In 2019 investors and enterpreneurs should know about the following two Czech tax highlights. TPA tax experts from the Czech Republic on the most important changes.
1. Stricter Conditions for the Application of the Basic Investment Fund Regime
Basic investment funds as defined by the Czech Income Tax Act apply 5 % CIT rate on their profits. To qualify as such, certain conditions have to be met. One of the alternatives for investment funds was to be quoted at a European regulated stock market.
However, as of 2019, this status is not sufficient on its own and the investment fund has to meet further conditions, especially that no corporate taxpayer owns more than 10 % share in the fund and that the fund does not perform activities regulated under the Czech Trade Licensing Act.
2. Calculation of Employment Income Tax
Starting from January 1st, 2019 it will be necessary to distinguish the country in which an employee participates in a system of compulsory insurance (social security and health insurance) in calculating employment income tax.
If the employee is insured in another EU Member State, an EEA state or in Switzerland, the tax base will newly include the compulsory foreign insurance contribution paid by employers. For those participating in the compulsory insurance system in the Czech Republic or in a non-EU/EEA country the calculation remains unchanged, i.e. the tax base will be calculated as the gross taxable income increased by the Czech compulsory insurance contributions paid by employers or hypothetical Czech insurance contributions.