2009 Legislation News

• Amendment to the VAT Act and the Income Tax Act

On 26 March 2009 the Senate approved an amendment to the VAT Act which allows the deduction of VAT in respect of passenger cars. This amendment also includes an amendment to the Income Tax Act changing the rules for the tax deductibility of interest on loans and credits. This regulation was signed by the president on 27 March 2009 and will be published in the Collection of Laws on 1 April 2009 under No. 87/2009, Coll. The act becomes effective at the moment of such publication.

• Amendment to Decree No. 500/2002 Coll., implementing certain provisions of the Accounting Act

Decree No. 500/2002 Coll., implementing certain provisions of Act No. 563/1991 Coll., the Accounting Act (the “Decree”), was amended effective 1 January 2009. The Decree is applicable to businesses carrying out double-entry bookkeeping.

The amendment imposes a new duty on accounting units to disclose further information in an attachment to the final accounts. Accounting units which qualify under at least two of the three prescribed criteria (aggregate assets of CZK 350 million, annual aggregate net turnover of CZK 700 million and the average recalculated number of employees to amount to 250 or more) must disclose information on transactions with an affiliate and, if such transaction are not entered into on an arm’s length basis, the accounting unit must include the amount of any such transaction, including the nature of its relationship with the affiliate.

Further, all public limited companies must include in the final accounts information on transactions carried out directly or indirectly between the particular accounting unit and its majority shareholders and between the accounting unit and the members of administrative, management and supervisory bodies, if such information is necessary in order to understand the financial situation of the accounting unit, provided that the transaction is substantial and was not entered into under standard market terms and conditions.

Yet another provision introduced by the amendment is the requirement for a depreciation plan to be maintained, including updates to reflect any changes in the course of using the assets. It is further possible to apply the anticipated residual value of the assets.

The new Section 56a of the Decree introduced the possibility of applying “component” depreciation of assets as from the accounting period commencing on 1 January 2010. A “component” means a certain portion of assets or a set of assets or a designated inspection of defects whose period of use differs substantially from the period of use of assets or a set of assets. “Components” may be depreciated during their period of use independently from other components and the rest of assets. The component depreciation method is not mandatory.

The amendment to the Decree further sets forth rules for the keeping of records in respect of new assets items A.II.4 “Depreciation Differences Resulting from Corporate Transformation Revaluation” and A.II.5 “Corporate Transformation Differences”. The keeping of records in respect of these new balance-sheet items is associated with, without limitation, amended Section 54 and new Section 54a of the Decree applicable to cross-border mergers. If a foreign company proceeds during transformation in a manner other than that required by the Decree, the surviving Czech accounting unit must keep a record of the evaluation and any differences resulting from corporate transformations in the balance sheet in accordance with the Decree.

• Collection of Acts

Issue No. 21/2009 of the Collection of Acts disclosed on 12 March 2009 contains and officially announces the unabridged Act No. 582/1991 Coll., the Social Security Organisation and Implementation Act, as amended.

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