On 1 April 2019, the so-called “Tax Package”, amending certain laws in the field of taxation and customs, entered into force. In addition to the amendments to the Income Tax Act and the Value Added Tax Act, about which we have already informed our readers, this amendment also introduces the following modifications.

The amendment lays down the rules for the taxation of taxable income by a controlled foreign company held by a Czech controlling entity (tax resident of the Czech Republic participating directly or indirectly in the registered capital of the controlled foreign company). For the purposes of the income tax, the controlled foreign company’s activities and the transactions implying its assets resulting in an income (e.g. income from borrowing, profit shares, income from the sale of goods and services purchased from affiliates and sold to affiliates, with limited or zero economic value), are deemed to have been carried out by the controlling company in the Czech Republic. When calculating the tax, the taxpayer’s share in the registered capital of the controlled foreign company will be taken into account at the time of the relevant activity or transaction with the asset.

The amendment also affects VAT rules. The term “economic activity” is now more broadly defined as an activity for the purpose of obtaining regular income, i.e. no longer as a continuous activity. Furthermore, the calculation of the amount of VAT changes so that the tax amount is always the same when calculating the tax both top-down and bottom-up. For the sake of simplicity, a new rule is introduced under which taxpayers will be required to notify the tax authority in advance of their intention to apply a deduction from the tax base in relation to new R&D projects. In addition, taxpayers are now required by law not only to issue tax documents within a set period of time, but also to make every reasonable effort to deliver the documents to the recipient of the performance.