Overview of significant income tax changes from 1 January 2025

Following the new Accounting Act, which is due to come into force on 1 January 2025, the Ministry of Finance has introduced a draft amendment to the Income Tax Act.

Changes in the field of VAT

• New definitions in the area of assets and debts: In connection with the amendment to the Accounting Act, a new conceptual feature will be introduced in the Income Tax Act. Thus, from the introduction of the amendment, the Income Tax Act should operate with the concept of a registered asset instead of a business asset.
   
• Simplification of tax depreciation: prohibition of tax depreciation breaks, depreciation on a monthly basis, abolition of accelerated depreciation, introduction of three basic depreciation periods:
  - 60 months -> all movable and immovable assets from CZK 100,000 to CZK 2,000,000
  - 360 months -> all movable and immovable assets above CZK 2,000,000
  - 180 months -> goodwill
   
• The possibility of using IFRS for determining the tax base of the profit or loss. Transactions accounted for on a balance sheet basis in IFRS will have to be taken into account in the tax base if they would be accounted for on a profit and loss basis in Czech accounting. On transition to IFRS, differences in the tax value of assets and debts under each system will be reflected in the tax base over a 10-year period.
   
• The concept of technical appreciation will be replaced by the concept of "additional appreciation", which will apply when the costs incurred exceed CZK 100,000 or 10% of the value of the asset.
   
• Foreign currency income tax should be a reality from the introduction of this amendment. For taxpayers keeping their accounts in EUR, the amount of tax will be administered in that currency.

We will continue to monitor the proposal throughout the legislative process and will keep you informed of any changes. If you have any questions, please do not hesitate to contact the PKF APOGEO Tax team.

Authors: Daniel Vladyka, Lívia Vaškaninová