On 10 October 2013, the Czech Senate approved a special law measure that includes a long discussed Income Tax Law amendment. For this amendment to be enacted it must be approved by a new Chamber of Deputies on its first session. The main changes are as follows:
- Higher research and development (R&D) incentive in the form of an improved R&D credit including a year-on-year increase in R&D costs eligible for a 210% deduction (currently a 200% deduction regardless of year-on-year increase) and also the broadening of the types of costs qualifying for R&D credit.
- Higher allowance for qualifying gifts with a deduction of up to 10% of the tax base (increase from 5%).
- Income of individuals from the sale of securities will be exempt if the holding period exceeds three years instead of the current six months (with exceptions).
- Corporate income tax for investment funds remains at 5% and withholding tax on dividends from investment funds remains at 15% (before any potential reductions), contrary to previous drafts which proposed a complete overhaul of the investment funds taxation.
- The previously discussed and anticipated broad extension of the dividend withholding tax exemption was not approved. The current dividend participation exemption rules remain basically intact.
In addition to the above, there is a simultaneous complete overhaul of civil and company laws which indirectly impact the taxation as it generally allows for more flexible structuring.
