Dear Readers,
The Chamber of Deputies approved the consolidation package in the third reading on 13 October 2023. This law will update more than sixty laws. The biggest number of changes will be made in the tax area, namely in relation to income taxes, VAT, tax on immovable assets, excise taxes and gaming tax.
Due to the extent of the new law, this article is intended to draw your attention to the most significant changes rather than to provide an exhaustive overview. This article brings a summary of changes in connection with VAT and taxes on immovable assets that are to come into effect on 1 January 2024.
Value Added Tax
- Tax rates: Only two VAT rates will apply from 1 January 2024: the basic rate (21%) and the reduced rate (12%); this change will result in modifications of concerned appendices of the VAT Act (a large number of items that were previously taxed at the first (15%) or second reduced VAT rate (10%) will be subject to the single reduced rate);
- A zero VAT rate is being introduced for deliveries of books (including electronic ones) – VAT deduction will apply to this supply;
- Reclassification of services to a different VAT rate:
- From the basic rate (21%) to the lower VAT rate (12%) – e.g. unscheduled land and water public transport of individuals; and
- From the reduced rate to the basic VAT rate (21%) – e.g. collection, transportation, disposal and processing of municipal waste, cleaning services, hairdressing services, shoe and clothing repairs or scheduled mass air transport;
- Beverages: Taxation of beverages will change; the reduced VAT rate will only apply to potable water and selected dairy beverages (other alcoholic and non-alcoholic beverages will fall into the basic VAT rate category); and
- VAT deduction in passenger vehicles: A VAT deduction threshold in the amount of CZK 420,000 (including technical improvements) will be set for a passenger vehicle (fixed assets rather than goods intended for resale).
Tax on Immovable Assets
- Tax rates: The tax rates will be increased (approximately 1.8 times in an average);
- Inflation coefficient: An inflation coefficient and a method of calculating it will be introduced;
- Additional changes:
- Introduction of types of land and a method of using immovable assets;
- Expansion of situations where the user is the payer of tax on immovable assets;
- The terms “groups of pieces of land” and “groups of structures and units” will be introduced;
- The floor space of a taxable unit will newly be defined;
- Calculation of tax will be regulated in a new way with the use of calculation sheets by the tax’s type; and
- The amendment details possibilities of using the local coefficient.
The above-described changes cannot be considered final due to the legislative process in progress, and we will therefore continue monitoring this process. If you need more information on this topic, please feel free to contact us. We will be happy to help you.
Lenka Kolmanová Michaela Kozminská
kolmanova@edmutilitas.cz kozminska@edmutilitas.cz
