PwC: New package of measures for the years 2013 and 2014

The Government has approved the additional economic measures which should keep the deficit of the state budget in the next three years under three percent of gross domestic product. The revenue side of the budget should be supported by the following changes according to the ideas of the Cabinet:

• Introduction of the three-year “solidarity contribution” amounting to 7% of the tax base over the limit for the payment of insurance premiums for social security, i.e. above approximately CZK 100,000 a month.
• The limit for the payment of insurance premiums for public health insurance, which is now approximately CZK 1.8 million per year, will be cancelled for three years. The limit for the payment of social security will be maintained.
• Self-employed persons will be able to apply a flat-rate expenditure in the amount of 30 and 40 percent but only if their annual income does not exceed CZK 2 million.
• All self-employed persons claiming any flat rate expenditure will not be able to use some tax discounts, e.g. for the wife/husband without their own income or child tax benefits.
• Real estate transfer tax will increase by one percentage point and will be 4%.
• Working pensioners will lose the basic discount that every taxpayer is currently entitled to, for three years.
• Withholding tax on income of foreign tax residents rises to 35%. This rate will apply to income from sources in the territory of the Czech Republic, e.g. the profits and royalties that are gained by residents of countries with which the Czech Republic has not yet concluded a double tax treaty.
• Increase in VAT rates to 15% and 21%. The increase in VAT rates will only apply in the years 2013 to 2015. The extent of supplies subject to a particular rate will not change with the exception of the transfer of some medical devices and children’s nappies to the basic VAT rate as application of reduced VAT rate on these products is in violation of EU legislation.
• Farmers will no longer benefit from the refund of a part of the excise duty on fuel consumed by them, so-called “green fuel”.
• The excise duty from cut tobacco will be increased. The aim of this measure is to gradually reduce the difference in the tax burden on cigarettes and cut tobacco.
• Introduction of a new indirect tax from prescribed insurance premium. Details of this tax and term of its introduction will be specified later.

• Cancellation of super-gross wage and the introduction of a single rate of 20%.
• Cancellation of the planned employment flat rate amounting to CZK 3,000 in exchange for maintaining the tax exemption of meal tickets and advantageous canteen meals.
• The excise duty from cut tobacco will be increased in a second step.
• Increase of excise duty from still wine from current nil rate to CZK 10/litter. Production of small-scale wine growers will be exempt from excise duty.
• Introduction of the emission component of excise duty on heating oils, solid fuels and duties on natural gas and some other gasses.
• Cancellation of the exemption from the tax on gas in the case of the gas consumed in domestic boilers, convector heaters and gas cookers.