Our expert outlines several changes to Act No. 431/2002 which come into effect in three stages; as of 1 July 2015, 1 January 2016 and then major changes to commence on 1 January 2017.
1. Act No. 431/2002 Coll. on Accounting
The amendment to this Act specified and corrected imperfections in the existing legislation. Following are the essential changes made on 1 July 2015:
a) Classification of accounting entities into size categories (Section 2 (10)):
- Accounting entities shall be classified into size categories upon fulfilment of the conditions stated in Section 2 (6-8) with consideration to the date of the financial statement preparation for the respective accounting period. Compliance with the conditions shall be assessed for the current as well as the immediately preceding accounting period. Accounting entities have to meet at least two out of three conditions in order to be classified. The conditions assessed are the amount of total assets, net turnover and the average number of employees for the given year.
- Accounting entities not fulfilling the classification conditions stated in the above mentioned paragraph shall be classified as small accounting entities.
- Accounting entities shall not change their size classification category after entering into liquidation or after bankruptcy announcement.
- The new provision shall be applied in regard to financial statement preparation for the current accounting period ending on 31 December 2015. Provided that the accounting period started after 1 January 2015, accounting entities shall apply the provision for financial statement preparation after 30 June 2015.
b) A more precise regulation in regard to the accounting records of accounting entities (Section 11 (3)):
- Accounting entities are prohibited from keeping accounting records outside accounting books, keeping accounting records on non-existent accounting transactions, concealing and refusing to recognise information which is a subject to bookkeeping.
c) Financial statements (Section 17 (5; 8)):
- Accounting entities are obliged to prepare financial statements within six months of the financial statement preparation date. Pursuant to the new legislation, financial statements are to be prepared upon the signature of a statutory body or a member of a statutory body of the accounting entity, or a natural person (self-employed person). This change has already been applied in financial statements for 2014; however certain related changes in the Act are only being discussed at present.
- Financial statements are to be prepared on the date of being personally or electronically signed by the above mentioned persons.
- The amendment specifies the date of financial statements preparation, i.e. the date shall be determined by the accounting entities themselves.
d) Administrative offences (Section 38 (1a), Section 38 (1o), Section 38 (2a))
- Accounting entities commit an administrative offence if they fail to keep accounting records under the Section 4 (1), i.e. as of their establishment until their dissolution with the exception when the company is dissolved without liquidation.
- Accounting entities commit an administrative offence if they fail to prepare financial statements under the Section 6 (4), i.e. accounting entities are obliged to prepare financial statements as consolidated financial statements on behalf of a given accounting entity as well as on behalf of a group of accounting entities regardless of their registered office. Consolidated financial statements shall be prepared by the parent company which prepares a consolidated annual report as well. This financial statements need to be audited.
- Accounting entities commit an administrative offence if they violate the provision of the Section 11 (3), i.e. accounting records are made outside accounting books, accounting entities concealed or did not recognise information which is a subject to bookkeeping.
- The Tax Office may impose a fine on an accounting entity for an administrative offence up to the amount of €3, 000,000. New rates of fines shall apply to offences committed after 30 June 2015.
The second stage of changes shall come into effect at the beginning of next year, on 1 January 2016 and the final stage shall become effective on 1 January 2017. Changes introduced on 1 January 2016 shall mainly affect consolidated financial statements, financial statements in the public sector, entities active in the extractive industry or in the logging of primary forests as well as public interest entities. Furthermore, the second-stage changes shall have impact on the fair value, participating interests in another company, tangible and intangible assets, excluding inventory.
Major changes shall also apply to the companies operating under a fiscal year. The changes shall mainly concern valuation of assets and liabilities, annual report preparation, goodwill, and capitalised development costs. However, the most essential changes in the Act are planned to be introduced at the beginning of 2017.
2. Act No. 595/2003 Coll. on Income Tax
The amendment to this Act is to clarify the provisions on investment aid and tax relief for incentive recipients, effective 1 April 2015.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.