12 months on a straight-line basis up to 60% of the input cost and the subsequent 12 months on a straight-line basis up to 40% of the input cost;
  • increasing the limit for treating an investment/expense as a tangible fixed asset and technical improvements thereof from the current CZK 40,000 to CZK 80,000.  As a result, a larger number of acquired tangible assets could immediately be expensed, be applied to assets and technical improvements acquired/completed after 1 January 2020.
  • abolition of the category of intangible assets and their tax depreciation in the Income Tax Act. Accounting depreciation charges would then be treated as deductible expenses. 
• The Ministry of Finance propose cancellation of super gross salary (employer part of social and health insurance would not be included into the taxa base for calculating employees tax liability). 15% and 23% (on income exceeding four times average salary) would be applied. This proposal must be still approved by the Parliament.

Additional Information

Lex COVID

• In April 2020, the Czech Chamber of Deputies adopted a summary consideration of selected government bills aimed at mitigating the effect of the current pandemic. First, this concerns Lex COVID (Act no. 191/2020, the government bill on certain measures to mitigate the effects of the SARS CoV-2 pandemic), which in addition to changes to insolvency rules and some other issues associated with the decision-making of corporate entities also contains other changes.
• Lex COVID allows participants in court and other listed proceedings to apply for a waiver of deadlines missed as a result of the current pandemic, or for the restoration of time limits in criminal proceedings (deadline retrocession).
• Within Lex COVID, an amendment to the Enforcement Procedure Code allows bailiffs to suspend proceedings if in the last three years these did not result in the recovery of debt. The entitled party (i.e. creditor) may prevent such a suspension by depositing an additional advance for expenses or by just expressing disagreement with the suspension of enforcement if claims such as maintenance and support allowances for minor children or compensation of damage to health are concerned.
• According to existing Czech legislation, general meetings of joint-stock companies and limited liability companies must still discuss their ordinary financial statements within six months from the end of the prior accounting period. The Corporations Act contains legal concepts that may help corporations fulfil their duties even under the current circumstances while ensuring an effective and safe decision-making process.
• Decision-making outside general meetings (per rollam) is carried out in writing between the concerned parties sending one another proposed resolutions and opinions, etc. The basic rules are regulated by law; more detailed conditions can then be stipulated by the acts whereby corporate entities are founded (such as memoranda/articles of association).
• Limited liability companies may decide per rollam unless their memoranda of association exclude this possibility; joint-stock companies, on the other hand, may only do so if their articles of association explicitly permit it.
• The Corporations Act also provides for the option to use technical tools (e.g. teleconferencing or communication via Skype), but with respect to limited liability and joint-stock companies, this is only possible if explicitly allowed by their memoranda/articles of association.
• Lex COVID brings certain hope to companies that would like to use the above legal concepts under the current circumstances but are limited in doing so. The bill allows bodies of corporate entities to decide per rollam even if their relevant founding acts do not explicitly say so. The right to proceed pursuant to this special measure would only apply in the duration of the imposed emergency measures.
• Lex COVID also introduces a change to the approval of ordinary financial statements, postponing the statutory deadline for their approval where the time limit for doing so would expire earlier than three months after the end of the extraordinary measure. The new deadline is set three months after the end of the extraordinary measure, but no later than on 31 December 2020.

Additional Information

Additional information regarding employment-related measures, economic stimulus measures and other measures.