Regulation (EC) No 1896/2006 of the European Parliament and of the Council of 12 December 2006 creating a European order for payment procedure took force and effect on 12 December 2008. The Regulation is directly applicable in all Member States with the exception of Denmark and helps creditors swiftly and efficiently recover their outstanding debts in civil and commercial matters having cross-borders implications through a uniform procedure using standard forms.

Law firm Kocián Šolc Balaštík provided legal consultancy to Closed Unit Trust Fortius 1, managed by the investment company Fortius Global Investments, in the takeover of assets of the joint-stock company TERION CZ a.s.

Amendment to the VAT Act and the Income Tax Act; Amendment to Decree No. 500/2002 Coll., implementing certain provisions of the Accounting Act; Collection of Acts

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

In judgment No. 2 Afs 112/2008-44 dated 24 February 2009, the Supreme Administrative Court commented on the term “in connection with business operations”. The need for an explanation of the term is the result of a dispute between a taxpayer and the tax authority over a father’s donation of assets to his son, the father and son both having originally been engaged in the same business.

The European Parliament adopted at its February session the Directive providing for sanctions against employers of illegally staying third-country nationals. Criminal penalties may be applied to deny this form of grey economy. Where the employer is a subcontractor the penalties may be imposed on its business partner as well. The Directive also aims at providing illegal workers with legal payroll. 

The EU Finance Ministers under the Czech Presidency finally agreed on 10 March 2009 to reduce the value added tax rate for certain services. The draft amendment to Directive No. 2006/112 primarily covers areas where the current exemptions only made it possible to apply VAT lower than 15% by the end of 2010, which could result in considerable price increase for these services after 2010. The initiative constitutes a part of the European Small Business Support Program (Small Business Act).

Judgment by the ECJ of 16 December 2008 in the case C-210/06 Cartesio Oktató és Szolgáltató Bt The European Court of Justice dealt with yet another case of a transfer of a company seat to another EU Member State. Cartesio, a limited partnership incorporated under Hungarian law with its company seat in Hungary, filed a petition with the registration court to transfer its seat to Italy. The registration court dismissed the petition due to the fact that Hungarian law does not make it possible for a company incorporated in Hungary to transfer its seat to a foreign country and, at the same time, be subject to Hungarian law as its personal statute.

One of the first sessions held by the Czech presidency was the session of the Transport, Telecommunications and Energy Council during which the joint position to the energy liberalization package was approved. As expected, the Council did not endorse most of the draft amendments by the European Parliament which were adopted in the first reading held last year. Unbundling or separation of electricity generation from transmission systems continues to be one of the most controversial issues, having impact on all gas producers and electricity generators in the EU. 

The EU authorities passed Directive 2008/118/EC concerning the general arrangements for products subject to excise duty, which repeals Directive No. 92/12/EEC. The new legislation shall substantially aid in the efficient exchange of information between national tax authorities, introduce an electronic system for the monitoring of movement of consumer goods within the EU and define the legal framework for the functioning thereof. It also refines the definition of the objects subject to excise duty and the rules applicable to the payment thereof for the international shipping of goods. It has been designed to improve, and render more efficient, the fight against tax evasion.

The European Commission has issued instructions for enforcement priorities in application of Article 82 of the EC Treaty against abusive exclusionary conduct by dominant undertakings, which discriminate against other competitors on the market (Official Bulletin C 45 dated 24 February 2009). The document should assist companies in anticipating whether the Commission will intervene with regard to their  particular conduct. 

The negotiations on the legal framework of a European Private Company (Societas Privata Europaea) progressed significantly during March. The European Parliament discussed and approved (subject to several amendments) the proposal on the statute for a European private company. 

The European Commission presented a proposal at the end of last year as part of a package of proposals addressing the financial crisis. It was instigated by current insufficient control over the quality of work of rating agencies that many people believe fairly contributed to the current financial crisis. Credit rating has been subject to legislation primarily applicable to other aspects of financial markets (Directive No. 2003/6 on insider dealing and market manipulation and Directive No. 2006/49 on the capital adequacy of investment firms and credit institutions). 

The European Parliament approved in its March session the proposal for a directive on industrial emissions on first reading. The proposal suggests consolidating the current seven industrial-emission laws into a single act – directive on integrated pollution prevention and restriction (IPPR) and six industry laws – the so-called VOC, LCP, titanium dioxide and waste burning directives. The reasons for this change are not to merely eliminate difficulties and discrepancies in the current legal framework, but respond to the ever-increasing emission levels which pollute water, soil and air, in attempt to create a more efficient pan-European framework and standards for an integrated approach to prevention. 

Kocián Šolc Balaštík successfully represented Agrofert Holding, a.s. in proceedings before the Anti-Monopoly Authority regarding Agrofert’s merger with Agropol. The Anti-Monopoly Authority permitted the merger subject to predefined conditions.

Law firm Kocián Šolc Balaštík, named several times by international rating agencies as a leading Czech law firm, opened a new branch office in Ostrava on 1 March 2009. The opening of KSB’s Ostrava branch office is an expression of KSB’s focus on satisfying the needs of its large corporate clients from the Moravia region.

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

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 by the Constitutional Court dated 1 December 2008 (I. ÚS 705/06), the facts ascertained by tax authorities (carrying out procedural acts) in the course of a tax inspection that serve the decision-making of tax administrators but subsequently found to be illegal by the Financial Directorate, cannot be reapplied by the tax administrator.

Law firm Kocián Šolc Balaštík has been providing legal consultancy to its long-term client, the globally operating Canadian company MAGNA, in its acquisition of Cadence Innovation, s.r.o. The company belongs to the largest world-wide manufacturers of car parts and is established in the Czech Republic.

Professor Jan Dědič, a partner of law firm Kocián Šolc Balaštík, wrote an article on changes expected in 2009 concerning legal regulations in commercial law in the Czech-German Commercial and Industrial Chamber's magazine Plus, which was published in February.

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

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.