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

The Senate passed without any amendments the government’s draft bill amending the Income Tax Act, as amended (Parliamentary press No. 959/0). The bill was subject to certain amendments during its second reading, of which the amendment to the Act on Local  Financial Authorities is of considerable significance. In view of the Senate’s actions in passing the bill, it can be stated that the legislative process for enactment of the bill has almost been completed. The bill must still be signed into law by the President. Despite the fact that the second reading amendments were of a fundamental nature, they were not subject to due legislative consideration, including approval by the Government Legislative Council. The change in the roles and structure of local financial authorities is also of fundamental significance.  

A General Tax Directorate (“GTD”) has been established in place of the current non-uniform management of tax administration through autonomous financial directorates. The new GTD should achieve the uniform and methodological management of financial offices through direct management of financial directorates. Unfortunately, the relevant amendments to the bill were not accompanied by any parliamentary report. The effectiveness of this amendment is proposed from 1 January 2011.

A new specialized financial office shall be established under the amendment to the Act on Local Financial Authorities, which specialized financial office will be responsible for all banks, insurers and corporate entrepreneurs with a turnover of more than two billion Czech crowns. The GTD will be able to decide in justified cases that an individual or legal entity is considered a regulated entity even if it is not a bank or does not generate the required turnover. Simultaneously, the GTD will be able to decide that an individual or legal entity with turnover of more than two billion Czech crowns is not considered a regulated entity and its local competence will remain unchanged. The new specialized financial office will have its registered office in Prague and will be incorporated as of 1 January 2012.

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