Amendment to the Income Tax Act from 1 January 2025
A comprehensive amendment to the Income Tax Act, which responds to a new accounting bill, has been in the comment procedure. The amendment is proposed to come into force from 1 January 2025. Since both the effect and proposed changes can deviate from the original draft during the legislative process, please find below a short summary.
Definition of Property and Debts
The term business property will be replaced by the term carried asset. In addition to this, the amendment is introducing for example the term tax value of an asset or tax value of a debt. Technical improvements will be replaced by the term additional improvements, and the amendment also proposes changes in the improvements’ valuation in this context.
Application of the IFRS
It will be possible to use results of operations under the IFRS for the purposes of determining the tax base, but they will have to be modified. In transiting to determining the tax base with reference to the IFRS, the difference between the tax value of assets and debts will have to be quantified and reflected in the tax base during the next ten years.
Depreciation/Amortisation for Tax Purposes
The term asset depreciated/amortised for tax purposes is being introduced and the threshold for depreciation/amortisation is being increased from CZK 80,000 to CZK 100,000. The amendment cancels depreciation/amortisation groups, the possibility to suspend tax depreciation/amortisation, and accelerated depreciation/amortisation, and, at the same time, introduces depreciation/amortisation on a monthly basis. Three primary depreciation/ amortisation periods are being introduced:
- 60 months: movable assets, immovable assets with a value below CZK 2,000,000;
- 360 months: immovable assets with a value above CZK 2,000,000; and
- 180 months: goodwill.
Calculation of Tax in EUR
Taxpayers using EUR as their accounting currency (which has been possible since 1 January 2024) will declare both the tax base and tax in a tax return in that currency (this regulation is proposed to come into force from 1 January 2027).
Taxation Period of Legal Persons
Taxation period will be fully tied to the accounting period (with certain exceptions); the taxation period will be the calendar year, if the taxpayer is not an entity.
In addition to this, the amendment regulates the concept of finance leases. In costs, deductibility of which depends on payment (e.g. insurance premium or contractual fines), such link is omitted, and recognition in accounting books will be the key aspect. Tax provisions will be created independently of the recognition.
The amendment also contains a number of additional changes; we are monitoring any and all developments and will keep you posted about the progress. If you are interested in having more details, please feel free to contact us.
Michaela Kozminská
kozminska@clarksonhyde.cz
