Profits of legal entities are now taxed at a linear rate of 19 % in the Czech Republic and it is one of the lower rates compared to the European Union. Therefore, the Czech Ministry of Finance proposes to increase the corporate income tax rate from 19 % to 21%. This should bring the Czech corporate income tax closer to the European average. The higher rate will be applied on the income tax which will be declared for the tax period starting after 1.1.2024, e. g. for the corporate income tax return submitted for the year 2024.
Furthermore the Ministry of Finance plans to limit the deductibility of tax expenditures on higher-value vehicles. The purchase of passenger cars is currently favored when the cars are purchased for so-called "business use." This is a tax-deductible expense and cars can be written off as an expense without any material limitation on their purpose or purchase price. The Ministry of Finance now proposes to limit the tax deductibility of the purchase of conventional passenger cars for business purposes to the first CZK 2 million of the car's price.
Another change relates to the tax deductibility of silent wine as a gift of up to CZK 500. Currently, the tax deductibility of the so-called representation expenses is allowed up to CZK 500, provided that other conditions are met. One of these conditions is that the item in question is not subject to excise duty. Therefore especially gifts of tobacco or alcoholic products are not tax deductible even their value is under CZK 500. The only exception is silent wine, which is not subject to this restriction. This should change with the amendment and the wine will be tax non-deductible as well.
From January 1, 2024, a number of significant changes will take place in the Czech tax system - the corporate tax rate will increase, VAT rates will change and, last but not least, the tax burden on natural persons will also increase.
In addition to changes in the area of corporate income tax, the Czech Ministry of Finance is preparing to adjust VAT rates. VAT rates should change from January 1, 2024.
The Czech Republic is planning extensive changes to its tax system, including changes to corporate income tax rates, effective from the beginning of 2024, which should help reduce the state budget deficit.