Building Foundations Legal News Update on recent legislative amendments in the Czech Republic Issue: May 2015 www.roedl.cz Contents: Law > Selected legislative changes > Selected additions to the Collection of Laws > Effective dates of selected laws and regulations > Tax legislation update > Judicial decisions > Briefly > Selected legislative changes Protection of Non-Debtor Spouse in Debt Recovery Proceedings Vojtěch Hrdlička, Rödl & Partner Prague The Chamber of Deputies recently enacted an amendment bill that could soon improve the protection of a non-debtor spouse in debt recovery proceedings. If promulgated, the law will exempt from attachment of any kind one half of the balance of the bank account of the non-debtor spouse (and no less than twice the amount of the living wage). Under the new law, when a court issues an attachment order for the non-debtor spouse s bank account, the nondebtor spouse will receive a notice that he or she will not forfeit one half of the account balance and that he or she will be able to make dispositions with the amount at his or her sole discretion. According to the Ministry of Justice, this solution allows creditors to recover debt from the community property of spouses, while introducing at least a limited protection for persons that may not even know that their spouse is in financial troubles. This is frequently the case of married couples that are separated but are yet to file for divorce. Under the new law, the non-debtor spouse does not lose the entire balance of their account but rather never more than just one half at most. As such, this is a compromise between the legal protection granted to non-debtor spouses and the creditors right to recover their debts. Another change introduced by the law is the statutory duty of the relevant court or the judicial enforcement officer to act, in ordering and implementing the debt recovery proceedings, in view of whether the community property of spouses has been reduced or otherwise affected by the spouses contract or by a court s ruling, if and when available in public domain, namely in a spousal property register administered by the Notarial Chamber of the Czech Republic. Until now, the non-debtor spouse had to file an action to exempt his assets from debt recovery proceedings and hope of the best. The amendment law also grants a successful party to civil proceedings the right to a compensation for cash expenses, even when not represented by a lawyer. If a successful party s costs exceed the amount laid down in law, the party is still entitled to the compensation so long as she or he manages to satisfy the court that the expenses were reasonable and expedient. The foregoing changes are introduced as part of the overarching legislative effort to cultivate the debt recovery proceedings by laying down a fixed process to be followed by judicial enforcement officers, the list of things that will be exempt from judicial enforcement or the minimum amount of claim that can be used as the legitimate cause for seizing real property. 1
Law Driving faster on motorways and expressways? Monika Štýsová, Rödl & Partner Prague The amended Road Act has come up with a new subdivision of expressways into two classes. The higher class is an intermediate stage between regular two-lane expressway and the motorway; the maximum permitted speed on this type of road will be raised by twenty kilometers per hour, i.e. to one hundred and ten kilometers per hour. Thee Ministry of Transport has identified twenty four road segments where it intends to raise the speed limit. In all instances, the speed limit increase will be applied to dual carriageways with one lane in each direction separated by a guardrail or other type of median barrier; in other types of expressways, the ninety kilometer per hour limit will remain unchanged. This will be accompanied by change of official terms used to denote different types of roads. The expressway will be now termed as class II motorway. The speed limit in this class of roads will remain at the current one hundred and thirty kilometers per hour. At the same time, at selected motorway sections (specifically D1 between Lipník nad Bečvou and Ostrava, D1 between Vyškov and Kroměříž, D3 still unspecified, D8 between Teplice and Dresden, D11 between Poděbrady and Hradec Králové), the speed limit will be raised, in good weather and traffic, to up to one hundred and fifty kilometers per hour. Before promulgation, the law must be passed by the Senate and countersigned by the President. The amended law does not incorporate the contemplated launch of the electronic toll stickers, which the Government finds needlessly expensive. As a result, traditional paper toll stickers will continue to exist, although some changes are to be expected as far as we understand from the recent statement by a special committee of the Ministry of Transport. Amendment Bill to the Civil Infraction Act Ilona Štrosová, Rödl & Partner Prague The Committee on Constitutional and Legal Affairs of the Chamber of Deputies of the Parliament of the Czech Republic has reached a consensus about the proposal to include in the amendment bill to the Civil Infraction Act an option to make individuals records in the contemplated central register of civil infractions available in public domain (at a request). According to the Committee, the risks of this solution far outweigh its potential benefits. In the discussion, the argument prevailed that employers could start demanding from their employees a copy of this record (in addition to the criminal record), which would both increase the administrative burden and potentially violate the employees privacy for no good reason. The records are not be made available to revenue and customs authorities either. The register of civil infractions will be kept together with the register of criminal convictions, and will be used to record infractions against property, public order, peace and quiet. Unlike the original proposal, the Committee also recommended against the idea that certain infractions should be treated as criminal offences when committed repeatedly. At the same time, recidivism will be treated more strictly than in the past, since the amount of maximum administrative fine for certain infractions is to be raised by up to one half. This applies to recurrent petty theft, disturbing the peace or littering. The maximum amount of fine payable in administrative hearing on a citation will be increased to up to five thousand Czech korunas. > Selected additions to the Collection of Laws 17.4.2015 Collective: 77/2015 Chapter: 37/2015 ACT of 19 March 2015 to amend Act No. 104/2013 Sb., On International Judical Cooperation in Criminal Cases, and other associated laws. 17.4.2015 Collection: 84/2015 Chapter: 37/2015 ACT of 19 March 2015 to amend Act No. 72/2000 Sb., On Investment Incentives and Amendment of Some Laws (Investment Incentives Act), as amended, and other associated laws. 4.5.2015 Collection: 103/2015 Chapter: 43/2015 ACT of 10 April 2015 to amend Act No. 406/2000 Sb., On Energy Management, as amended, and Act No. 634/2004 Sb., On Administrative Fees, as amended. > Effective dates of selected laws and regulations 66/2015 Sb., effective from 15 April 2015 REGULATION of 1 April 2015 to amend Regulation No. č. 222/1995 Sb., On Waterways, Navigation at Ports, Joint Accidents and Transport of Hazardous Goods, as amended. 82/2015 Sb., effective from 1 May 2015 Subject to an exception ACT of 19 March 2015 to amend Act No. 561/2004 Sb., 2
Law / Issue: May 2015 On Pre-School, Primary, Secondary and Vocational and other Education (Education Act), as amended, and some other laws. 80/2015 Sb., effective from 2 May 2015 ACT of 18 March 2015 to amend Act No. 378/2007 Sb., On Pharmaceuticals and on Modification of Some Other Associated Laws (Pharmaceuticals Act), as amended. Your contact for additional info: denying the investment incentives completely, but instead it only results in lower discounts and the fact that the incentive cannot be granted in the next tax periods. In addition, as from the tax period when all the general conditions were met, the recipient of investment incentives must claim as many tax allowances as possible (such as, the depreciation of assets, bad debt allowances). Any promises of investment incentives that were expressed prior to 1 May 2015 are also affected by these changes. Tax payers who were promised the investment incentives before 1 May 2015 are also subject to the so-called S2 amount that is needed when the tax relief is calculated. Modified Bill on Electronic Recording and Reporting of Sales Mgr. Monika Štýsová Attorney-at-law / Senior Associate Phone: +420 236 163 760 E-mail: monika.stysova@roedl.cz > Tax legislation update Amendment bill to the Investment Incentive Act and associated amendments to certain provisions of the Income Act and the Real Property Tax Act Under Reference Number 84/2015 Sb., the amendment bill to the Investment Incentive Act and related amendments to certain provisions of the Income Act and the Real Property Tax Act were published in the Collection of Laws on 17 April 2015. The Act came into force on 1 May 2015. The Investment Incentive Act now defines: > Incentive as an exemption from the property tax for up to five years for land and taxable properties in the special, concessional industrial zones; this incentive is then regulated by the Real Property Tax Act; > An incentive for data centers and customer-support centers (call centers); > A condition under which investments projects with eligible costs of over EUR 100 mil would be granted an exemption from the ban on state aid imposed by the European Commission The amendment to the Income Act diminishes consequences defined for the breach of the conditions under which the investment incentives are granted, namely in the area of transfer prices and transformation of companies. Now, the breach of these conditions no longer results in The Ministry of Finance incorporated some of the comments in its Electronic Recording and Reporting of Sales Bill. The Bill is to be presented to the Government in May. The Bill now contains provisions to regulate the reporting of sales by general partnership companies and limited partnership companies; according to the Bill, the sales will be recorded and reported by partnership companies rather than by its partners. When represented indirectly, the sales will be reported by an agent acting in his name on behalf of another. When represented directly, the company will be entitled to vest the reporting duty in a person that acts in the name of the principal and at the principal s account. A single person may be authorized to report sales on behalf of several persons. The electronic reporting duty does not apply to sales generated in the electric power industry under the license granted in accordance with the Energy Act, sales generated under the license granted by regional authorities in accordance with the Water and Sewage System Act, from revenue generated through postal services and the associated goods and services, revenue generated under or in connection with employment (employer s revenue generated in connection with benefits, canteen and workplace catering). Taxpayers generating revenue from goods or services that would otherwise be liable to electronic reporting and recording duty are exempt from the duty if the relevant revenue in the preceding income tax year does not exceed CZK 2,000,000 and 20% of the taxpayer s total sales. The most recent draft of the bill also introduces an option to request a official opinion as to whether a particular payment needs to be recorded and reported electronically. The opinion may be requested for a fee of CZK 1,000. Taxpayers will be able to request a confirmation from the tax administration as to whether the tax administrator received the sales report; in the absence of such confirmation, the taxpayer will be able to record the sales in a simplified manner. 3
The enactment of the Electronic Recording and Reporting of Sales Act is to be accompanied by an amendment of some other tax laws. The Income Act will grant a CZK 5000 tax discount on tax liability to individuals that report their sales electronically (in the year in which they start reporting the sales). Under the contemplated amendment of the Value Added Tax Act, taxpayers will be obliged to file their VAT returns, including their schedules, recapitulative statements, inspection reports and registration applications electronically, either by e-mail with certified electronic signatures or via the official website run by the tax administration (EPO). This means that the taxpayer will not be able to file those document via their data boxes. The up-and-coming amendment to the VAT Act should also reduce the VAT rate for catering services (alcoholic beverage excepting). > Judicial decisions Member s Income from Work Performed for a Company The Supreme Administrative Court recently ruled in a case involving the taxation of income generated by a member (owner) of a limited liability company from the work performed for the company. In the case, the tax administrator classified the remuneration paid to the member for the work thus performed as income from dependent activity (i.e. an employment or quasi-employment income) on the grounds that the member carried out the same activities for which the company itself was licensed too. In its judgment ref. No. 6 Afs 116/2014 of 25 February 2015, the Supreme Court confirms that the work performed for the company by the member includes services that coincide with the company s principal business activity; by performing such activities, the member carries out the business objects of the company. At the same time, the SAC finds that not all activities performed by the member for the company can be classified as dependent activity. The exact type of income will always depend on the specific circumstances and nature of the income rather than on its textbook definition. The member s income paid by the company satisfies the definition of dependent income when generated through work for the company, i.e. when paid as remuneration for the activity performed by the member in person while the activity itself is comparable to what would be performed by an employee in order to carry out the company s business objects or other similar activities. On the other hand, the member s income does not satisfy the definition of dependent income if the member also provides similar services to other persons under similar conditions, i.e. in the circumstances where the nature of the economic relationship between the member and the company is that of the supplier and the customer. In the case brought before the Supreme Administrative Court, the court ruled that the supplier/customer nature of the relationship prevailed in the transactions at issue, because the member performed the activities in person only in part, as more than one half of the amount invoiced included costs of employees, equipment, profit and so forth, while the member also carried out, to a significant extent, similar activities also for other entities. ECJ s Ruling on VAT Aspects of Real Property Lease The European Court of Justice issued a preliminary ruling in the case C-42/14, Wojskowa Agencja Mieszkaniowa w Warszawie concerning the taxation of the supplies of goods and services in the course of the lease of immovable property. According to the ECJ, in the context of the leasing of immovable property, the provision of electricity, heating and water and refuse collection, provided by third-party suppliers for the tenant directly using those goods and services must be regarded as being supplied by the landlord where he has concluded agreements for the provision of those supplies and simply passes on the costs thereof to the tenant. The ECJ also ruled that the lease of immovable property and the provision of water, electricity and heating as well as refuse collection accompanying that lease must, in principle, be regarded as constituting several distinct and independent supplies which need to be assessed separately for VAT purposes, unless the elements of the transaction, including those indicating the economic reason for concluding the contract, are so closely linked that they form, objectively, a single, indivisible economic supply which it would be artificial to split. Nevertheless, it is for the national court to make the necessary assessments taking 4
Issue: May 2015 into account all the circumstances of the letting and the accompanying supplies and, in particular, the content of the agreement itself. > Briefly General Financial Director s Guidance Note on Deferment The guidance note aims to propose a unified policy to guide the decision-making process of local tax offices. The deferment request may be granted on certain social and economic grounds, with a view to the taxpayer s pre-existing arrears on taxes, his or her payment history and with a view to how the taxpayer discharges his other obligations. Deferment request may not be granted to participants in a retirement saving schemes on the premium that is withheld from wages, to income taxpayers on their advance payroll and withholding taxes, and to payers of withholding photovoltaic tax. Nor may the deferment request be granted for taxes that have already been paid. The deferment request may be submitted for an administrative fee of CZK 400; the same fee is charged for a request to modify the terms of the existing deferment. Amendment bill to Criminal Code An amendment bill to the Criminal Code has been recently introduced in the Chamber of Deputies that aims to make the process of preparing a tax evasion a criminal offence. At the same time, a failure to prevent or impede the offence of tax evasion planning and preparation will not be treated as an offence. Real Property Tax Payable Via SIPO from Year 2016 Starting from year 2016, taxpayers will be able to use SIPO (a direct debit of regular multiple payments as a special service provided by Czech Post) to pay their real property tax. Together with their postal order for the real property tax for the year 2015, tax payers will receive a special form Statement on the Payment of Real Property Tax Via SIPO. The taxpayers may file the completed form with their local Tax Office by 31 January 2016, and in the years to follow, their real property tax will be settled automatically via the SIPO system. Your contact for additional info: Ing. Tomáš Zatloukal, LL.M. Tax advisor / Partner Phone: +420 233 111 261 E-mail: tomas.zatloukal@vorlickova.com Building Foundations Our experise and experience lay the foundations for our advisory services. On those foundations we build, together with our clients. Rödl & Partner Our unique human towers needs a strong and solid foundation Castellers de Barcelona Each and every person counts to the Castellers and to us. Human towers symbolise in a unique way the Rödl & Partner corporate culture. They personify our philosophy of solidarity, balance, courage and team spirit. They stand for the growth that is based on own resources, the growth which has made Rödl & Partner the company we are today. Força, Equilibri, Valor i Seny (strength, equilibrium, valour and common sense) is the Catalan motto of all Castellers, describing their fundamental values very accurately. It is to our liking and also reflects our mentality. Therefore Rödl & Partner embarked on a collaborative journey with the representatives of this long-standing tradition of human towers Castellers de Barcelona in May 2011. The association from Barcelona stands, among many other things, for this intangible cultural heritage. Imprint: Legal News May 2015 Published by: Editorial board: Translation: Rödl & Partner Platnéřská 2, 110 00 Prague 1 Phone: + 420 236 163 111 www.roedl.cz Mgr. Monika Štýsová Ing. Tomáš Zatloukal Ing. Jana Švédová Mgr. Martin Mikolajek This document is only intended for your information. The information is not advice and should not be treated as such. If you have to deal with a specific problem, we recommend consulting the issue on a case-by -case basis to allow for an evaluation of your individual circumstances. Rödl & Partner disclaims liability for any inaccuracies in this document or for any damage caused by following the information contained in this document. Layout/Typeset by: Rödl & Partner publikace@roedl.cz