News & Publications  

The Ministry of Finance (MF) issued Instruction D-324 interpreting the term “residential needs” so that interest paid on mortgages can be claimed as tax-deductible by natural persons.

The Ministry of Foreign Affairs’ Communication on conclusion of the Protocol to the Agreement between the governments of the Czech Republic and Russian Federation on the Abolition of Double Taxation and Prevention of Tax Evasion in the Field of Income Taxes and Property Taxes was published in the Collection of Treaties on 9 July 2009, Chapter No. 24/2009.

Amendment to the VAT Act in the Chamber of Deputies; The Act on Financial Administration of the Czech Republic and the Act on Customs Administration

Discounts on insurance – Act No. 221/2009 Coll. amending Act No. 589/1992 Coll. on Social Security Insurance Contributions and Act No. 586/1992 Coll. on Income Taxes; The Payment System Act; The Amendment to the Act of Administration of Taxes and Fees through the Payment System Act

Statutes amending the Income Tax Act have been published in the Collection of Laws.

Based on the Supreme Administrative Court's (SAC) opinion, the fine cannot be imposed on the executive as a natural person but should be imposed directly on the legal entity on behalf of which the executive acts.

Pursuant to the Supreme Administrative Court's (SAC) interpretation, since the definition of the term in question is not included in the VAT Act, it is necessary to take into consideration the European Court of Justice’s interpretation pursuant to European legislation. Therefore, in order to make a lease of non-residential premises exempt from VAT, merely meeting the formal requirements of a Lease Agreement under the general civil law rules is not sufficient; the term “lease” and its exemption from VAT needs to be interpreted in a restrictive manner.

The amendment to the Act on the Protection of Economic Competition (published under Act No. 155/2009, Coll.) brings existing Czech regulations in line with EC competition law. The amendment applies to a number of provisions and specifies or replaces their wording with the aim of removing existing differences of application and interpretation. In addition the amendment implements certain new “European” institutes, in particular the simplified proceedings on obtaining approval for concentration of undertakings and sector-related surveys. The proceedings before the Antimonopoly Office shall be regulated in greater detail while the provisions on sanctions have been completely revised.

The amendment, which was published under Act No. 215/2009 Coll., and took force and effect on 20 July 2009, is primarily harmonizing in character. The majority of changes arise from implementation of the Amendment to the so-called Second Company Law Directive and simplify certain aspects of provisions applicable to limited liability companies. The main changes include the reduction of requirements to valuate asset contributions, requirements for so-called financial assistance and acquisition of own shares.

Kocián Šolc Balaštík was named for the fourth consecutive year Czech Republic Law Firm of the Year 2009 in the international Who’s Who Legal Awards organized by the British rating agency Who’s Who Legal.

Decision of the European Commission in the case of INTEL (COMP/37.990)

The European Commission has imposed a penalty in the amount of €1.06 billion on the computer microprocessor manufacturer Intel for the abuse of its dominant position (see Article 82 of the EC Treaty) on 13 May 2009.

The Commission ruled that Intel abused its dominant position on the market from October 2002 until December 2007 by being involved in two types of illegal conduct.

Decision of the European Commission in the case of Electrabel (COMP/M.4994)

On 10 June 2009 the European Commission imposed a fine of 20 million EUR on the company Electrabel since it did not notify the Commission during its acquisition of Compagnie Nationale du Rhône (hereinafter "CNR") of this intention and thus failed to fulfil its obligations under Council Regulation No 139/2004 on the control of concentrations between undertakings. This rule requires that the Commission be informed of the merger in advance in case those companies fall within the scope of the Regulation. The Commission may investigate whether a significant infringement of free competition within the European Union occurred by this merger.

Commission Regulation No 355/2009 (Official Journal L 109/2009) reduces the total amount of fees to be paid to the Office for Harmonization in the Internal Market for the registration of a Community trademark.

An amendment to Regulation No 1927/2006 establishing the European Globalization Adjustment Fund (Official Journal L 167/2009) has temporarily extended the scope of this fund. It will be possible to finance from its resources support to workers who have lost their jobs as a result of the current economic and financial crisis. The contribution for this purpose is available until the end of 2011. Concurrently the amendment has mitigated current intervention criteria.

European authorities have agreed on the compromise text of a Directive on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II). Its main objective is to strengthen the stability of the insurance sector, to deepen its integration and competitiveness. The current 13 Directives relating to insurance and reinsurance have been recast into a single act. New and more elaborate rules of capital adequacy should better reflect the risks that insurance and reinsurance carry and ensure their sufficient coverage.

Directive of European Parliament and Council 2009/49 of 18 June 2009 (Official Journal L 164/2009) is a further step toward reducing the administrative burden on firms. It allows medium-sized companies to abolish the requirement to disclosure certain information in their accounting and also reduces the duty to prepare consolidated accounts and a consolidated annual report.

The European Commission has also completed in a form of a Recommendation the existing system of remuneration of directors of listed companies (Official Journal L 120/2009). The Commission asserts basic principles that are the same as the remuneration in the financial sectors: focus on long-term sustainability instead of short-term results, elimination of excessive payment incommensurate with performance, simplifying the pay structure and its transparency. Other requirements relate to the principles of payment of the so-called "golden parachutes" and bonuses in the form of shares or share options.

On 29 April 2009 the European Commission issued the Recommendation on remuneration policy in the financial services sector (Official Journal L 120/2009). Uniform principles apply to all companies operating in this sector and should be applied primarily to employees whose job description has a substantial impact on the risk profile of the company. The remuneration policy will also be subject to the supervisor’s assessment. The Recommendation is not legally binding but the Commission envisages the adoption of regulations that will reflect the main requirements of the remuneration policy. Member States should take the necessary measures to implement the Recommendation by the end of this year.

European Commission, after long-term reluctance to intervene in this sector of financial markets, finally presented a proposal for a Directive on managers of alternative investment funds at the end of April. The draft applies to all funds not covered by Directive 85/611 (the so-called UCITS Directive) and encompasses hedge funds, so-called private equity funds, commodities and real estate funds and special funds for professional investors.

At the end of April the European Parliament passed in the second reading the energy package dealing with the further functioning of the single EU energy market, mainly the strengthening of its competitiveness and security. In the hitherto most controversial issue of fission energy companies, the members of Parliament receded from the original strict requirement of full ownership unbundling of production capacity from the transmission networks owned. The approved compromise also brings a strengthening of consumers’ rights.