It is already the case that financial donations to e.g. Czech organizers of collections for public benefit purposes are deductible from the tax base by the Czech law. When the amendment is passed, it would be newly possible to deduct from income taxes also supplies provided in 2022 for the purpose of supporting Ukraine's defense efforts. At the same time, it will be possible to deduct from taxes the donations provided directly to Ukraine (e.g. through the Ukrainian embassy) or to Ukrainian non-profit organizations. Another proposed modification is that the possibility of deduction of supplies from the tax base may also be used by taxpayers from Ukraine if their taxable income from sources in the Czech Republic constitutes 90% of their taxable income. The current wording of the law still allows tax deduction only for tax residents of the Czech Republic, or under certain conditions from countries of the European Union or the European Economic Area.
From the point of view of the recipient of gratuitous supplies, income for humanitarian or charitable purposes or for public collections organized by legal entities is already today exempt from income tax. In 2022, gratuitous income provided for the purpose of supporting the defence efforts of Ukraine will be newly exempt, i.e. any withholding tax will not be applied on the basis of the amendment. This year, the income of Ukrainian employees will also be exempt from tax when the company provides them and their family members with accommodation in the Czech Republic due to the war conflict in Ukraine. Furthermore, if an employee receives a monetary gift from his employer for the purpose of helping in a difficult life situation, this gift will be exempt from income tax as gratuitous supplies received for humanitarian or charitable reasons.
The parliament could now give its approval to the amendment at first reading. The amendment to the Income Tax Act could become effective at the end of May. It should have a retroactive effect from the beginning of 2022. The financial administration will therefore proceed in accordance with the planned amendment to the law.
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.