Tax package finally approved!

The long-awaited tax law amendment, so-called tax package 2019, is finally approved. The Chamber of Deputies finally approved the tax package on 12 March 2019, in its original version dated 21 December 2019, without amendments proposed by the Senate. The President's signature followed on 15 March 2019. Most likely, the amendment will be promulgated in the Collection of Laws by the end of March 2019 and changes will enter into effect on 1 April 2019, with some exceptions.

Thanks to the tax package, interesting changes will be made to the Income Tax Act, especially in the following areas:

• increasing the maximum limit of expenditure lump sums for sole traders to double the current level;
• transposition of the ATAD Directive, which brings several measures against tax evasion, in particular for large multinational corporations, e.g. by reducing the tax deductibility of interests, controlled foreign companies tax rules and, from 2020, by taxation when relocating property (so called exit tax) or new rules against abuse of tax system mismatches;
• extension of the reporting duty of domestic taxpayers in relation to income paid to tax non-residents which is exempt from tax or not subject to taxation in the Czech Republic under the particular Double Tax Treaty

As a result of the approval of the tax package, the Value Added Tax (VAT) Act will be subject to the biggest changes, at least in terms of the number of changes. These include:

• new rules for taxing vouchers and coupons;
• a new regulation of the delivery of tax documents and corrective tax documents;
• changes in VAT calculation “from above” and in rounding VAT;
• introducing a VAT refund adjustment in relation to repairs made in the past on the property sold in case of the sale of real estate;
• lowering the VAT rate on heat and cold to 10% (effective from 1 January 2020);
• new arrangements for lease agreements with redemption rights (effective from 1 January 2020);
• restrictions on the choice of taxation of property rental where more than 60% of the area is made up of space for permanent housing (with effect from 2021).

In the Tax Code, the tax package incorporates the so-called general anti-abuse rule, preventing abuse of the tax system in case of tax planning.