Proposed Amendments to the Income Taxes Act

The Finance Ministry has proposed amendments to ITA, amendments to the Act on Reserves for determining the income tax base (no. 593/1992 Coll.) as amended and amendments to the Act on inheritance, gift and real estate transfer tax (no. 357/1992 Coll.). The proposed ITA amendments are a response to the amended Commercial Code on issues such as transformation of companies. They also represent an extension of the conceptual change in the approach to tax deductibility of expenditure/costs incurred in connection with employees' work and social conditions under the new Labour Code, and of the tax authority's editing obligations. The response to the changes in the Commercial Code include but are not limited to an extension of types of company transformations, to include division by split off and division by split off and merger, and harmonisation with EU law.  These changes are intended to establish the same tax regime as that applicable to other forms of transformations of companies that make use of the benefits ensuing from implementation of the above Directives i.e. the opportunity for a legal successor to assume a tax loss, items deductible from the tax base, reserves and provisions (adjustments). The extension in the editing obligations of the tax authority relate to the allocation of expenditure (costs) for natural persons (individuals) who use of real property for both business and private purposes, allocation of expenditure (costs) in particular relating to legal entities not established or founded for business purposes and assessment of expenditure (costs) for research and development.