Changes in payment of social security contributions from 1 January 2009; Maximum assessment base for 2009; Sickness Insurance Act

The break-through resolution of the Constitutional court concerning the deadline for additional tax assessment of which we informed in the past Tax News was preceding by another interesting resolution from the end of November 2008 in which the Constitutional court provided its comments on the contents and objective of tax inspection.

Communication of the Ministry of Foreign Affairs on termination of the Agreement between the Czech Republic and the Union of Soviet Socialistic Republics on Social Security and the Protocol to the Agreement in relation to the Russian Federation

Amendment to the Income Tax Act; Chamber of Deputies postpones approval of partial harmonization amendment to the VAT Act and Excise Tax Act; Amendment to the Foreign Currency Act

Kocián Šolc Balaštík advised OKD, a.s. in connection with the spin-off of OKD’s CZK 2.8 billion worth of energy-related assets to its sister company NWR Energy, a.s.

In the end of the past year, an amendment to the Cadastral Register Act was passed. In addition to legislative and technical adjustments, the amendment also contains significant factual changes. In general, data registered in the Cadastral Register will be more easily accessible, since in view of the advanced digitalization, any Cadastral Office may provide extracts, extracts from cadastral maps and any other data regardless of where the real estate is situated or under what Cadastral Office its cadastral area belongs. Simultaneously, together with the protection of important personal data that is usually contained in the Cadastral Register’s information system (such as information on financial circumstances, in particular information on acquisition of assets, purchase prices, etc.), the provision of certain data will be subject to certain regulation.

The amendment to the Banking Act increases the maximum compensation provided under insurance of deposits to the amount equaling the equivalent of EUR 50,000. The new amendment took effect on 15 December 2008.

Following the new regulation concerning mergers and other transformations effective 1 July 2008, an amendment was passed to Decree 250/2005, Coll. on Binding Forms for Filing Applications for Entry into Commercial Register. The major change is a new detailed regulation of mandatory annexes documenting facts entered into the Commercial Register in case of transformations of commercial companies, cooperatives and European cooperatives.

Law firm Kocián Šolc Balaštík provided legal advice to the MICHEL THIERRY GROUP SA during the merger and transfer of assets of its subsidiaries.

Law firm Kocián Šolc Balaštík, recognized as the Czech Republic's leading law firm in corporate law by the November survey of ePravo.cz, expanded its team of attorneys by two new members, Radka Felgrová and Martin Škrabal.

Law firm Kocián Šolc Balaštík assisted OKD, a.s., the biggest Czech producer of black coal, on the sale of its subsidiary, OKD, BASTRO, a.s. The transaction was another step towards the realisation of OKD’s long-term plan to focus on its core business of coal extraction.

Notification of the Finance Ministry dated 2 December 2008 on classification of tangible assets into depreciation groups; Decree sets foreign meal allowances for 2009; Information on application of the provisions of Section 36, subsection 11 of the VAT Act

Changes in payment of social security contributions from 1 January 2009; Maximum assessment base for 2009; Sickness Insurance Act

Pursuant to the award of the Constitutional Court dated 2 December 2008, the three-year period in which a tax or an additional tax can be assessed does not commence at the end of the taxation period in which the tax return is to be filed but already from the end of the taxation period provided it is evident at the moment the obligation to file a tax return arises.

Amendment to the Income Tax Act; Chamber of Deputies postpones approval of partial harmonization amendment to the VAT Act and Excise Tax Act; Amendment to the Foreign Currency Act

For the taxation period commencing 1 January 2008,  a newly concluded double-tax treaty between the Czech Republic and the Hashemite Kingdom of Jordan, which also prevents tax evasion in the area of income taxes, became effective.

The meeting of the Council of EU Telecoms Ministers in Brussels on 27 November 2008 brought significant changes toward creation of a “Single EU Telecoms Market”. Telecommunications ministers from 27 EU member states arrived at a preliminary agreement to review the regulatory framework for electronic communication networks and services.

The European Parliament considered a draft directive on 19 November 2008 that amends existing obligations of companies with regard to mandatory publication of certain data (Draft Directive of the European Parliament and Council amending Directives of the Council Nos. 68/151/EHS and 89/666/EHS as concerns obligations of certain forms of companies in the field of publication and translations).

A new legal regulation is in progress that will affect the system of collecting airport charges. Its aim is to prevent individual airports from abusing a dominant position. Non-transparent or overestimated airport charges should be removed through the consultation mechanism between airports and their users, together with the rules for resolution of mutual disputes.

The target of the most recent legislation efforts by the European Commission is to ensure a more effective functioning of the internal aviation market, to increase the safety of aviation services and to improve protection of passengers that include, inter alia, the terms of fares and rates. In addition to simplification of existing regulations, it was necessary to resolve the needs of the efficient and uniform application of such regulations, which is a prerequisite for creation of equal conditions for all aviation companies in the EU.

The European Commission commenced a public consultation concerning the functioning of Regulation No. 139/2004 on the control of concentrations between undertakings. The purpose thereof is to assess application rules after four years of existing practical application, i.e. setting of the threshold value and criteria as well as mechanisms of transfer of powers concerning assessment of the connection between the Commission and national antimonopoly authorities.

On 23 September 2008, the European Commission published a proposal for a regulation introducing lower prices for roaming data services and SMS. The document also takes into account the reduction of voice services. The Commission seeks to improve transparency of Internet usage and downloading of data from mobile phones during travels abroad.

Václav Rovenský and Ján Béreš became the first contributors for the Czech Republic in the publication Electricity Regulation 2009 for the series Getting the Deal Through, published by London-based company Law Business Research Limited. The publication contains an overview of information on legal regulation in the electrical energy sector of 34 countries. The chapter concerning Czech law can be downloaded here

France exerts significant efforts to bring all 27 EU member states to reach an agreement on reduction of greenhouse gas emissions, energy consumption and use of alternative sources by the end of this year, as it has set this task as one of the priorities of its chairmanship. Non-standard procedures should also assist to push through one of the most costly projects – the so-called informal “trialogues” between European Parliament, Council and Commission, by which Parliament waives a part of its powers in favour of such compromise or for intensive separate negotiations by the French president with individual EU member states.

Resolution of the European Court of Justice (ECJ) dated 16 September 2008 in matter C‑288/07 Commissioners of Her Majesty’s Revenue & Customs vs. Isle of Wight Council, Mid-Suffolk District Council, South Tyneside Metropolitan Borough Council, West Berkshire District Council. Interpretation of the Sixth Directive on VAT – Article 4, para 5 – Activities performed by a public-law entity – Operation of paid car parks – Infringement competition – Meaning of the expressions “if it led” and “significant”.

Law firm Kocián Šolc Balaštík joined the Pro Bono Declaration within the framework of the Pro Bono Centre that aims to support the development of pro bono legal services provided by Czech attorneys.

An amendment to the Tax Administration and Collection Act is now at the Chamber of Deputies awaiting a third reading. The proposed amendment amends the rules for imposing sanctions for infringement of confidentiality obligations and introduces a suspensory effect should additional payment assessment be issued after completion of a tax inspection.

From 1 January 2009, a new form shall be valid (No. 25 5401 MFin 5401, sample No. 15) for value added tax returns. The new form, in comparison with the existing four-page form, only has two pages. Services rendered outside the Czech Republic shall newly be monitored and reported separately. Besides renumbering individual lines in the tax return, the form includes new lines in connection with the most recent amendments to the VAT Act. The form is to be first used for the taxation period of January 2009 or first quarter of 2009.

The House of Representatives (Lower House) approved an amendment to the Road Tax Act. The amended provisions should result in reduction of road tax rates for vehicles over 12 tons used as new for businesses that are more environmentally friendly. The lower rate should apply for 36 months following the first registration.

The Supreme Court, in its resolution No. 22/2007, addressed the differences between the loan agreement regulated by the Civil Code and the credit agreement pursuant to the Commercial Code. Pursuant to the Supreme Court, the difference is, inter alia, based on the subject of the agreement.

For the taxation period commencing 1 January 2008,  a newly concluded double-tax treaty between the Czech Republic and the Hashemite Kingdom of Jordan, which also prevents tax evasion in the area of income taxes, became effective.

On 19 August 2008, Act No. 304/2008, Coll. was published in the Collection of Laws, which amends the Act on Accounting. This amendment will become effective from 1 January 2010, and only selected provisions will become effective from already 1 January 2009.

On 4 July 2008, the amendment to the Road Tax Act became effective, which introduces a new system that reduces road tax rates for more environmental friendly cars from 2009.

The Chamber of Deputies had a first reading of the governmental proposal to amend the VAT Act and the Excise Tax Act, which has been proposed to take effect from 1 December 2008.

The Czech Statistical Office superseded the Standard Classification of Production by Production Classification (CZ – CPA) with effect from 1 January 2008. The Finance Ministry announced that for the purposes of the VAT Act, the Standard Classification of Production valid from 1 January 2003 shall continue to be applied. This classification shall be further binding for allocation of services after 1 January 2009.

In connection with the cancellation of fifty-heller coins, the validity of which was terminated as of 31 August 2008, the Czech Tax Administration published information concerning the rounding off of taxes in respect of VAT.

Václav Pátek, a tax expert at law firm Kocián Šolc Balaštík, prepared a contribution for the Bulletin of the Czech Union of Full-Blooded Horses and Owners of Race Horses, Český chov, which is a part of TURF Magazine. The contribution focused on a change of VAT rates for the sale of race horses resulting from the amendment to the VAT Act effective from 1 January 2009. To apply the lower VAT rate on the sale of race horses for 2009, VAT prepayment should be made before the end of the year, similar to housing for 2007. The whole article can be downloaded here (in Czech only)

Dagmar Dubecká and Vlastimil Pihera prepared an information document for the International Bar Association addressing the legal regulation concerning takeover bids in the Czech Republic. The document summarizes the basic principles of the new legal regulation of takeover bids in the Czech Republic, a new construction of the bid obligation, types of actions on the grounds of a takeover bid or an unfulfilled bid obligation and the method of performance of supervision over takeover bids by the Czech National Bank. The published text contains information applicable as of the editorial closing date, i.e. April 2008. The contribution can be downloaded here

Václav Pátek published an article concerning preclusion in tax law following the resolution by the extended panel of judges of the Supreme Administrative Court in the professional tax magazine Daňový expert.

Law firm Kocián Šolc Balaštík has been awarded the title of the Czech Republic’s leading law firm in the field of corporate law in the first year of the survey Leading Law Firm of the Year 2008.

Kocián Šolc Balaštík is organising the fourteenth annual Charity Concert of Good Will – Olga Havel Foundation. The concert is to be held in the Church of St. Simon and St. Jude, Old Town, Prague on Sunday 23 November 2008 at 7:00 pm.

The Act on Some Measures against Money Laundering and Terrorist Financing (effective since 1 September 2008) responds to a number of EU legislative requirements, primarily to Directive No. 2005/60 EC on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing (the so-called 3.AML Directive).

The amendment (effective since 1 September 2008) responds primarily to the objections raised by the European Commission and abolishes the allowance guarantees for new facility operators or other operators whose facilities changed in terms of use, manner of operation or capacity as a result of major investment.

It has been over four years since the 15,000 Euro cap for cash transactions was introduced. The Act on Restriction of Cash Payments was amended in August to modify the penalties, including fines for breach of the cap.

One of the lecturers at the 20th annual conference of the European Air Law Association, which takes place on 7 November 2008 in Prague, is Jiří Horník, an attorney specializing in aviation law at law firm Kocián Šolc Balaštík.

Law firm Kocián Šolc Balaštík is preparing the second part of an ongoing seminar in the field of personal data protection. The seminar will focus on specific topics in this area, such as the transmission of personal data to foreign countries, the processing of personal data of employees (including the monitoring of employees and their electronic communications), CCTV, the sending of marketing communications and other related practical questions.

Delta Pekárny and Odkolek, both represented by Kocián Šolc Balaštík, won lawsuits against the Anti-Monopoly Office before the Regional Court in Brno and subsequently the Supreme Administrative Court, involving an alleged cartel agreement in the bakery market.

Kocián Šolc Balaštík (KSB) scored high by finishing second in a number of traditional autumn sport events and contests of attorneys, junior lawyers and back office staff.

For this year’s VIA Bona Awards given out by the VIA Foundation, law firm Kocián Šolc Balaštík (KSB) received the Award For Long-Term Partnership for its long-term support of the Good Will Committee – Olga Havlová’s Foundation (GWC) through Advent charity concerts.

Law firm Kocián Šolc Balaštík provided consultancy to Chapman University of Orange County, California in the establishment of a branch in the Czech Republic. The branch will provide the MBA program in the Czech Republic.

Within the framework of long-term consultancy services, the law firm Kocián Šolc Balaštík assisted the Kladno energy groups of Energy Businesses from Swiss corporate group ATEL during the restructuring of this group.

Vlastimil Pihera published an article on free movement of companies in Euro. The article refers to the European Court of Justice’s expected resolution in the Cartesio case and the new possibility for companies to move their registered offices within the European Union as a result of the resolution. To download the article click here

Professor Jan Dědič, a partner of the law firm Kocián Šolc Balaštík, published two extensive contributions in the Legal Information Bulletin, a professional monthly for legal practice, on the new act of transformations of commercial companies and cooperatives, which became effective on 1 July 2008.

Law firm Kocián Šolc Balaštík (KSB) provided legal advisory to the Michel Thierry Group, a leader in the production of textiles and leather for the car industry, during its acquisition of majority shares in FEZKO, a.s. and FEZKO SERVIS, a.s.

Law firm Kocián Šolc Balaštík has been engaged by the participants of Biofaktory Praha s.r.o., a Czech and Slovak leader in production of animal feed, fodder additives, veterinary medications, health supplements and pet products, to provide comprehensive advisory services on the sale of the Biofaktory Group to international holding company Nutreco, with its registered office in the Netherlands.

Since 1 July 2008, on the basis of Act No. 130/2008, Coll., amending the Trade Licensing Act, requirements for commencement of business activities and reduction of the overall administrative burden for tradesmen are significantly simplified.

Act No. 230/2008, Coll., a very important amendment to the Act on the Capital Market Business (“Capital Market Business Act”) was published and transposes Directive 2004/39 on financial tools markets known under the abbreviation MiFID as well as other European regulations into Czech law. The aim of the regulation is to enhance the transparency of financial markets, improve protection of investors and strengthen the competitive environment. The amendment took effect on 1 July 2008. New implementation regulations were issued on the same date.

Act No. 125/2008, Coll., on Transformations of Commercial Companies and Cooperatives, taking  effect 1 July 2008, supersedes the existing regulation of intra-state transformations in the Commercial Code and newly regulates certain transformations with foreign elements, i.e. cross border mergers and transfer of assets to a foreign participant.

Regulation of the road tax has been significantly changed. Act No. 16/1993, Coll., on the Road Tax, as amended, brings extension of the existing exemption from the tax for cars using further kinds of alternative fuels. It further introduces a newly drafted system of reduced rates.

From the beginning of July, creditors receive a more comfortable and perhaps faster possibility on how to collect their monetary receivables. Act No. 123/2008, Coll., introduces an electronic payment order into the Code of Civil Procedure.

Law firm Kocián Šolc Balaštík provided legal consultancy to ASIANA, spol. s r.o., one of the largest travel agencies with IATA accreditation in the Czech Republic, during its complete restructuring.

On 17 June 2008, the European Parliament approved a new directive on waste to supersede the current obsolete norm from 1975. The modernized approach to waste management should lead in particular to reduction of waste production.

Resolution of the European Court of Justice (ECJ) No. C‑309/06, Marks & Spencer plc of 10 April 2008. The ECJ gave a ruling in response to an application for a resolution on a preliminary issue that was filed within the context of a dispute between Marks & Spencer plc and the Commissioners of Customs & Excise wherein Marks & Spencer applied for return of value added tax unjustly collected by the Commissioner. The ECJ’s resolution interprets Article 28, paragraph 2 of the Sixth Directive (Directive of the Council No. 77/388/EHS on harmonization of legal regulations of EU member states concerning turnover tax).

In the July session, the European Parliament adopted a package of legislative measures for the gas market at first reading, the objective of which is to deregulate the market, increase its competitiveness and ensure consumer rights. The deputies supported two scenarios from which EU member states can choose: either full ownership separation of suppliers from gas networks or the so-called ITO model – the preservation of network ownership by suppliers with simultaneous introduction of “independent operators of transportation systems”.

In May 2008, the long-term process of preparing and putting through legal regulations to punish serious offences against the environment as criminal activities was completed. The European Parliament has approved a draft directive with minor changes pursuant to which infringement of communitarian regulations or Euratom regulations listed in annexes shall be deemed illegal conduct, as well as infringement national acts, administrative regulations or administrative decisions implemented by the regulations stated in the annexes.

European Parliament and Council Regulation No. 593/2008 (Official Bulletin No. L 177) on the law applicable to contractual obligations (Rome I), starts from the original Convention on the Law Applicable to Contractual Obligations that has been adopted in 1980 but not yet a part of the European Law. The Regulation implements certain changes to the original Convention in the direction of modernization and specification thereof.

Commission Regulation No. 622/2008 dated 30 June 2008 / (Official Bulletin No. L 171), which amends Regulation No. 773/2004 relating to the conduct of proceedings by the Commission pursuant to Articles 81 and 82 of the EC Treaty, introduces a procedure for settlement applicable should parties be prepared to admit their participation in a cartel and accept liability.

The European Parliament approved opening of the postal services market pursuant to Directive No. 2008/6, published in Official Bulletin L 52 on 20 February 2008. The exclusive right of national post offices to deliver postal consignments of up to 50 grams ceases to exist in most EU countries as of 31 December 2010, but the Czech Republic and other new members may postpone this change until 2013. Simultaneously, they may be refused the right to enter the already liberalized markets.

Law firm Kocián Šolc Balaštík (KSB) has recently launched a new website at www.ksb.cz and www.ksb.eu. The redesigned website matches in its scale and technology those of leading international law firms.

Kocián Šolc Balaštík was named for the third consecutive year the Czech Republic’s Law Firm of the Year in the international Who’s Who Legal Awards.

The Collection of Acts No. 166/2008 includes an award by the Constitutional Court dated 23 April 2008 cancelling the provisions of the Employee Health Insurance Act that award sickness allowance to employees after the fourth day of sickness, effective as of 30 June 2008. The sickness allowance should be newly paid out beginning the first day of the sickness.