Amendment to Various Acts Approved by the Senate13/07/09 / cata_tax-news

Double amendments of Income Tax Act

• extraordinary depreciation

The Senate approved two separate amendments to the Income Tax Act that contain the same provisions. First it passed the governmental draft amendment to the Income Tax Act pursuant to which extraordinary amortization for 2009 and 2010 of property classed in the first and second depreciation group (for example cars and computers) was classified into law. Similar amendments were made simultaneously to tax-deductible costs of lease payments under financial lease contracts. Thereafter Parliament approved the draft Act on Promotion of Economic Growth and Social Stability, in which thirteen amendments to various regulations, including an amendment to the Income Tax Act, are contained. The same provision of extraordinary amortization and tax-deductible costs for lease payments, which has been approved in the governmental draft amendment to the Income Tax Act, appears here as well. This situation where the same matter, i.e. extraordinary depreciation, has been approved in two different legal acts is very non-standard.

• car scrappage bonus

From other amended regulations contained in the Act on Promotion of Economic Growth and Social Stability, it is appropriate to draw attention to the amendment to the Act on Waste. This amendment is part of the thirteenth amendment pursuant to which individuals who do not have income from business or other self-employment and are not registered for, or subject to VAT, shall receive a state contribution for the disposal of an old car (scrappage bonus). The state contribution is set at CZK 30 000 for purchase of a new vehicle, the cost of which does not exceed CZK 500 000 and meets the statutory emission limits. If a natural person purchases the vehicle on electric-powered or hybrid propulsion, he or she may receive an allowance of CZK 60 000. The government has yet to establish the requirements for the provision of this state contribution and, in fact, it has not yet determined when this change shall be realizable in practice.

With regard to these legal acts, the President vetoed the draft Act on Promotion of Economic Growth and Social Stability and returned it to the Senate for further discussion in September. On the other hand, the President signed the Income Tax Act which is to become effective from the date of publication in the Collection of Laws.

Amendment to Act on Social Security - discounts on insurance

The Senate passed an amendment to the Social Security Act (Parliamentary publication no. 769) pursuant to which employers may apply discounts on insurance paid on behalf of their employees. This is a discount is calculated as 3.3% of the difference between the amount of 1.15 times the average wage rounded up to a hundredth of a Czech crown (the average wage calculated for 1Q09 was 22 328 CZK) and the amount of insurance tax base of the employee. Total discount can be applied only until the maturity date of the premium for the calendar month to which the discount applies. In addition, the discount cannot be applied retroactively. The proposed date of effect for this change is the first day of the calendar month following the date of publication. The President signed this draft amendment on 7 July 2009. We expect the Act will be published in the Collection of Laws in July 2009 and therefore the relief should apply from 1 August 2009.