Law firm Kocián Šolc Balaštík advised the Linde Group, one of major publishing houses focused on professional legal and economic literature in the Czech Republic, during an intra-group merger.

Helena Navrátilová, head of the KSB tax team, commented on one of the most recent judgments of the Supreme Administrative Court for the law and taxes section of the weekly Euro. The court has come to the conclusion that interests and other costs of a public limited company in connection with receipt of, and drawing on a loan used to pay dividends to shareholders can be considered as tax deductible.

Kocián Šolc Balaštík provided legal services to Spolek pro chemickou a hutní výrobu in founding a joint venture with the Japanese DIC Corporation, one of the world-wide leaders in the specialty chemicals industry.

Law firm Kocián Šolc Balaštík provided legal consultancy to sellers during the transfer of control over a portfolio of 2,700 apartments in Litvínov. The control of the apartments was taken over by the CPI Group.

Martina Zímová and Ivo Šimeček published an article on the new block exemption for vertical agreements between undertakings in weekly magazine Ekonom. Pursuant to the applicable Commission Regulation, certain vertical agreements (such as agreements between manufacturers and distributors, franchising agreements, etc.) are permitted subject to their compliance with predefined requirements although each one of them could be considered as illegal and, as such, be banned. This applies to all distribution relationships relative to the sale of goods. To download the article (in Czech only) click here

Kocián Šolc Balaštík was founded 20 years ago on 1 July 1990. The originally small traditional law firm rapidly grew over several years into a dynamic modern law firm which, with a team of seventy lawyers, five tax advisers and over sixty employees, now belongs among the leaders on the Czech market. KSB celebrated its 20th anniversary with clients, business partners and friends in the historical premises of Martinický Palace on Hradčanské náměstí in Prague.

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

Amendment to the Act on Local Financial Authorities: Changes to Respective Roles of Authorities and a Specialized Financial Office

which occur due to the decision of the Ministry of Finance or the tax office. Entities, which are exempt from tax or tax interest and charges by the state, are in principle recipients of public funds according to the Supreme Administrative Court, and the duty of confidentiality does not apply on information on exemptions within the framework of the tax proceedings.

On 17 June 2010, Petra Mirovská presented a lecture on behalf of the law firm Kocián Šolc Balaštík on the topic of sending unsolicited commercial communications at a seminar organized by OFFICE HOUSE CZ s.r.o. in Prague. The aim of the presentation was to provide basic practical information on the practice connected with distribution of unsolicited commercial communications.

On 30 June 2010, the law firm Kocián Šolc Balaštík was present at the ceremonial opening of the first of five halls of the “Green Meadow Logistic Center” in the Pardubice-Semtín industrial zone built by D+D Park Pardubice a.s.

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

Amendment to Act on Administration of Taxes and Fees and Income Tax Act - flat tax-deductible cost on transport; Amendment to Income Tax Act – flat tax-deductible costs for natural person-entrepreneur; New Tax Regulations

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

Double amendments of Income Tax Act; Amendment to Act on Social Security - discounts on insurance

Amendment to VAT Act – reduced rates for restaurant services

This special issue of Tax News is to inform you of the latest judgement by the Supreme Administrative Court of the Czech Republic (the “SAC”) No. 5 Afs 25/2009 – 98 dated 25 March 2010. We believe the ruling to be a substantial breakthrough for further review of, and dealing with, costs in terms of determining the tax base. The judgment is available at the SAC’s website: http://www.nssoud.cz/main.aspx?cls=anonymZneni&id=22401&mark=

Pursuant to the ECJ’s interpretation, the cleaning of common areas cannot be included as a part of housing rental services. Supply of rental apartments is exempt from VAT, but services of cleaning common areas must be subject to VAT.

The Supreme Administrative Court cancelled the challenged judgment and returned the matter to the Regional Court for further proceedings.

In the event that the date for delivery of a tax administrator’s letter is determined by a legal fiction, i.e. for example ten days after the recipient fails to collect the relevant document and has been appropriately notified in advance that the document was deposited, the date of a statutory holiday or Saturday or Sunday shall may also be considered as the date of delivery.

The ruling will affect assessment of the issue as to whether the commencement of a tax audit, without notification of any doubt or suspicion as to compliance with tax duties interrupts the statutory time period within which tax assessments may be made.

Amendment to the Act on Local Financial Authorities: Changes to Respective Roles of Authorities and a Specialized Financial Office

Amendment to the Act on Local Financial Authorities: Changes to Respective Roles of Authorities and a Specialized Financial Office

This major amendment was approved by the House of Representatives on 18 May 2010 subject to the Senate’s proposals for changes. It has been signed by the President of the Czech Republic and is waiting for publication. The amendment contains a set of changes which should increase the transparency of awarding contracts, simplify the current procedures and impose clearer rules on an overall basis for dealing with public funds.

The implemented legislative changes apply to unfair competition.

Law firm Kocián Šolc Balaštík advised the Monetica consortium in the acquisition of Česká mincovna, a.s., a traditional manufacturer of coins and medals in circulation and commemorative coins and medals.

Petra Mirovská and Drahomír Tomašuk contributed on behalf of the Czech Republic to the first issue of the new professional publication International Privacy Guide, printed quarterly by the publishing house West, a Thomson Reuters business. The topic of the first issue of the publication is international transfers of personal data and it includes a basic summary of the legal regulations of 26 countries regarding the transfer of personal data to foreign countries. The chapter concerning Czech legal regulations can be downloaded here.

KSB assisted New World Resources N.V. in the sale of energy assets concentrated in NWR Energy and its subsidiaries to Dalkia ČR.

Christian Blatchford has contributed an article to the winter 2009 edition of the PPP Bulletin, the quarterly publication of the Public Private Partnership Association in the Czech Republic. The article compares PPP projects with other projects from the area of project finance in an attempt to throw light on an area in which for many in the Czech Republic remains unfamiliar. The article can be downloaded here

Martin Krejčí, a KSB lawyer of many years standing, became a partner effective 1 January 2010. The firm now has nine partners and almost seventy legal and tax specialists.

Information on the main changes to the VAT Act effective from 1 January 2010.

IFLR 1000 – The Guide to the World’s Leading Financial Law Firms, an international annual publication ranking leading law firms in corporate and financial law, announced its rankings for 2010. Law firm Kocián Šolc Balaštík has been recommended in all categories ranked by IFLR 1000.

Judgment of the Court of Justice in Case C-42/07- reference for a preliminary ruling - Liga Portuguesa de Futebol Profissional, Bwin International Ltd, (Bwin) vs. Departamento de Jogos da Santa Casa da Misericórdia de Lisboa  (Santa Casa)

At the end of September, the European Commission published a draft list of sectors which could receive free of charge up to 100% of emission allowances even after 2013; in 2013, the European greenhouse gas emission trading system is to enter into a new stage in which the free-of-charge allocation of allowances based on the National Allocation Plans shall be replaced by the purchasing thereof in Europe-wide auctions. However, revised Directive 2003/87/ES approved within the climate-energy package in December of last year counts on some exemptions. One of them shall apply to industries which may, as a result of more stringent constraints, move outside of the EU to third countries in which climate protection is not that strict; such industry relocation would not only result in a loss for the EU economy but it would also negate the endeavours for emission reduction which would increase uncontrollably in such third countries.

Decision by the Court of First Instance dated 23 September 2009 re. T‑183/07 Poland v the Commission of the European Communities and re T‑263/07 Estonia v the Commission of the European Communities The Court of First Instance stated in the decisions referred to above that the European Commission has no right to order Member States on the amount of greenhouse gas emission allowances that they may issue in a given period. The Commission is therefore afraid of the verdict having a substantially adverse impact on the EU strategy for combating climate changes.

Directive 2009/109/EC of the European Parliament and of the Council of 16 September amending Council Directives 77/91/EEC, 78/855/EEC and 82/891/EEC, and Directive 2005/56/EC as regards reporting and documentation requirements in the case of mergers and divisions (published in Official Journal No. L 259) was adopted on 16 September 2009. It is yet another Commission measure to support business and enhance the competitiveness of companies by reducing the administrative burden and the costs resulting therefrom. The new legislation also leaves it up to the companies or their shareholders to decide what reports they actually need. The simplified reporting and documentation requirements is primarily reflected in the Third (78/855/EEC) and Sixth (82/891/EEC) Company Directive which apply to, and lay down the rules for, national mergers and divisions.

On 23 September 2009, the European Commission presented legislative proposals to enhance supervision over the European Financial Sector. The proposals are based on a report by Jacques de Larosièr, the former Managing Director of the International Monetary Fund, and his recommendations, which define a more efficient and integrated supervisory framework that would operate on a cross-border, European level. The new supervision architecture focuses on future sustainable reinforcement of financial stability throughout the entire EU, harmonising rules and creating coherent supervisory practice and enforcement, identifying systemic risks in early stage, enhancing cooperation in extraordinary circumstances and resolving disputes, if any, between supervisory authorities.

Directive 2009/111/EC of the European Parliament and of the Council of 16 September 2009 amending Directives 2006/48/EC, 2006/49/EC and 2007/64/EC as regards banks affiliated to central institutions, certain own funds items, large exposures, supervisory arrangements, and crisis management took force on 7 December 2009. The Directive amendment applicable to capital requirements is primarily a response to shortcomings revealed by the financial crisis, one of them being the due functioning of the supervision over cross-border bank groups; the major changes thus do not involve only banks and other regulated parties, but the very regulators themselves. The other areas to which the amendment applies include exposure rules, liquidity risk management, application of hybrid capital instruments in capital management and the requirements for securitization transactions.

Kocián Šolc Balaštík assisted in the international merger of PHL Správní a.s. with Cyprus-based CIMEX FRANCHISE MANAGEMENT LIMITED.

Kocián Šolc Balaštík organized its fifteenth annual Charity Concert of Good Will for the benefit of the Good Will Committee – Olga Havel Foundation. The concert was held on 22 November in the Church of St. Simon and St. Jude in Prague’s Old Town.

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

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.

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

Pursuant to the resolution of the Supreme Court dated 9 September 2009, No. 2 Afs 58/2009-85, a request for elimination of doubt based on the provisions of Section 43 of Act No. 337/1992, Coll., on Tax Administration and Collection, is illegal if it does not contain concrete specified doubt for subsequent refutation by the taxpayer.

Pursuant to a resolution by the Constitutional Court, resolutions on tax forgiveness based on the provisions of Section 55a of Act No. 337/1992, Coll., on Tax Administration and Collection can be reviewed by a court.

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

In the second year of the Leading Law Firm of the Year Competition organized by EPRAVO.CZ under the auspices of the Czech Bar Association, law firm Kocián Šolc Balaštík was awarded the leading law firm in the fields of company law and competition law for 2009.

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.

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.

Law firm Kocián Šolc Balaštík is representing the UNIMEX-TVS consortium, consisting of UNIMEX GROUP, a.s. and Travel Service, a.s., during the privatization process of Czech Airlines.

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

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

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.

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

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

On 27 April 2009, an amendment to Act No. 215/2004, Coll., on Regulation of Certain Relationships within the Area of State Aid and certain other regulations was published under No. 109/2009, Coll.  New term “state aid coordination body” has been introduced which, in addition to the existing Antimonopoly Office, is the Ministry of Agriculture, since the powers of the act was extended to cover state aid in the fields of agriculture and fishing.

On 27 April  2009, an amendment to Governmental Regulation No. 299/2001, Coll., on Using Funds from the State Fund of Dwelling Development for covering a Part of Interests from Loans Provided by Banks to Legal Entities and Individuals for Repairs, Modernization or Regeneration of Panel Houses,  was adopted. The regulation took effect on 1 May 2009.

Under Act No. 110/2009, Coll., the area of Support Research and Development from Public Funds has been amended. The new regulation represents a fundamental and conceptual change and constitutes a part of the reform of the system of research, development and innovations approved by the government with the aim to strengthen the effectivity of using state funds in this field. The subject of regulation by the act was extended by innovations. Provision of aid should be generally simplified; the number of providers was limited, so that the aid will not include all resorts. It is also assumed that access to drawing on funds from structural funds and EU framework programs will be easier.

Kocián Šolc Balaštík has expanded its legal team by three new advocates: Mgr. Miloslav Petrů, LL.M., Ing. Mgr. Ivo Šimeček, M.E.S. and Mgr. Jan Hrubec. With nearly seventy lawyers and tax advisors in offices in Prague, Karlovy Vary and Ostrava, KSB is ranked one of the largest law firms in the Czech Republic.