It is further expected that depreciation periods for buildings and technology will be shorter. Transfer of a tax loss to a legal successor in the case of merged or demerged companies is also under consideration.
The following changes in taxes are expected by the Ministry of Finance to be effective from 1 January, 1998 (property taxes with effect from 1999):
INCOME TAX
- The proposed amendment envisages a decrease of the corporate income tax rate from 39% to 37%.
- Depreciation periods should be shortened, in the third depreciation category from 15 to 12 years, the fourth depreciation category from 30 to 25 years and the fifth depreciation category from 45 to 40 years.
- Bad debt write-off ("old debts") may be increased to 15% per annum.
- Interest income on deposit accounts of entrepreneurs would be subject to normal income tax rates.
- Certain income from foreign sources would be taxable in the Czech Republic only at a special rate of tax rather than the usual income tax rates. This proposed amendment would therefore make treatment of income such as dividends from both local and foreign sources equivalent for Czech recipients.
- For individuals, increases are planned of the annual non-taxable amount by 2,400 Ke and the child allowance by 1,200 Ke.
EXCISE DUTIES
- An adjustment in the growth of excise duties rate is proposed, in order to bring Czech rates into line with minimum EU rates. This will result in an increase in particular of excise duties for fuel, beer and tobacco products.
- New provisions should be added to prevent tax evasion.
ROAD TAX
- The amendments are expected to address mainly tax rates for trucks.
- Special relief would be granted for "combined transport" in line with EU regulations.
PROPERTY AND TRANSFER TAXES
- Partial modifications should improve the conditions for refunding of tax when the parties cancel the contract.
- The amendment should also reflect market prices of real estate when the tax base is determined.
TAX COLLECTION ACT
The expected changes should deal mainly with the following areas:
- Exchange of information between Czech and foreign tax authorities, and introduction of reporting obligations for banks in tax proceedings.
- Assurances for owed tax liabilities.
The content of this article is intended to provide a general guide to the subject matter. It is therefore not a substitute for specialist advice.
For further information contact Paul Antrobus or Richard Fletcher, Arthur Andersen Prague, tel +42 2 2440 1300 or enter a text search 'Arthur Andersen' and 'Business Monitor'.
