New tax measures in the Czech Republic provide tax relief to flood damage and introduce a new payroll tax regime.

The Ministry of Finance of the Czech Republic is providing tax relief to companies and individuals affected by floods this year. The Ministry has granted corporate and personal income tax remissions equal to the amount of the actual damage caused to the taxpayer’s revenue generating assets for the fiscal period in which this year’s floods have occurred.

Also, a new payroll tax regime would be implemented in the Czech Republic through proposed legislation which if enacted would become effective from 1^st January 2013.

Under the new legislation, the maximum payroll tax base will not be applied separately to each employee’s salary but to the aggregated sum of all employees’ salaries. This will eliminate the employer’s maximum threshold for insurance premium payments.

The proposals also include relief from penalties and interest in certain situations. According to the proposed legislation remission of penalties and interest will apply to:

• Individuals – for penalties and interest incurred as a result of the late remittance of a tax prepayment as defined by Section 38a of the Income Tax Act (i.e. a prepayment in respect of the actual tax liability, not advances from employees’ wages) where the prepayment is due from the date a state of emergency was declared, i.e. from 2 June 2013, to 31 December 2013.
• Legal entities and individuals – for penalties and interest incurred as a result of the late remittance of income tax that was originally due from the date a state of emergency was declared, i.e. from 2 June 2013, if the tax is paid by 31 October 2013. The remission of such penalties and interest will only apply to taxpayers that have applied to defer the payment of tax and whose application is approved on the grounds of insolvency caused by this disaster.