Foreign trusts in the Czech Republic follow rules for trust funds under certain conditionshellip Foreign trustsfoundations can follow the tax laws in the Czech Republic applicable for trust funds under several conditions (i) the foreign group is considered a taxpayer (having a tax identification number) in the jurisdiction under whose laws it is established which can be a problem for trusts set up contractually (ii) the group doesnrsquot have a legal personality (it doesnrsquot have a business registration number) (iii) it is created by entrusting property to a custodian for purposes stipulated by a contract or in case of death (iv) the property loses the legal owner when it is entrusted and (v) profits from the appreciation of the assets and payment to

beneficiaries are taxable income in the jurisdiction in which the group is established These are the conclusions of the talks which have just ended between the Chamber of Tax Advisers of the Czech Republic and the General Financial Directorate on the comparability of foreign equivalents of the Czech trust fund which I actively participated in and whose detailed conclusions I would be happy to share with you in person Here the GFD also confirmed that revenue resulting from a foreign trust or foundation becomes taxable income for beneficiaries at the moment when the beneficiary (whether a natural or legal person) has the income at his disposal

David Borkovec +420 251 152 561

New ways to utilise tax losses A judgement of the Supreme Administrative Court has changed perceptions on the ways to utilise tax losses during a tax audit The present judgement (9 Afs 412013 33) indicates that if an entity has sufficient losses from previous years and shows a positive tax base and the tax administrator increases the entityrsquos tax liability during a tax audit the entity has the possibility to apply a higher tax loss and avoid the imposition of sanctions So far the tax administration and the courts have adhered to the interpretation that the tax loss can only be applied in a regular or additional tax return The judgement is in response to a change in the legislation whereby the Act on Administration of Taxes was replaced by the Tax Code

Tomaacuteš Urbaacutešek +420 542 520 255

Ministry of Finance plans to up the ante in fight against tax evasion The Ministry of Finance announced plans for further measures against tax evasion which should come into force in January 2015 One of the planned steps is to establish a central registry of bank accounts The Czech National Bank should manage the registry It would make available not just information about all of a tax entityrsquos accounts but also about the current account status The goals of the registry would be to map the cash flows of companies suspected of being involved in tax fraud and to have quicker access to information on the existence of accounts and their status for the tax administration and for the police

Martin Diviš +420 251 152 574

wwwpwccztbnTax Legal amp Business NewsSummary

rsaquo Foreign trusts in the Czech Republic follow rules for trust funds under certain conditionshellip

rsaquo New ways to utilise tax losses

rsaquo Ministry of Finance plans to up the ante in fight against tax evasion

rsaquo Are you a lessor collecting security deposits Watch out for the interest

rsaquo President signed amendment to Foreignersrsquo Act

rsaquo Capturing building rights in accounting

rsaquo Studie ndash PwC IPO Watch On the European market IPOs live again

rsaquo Studie ndash Wrong people in the wrong places costs the global economy USD 150 billion

rsaquo Studie ndash PayWell Study and HR Controlling

rsaquo Studie ndash Corporate social responsibility

rsaquo The Academy

rsaquo We invite you

Tax

MayJune 2014Tax legal accounting advisory and assurance newsletter

If you are interested in receiving Tax Legal amp Business News please contact Michal Horaacuteček michalhoracekczpwccom

2

Law Employees Accounting Study

Are you a lessor collecting security deposits Watch out for the interest Are you collecting security deposits from your lessees to ensure the payment of potential debts Watch out for a new regulation which provides that upon termination of the lease you are not only required to return the security deposit but you also have to pay the interest on it Its amount can be negotiated between the parties but in any case it should not be less than the statutory amount

The security deposit may be up to six times the amount of the monthly rent and must not be lodged in a separate account Itrsquos up to you how you deal with the money The exact amount should be given as the usual interest rate charged by the bank at the place of residence or the place of business of the debtor at the time the contract is concluded The same principle applies even if the parties donrsquot negotiate the interest amount

In practice it can be difficult to determine this amount Thus we recommend that lessors negotiate the exact amount of the interest in the contract In addition the new regulation brings a considerable number of other changes in connection with lease agreements We are ready to answer all your questions and revise existing lease agreements

Barbora Masařovaacute +420 251 152 912

President signed amendment to Foreignersrsquo Act A new amendment on foreignersrsquo residence in the territory of the Czech Republic introduces fundamental changes to the present system of work permits and long-term work visas One new item is the dual residency permit the so-called employment card which will represent both a work and residence permit The green card will be cancelled while the blue cardmdasha tool for highly qualified experts and specialistsmdashwill stay Thanks to this amendment the whole process should be administratively simpler It will have a positive impact mainly on companies and potential investors who cannot find qualified workers in the Czech Republic But employers should be well prepared for possible initial complications on the part of the authoritiesThe amendment which the Czech president signed on 6 May should take effect at the beginning of June Its main goals are to implement Directive 201198EU of the European Parliament and the Council resolve the critical labour shortage in certain professions and reduce the administrative burden connected with the immigration process The changes do not affect EU citizens they only concern citizens of third countries

Petra Kleinovaacute +420 251 152 612

Jana Zelovaacute +420 251 152 567

Capturing building rights in accounting The new Civil Code introduces the concept of building rights which is based on the assumption that a building is part of the land and therefore cannot have a different owner Landowners may then allow another person to build on their land by granting the building rights An agreement on the transfer of building rights cannot be changed for its durationThe consideration of building rights in accounting opens up three basic possibilitiesbull The building rights are recorded as a stock are not depreciated and are transferred to another person with the real estate or without it bull A company acquired the building rights but has no plans to build on the land It uses the so-called blocking rightmdashpreventing third parties from building on the landmdashwhich is recorded in accounting class 02 and depreciated for the duration of the agreement on the transfer of building rightsbull A company acquired building rights in order to construct a building The rights become part of the acquisition cost of the building in accounting class 04 and later class 02Building rights are always valued in the total amount which the rights holder is obliged to pay to the landowner for this right (ldquoacquisition cost of building rightsrdquo)

Martina Behenskaacute +420 251 152 231

The PwC IPO Watch study showed that the value of the initial offerings for the first quarter of 2014 exceeded the value of the IPOs of all first quarters of the last four years combined Renewed growth in the European IPO market which generated EUR 114 billion in the first quarter of this year followed the successful end of 2013 Indeed more than half of total revenues for the whole year happened in that last quarterThe first quarter of this year is the first one since 2007 where we noticed such a high volume of IPOs on a majority of European stock exchanges The last two quarters have brought larger transactions good market performance and subsequent trading but at the same time we are still seeing a certain degree of caution which hasnrsquot entirely disappeared from the market yet The driving force of the first months of 2014 was retail A total of 11 IPOs in this industry brought in EUR 28 billion In the second quarter initial offerings of at least 25 other European companies should be carried out with potential revenues of EUR 38 billion At least 15 IPOs with a value of over EUR 250 million are planned by the end of summer Whether we will see this in the Czech Republic too is very hard to say but there are definitely interested parties from a range of companies

Study for download is available here

Marek Richter +420 542 520 170

PwC IPO Watch On the European market IPOs live again

We invite youStudy The AcademyEmployees AccountingLawTax

3

Studie

A PwC global study revealed that a lower ability to retrain employees or transfer them between industries costs the global economy billions of dollars Making full use of the potential of social networks which are currently becoming more and more interconnected with the global labour market would help companies considerably lower their expenses

Thus it again confirms the importance of social networks in todayrsquos world They enable employers to search for the most suitable candidates according to specific requirements ndash not just those that are actively looking for work but also those who are not looking for work but are not satisfied with their current position

The unnecessary expenses of looking for new suitable candidates and the departure of the wrong people amount to USD 20 billion in the 11 surveyed economies If companies put the right employees in the right positions these 11 economies would make more than USD 150 billion thanks to higher productivity

The Netherlands ranked in the first place among the surveyed economies mostly thanks to the language skills of employees and the presence of international firms and foreign workers Surprisingly Germany ranked 8th out of 11 The reason is partly due to the fact that it is a highly specialised economy with stable sectors But it could mean a reduced ability for Germany to react to possible structural changes

The Adapt to Survive study analysed the interaction of more than 277 million professional users on LinkedIn and information on 2600 employers in the PwC Saratoga database one of the most comprehensive of its kind

Marek Richter +420 542 520 170

Do you know where you stand in the remuneration market in comparison with the competition

The PayWell study is concerned with the level of remuneration of employees by various categories (industry region company size etc) With this study you get the latest information on wage levels for individual jobs It also provides a detailed description of employee benefits provided in various sectors across the Czech Republic

The most common benefits that companies provided employees with last year werebull Company car for at least some employees (89 of companies) bull 5 weeks of holiday (82 of companies) bull Supplementary pension insurance (76 of companies)

PayWell helps youbull Get a tool for fair and reliable human resource managementbull Compare your company with the competition and set the remuneration of key people in relation to the competitionbull Get objective data from the market for setting up an optimal remuneration strategy

You can find details and application form on wwwpwcczpaywell

Wrong people in the wrong places costs the global economy USD 150 billion

PayWell Study

Ranking by country

1 Netherlands 2 Great Britain 3 Canada 4 Singapore 5 USA 6 Australia 7 France 8 Germany 9 Brazil 10 India 11 China

Hana Farskaacute +420 251 151 608

Corporate social responsibility PwC Czech Republic helped develop the start-up Forewear which produces sleeves for notebooks and tablets from used clothing which charities can no longer use The photo shows Vaacuteclav Pryacutemek a partner at PwC CR accepting non-traditional notebooks from Markeacuteta Borecka and Zuzka Jurova of the socially beneficial project Forewear which they created thanks to the charitable activities of PwC CR

As last yearrsquos winner of the Social Impact Award Forewear got advice from PwC CR on creating a business plan finances taxes laws and communication PwC CR also helped Forewear with its first collection of old clothes among its employees from which they created new products tailored for PwC CR

Forewear collects and sorts unwearable clothing which is uselessly hanging in peoplersquos closets They then recycle any unusable pieces which cannot be offered in charity shops and produce notebook sleeves from the resulting non-woven fabric

You can find more information on our CSR activities at wwwpwcczodpovednost

We invite youStudy The AcademyEmployees AccountingLawTax

4

Study We invite youThe Academy

Business breakfast Labour migration in the Czech Republic 56 2014 in Brno 10am - 12pm Barceloacute Brno Palace Hotel Šilingrovo naacuteměstiacute 2265 Brno Registration darjasykorovaczpwccom

The Via Bona Award nominations are starting And PwC CR is a partner of the competition for the fifth time

In cooperation with the US embassy the VIA foundation is opening nominations for the 17th annual Via Bona Award for philanthropy It awards individual and corporate donors for their thoughtful and inspiring philanthropic initiatives

You can nominate philanthropists and donors until 6 June 2014 Individuals firms schools civic associations charities and other non-profit organisations can send in nominations for the 2014 Via Bona Award You can find all information and the nomination form at wwwcenaviabonacz

This prestigious annual award highlights good examples of philanthropy and shows current philanthropic trends which inspires new donors PwC Czech Republic is a partner of the competition for the fifth time and covers the category for small and medium-sized firms

You too can get inspired by our corporate responsibility activities See more at wwwpwcczodpovednost

You can find details on this and other events at wwwpwcczevents

A new program Lean Six Sigma

Start on the first level with us Yellow Belt

Lean Six Sigma is a management methodology that aims to enhance quality performance and customer satisfaction while at the same time reducing costs The main objective is the systematic elimination of waste in all business processes keeping only those activities that have real value for the customer The Yellow Belt course will introduce you to the basic features and benefits and guide you through the individual phases of the DMAIC process ndash Define Measure Analyse Improve and Control Date 9 - 10 June 2014 900 ndash 1630 Place City Green Court Hvězdova 17342c Prague 4 Language Czech Price CZK 9900 + VAT

For more information and registration please visit our webpage wwwpwcczacademy Should you have any questions please write an email to theacademyczpwccom or contact Daria Šaškovaacute tel +420 251 152 446

How to reserve a spot

wwwpwcczacademy

Do you know how to measure the efficiency and productivity of human resources

HR Controlling offers a clear analysis of key indicators of human resource management including information focusing on the performance and activity of the management system For example with this study you get information on how investment in people in the form of wages translates into financial results or how HR processes contribute to the achievement of company-wide goals

HR Controlling provides you withbull A database of indicators that can be measured in human resources bull An external benchmark where you can measure comparables

For more information please visit wwwpwcczhrcontrolling

Hana Farskaacute +420 251 151 608

HR Controlling

Contact

Jiřiacute Moser Country Managing Partner PwC ČR +420 251 152 048

Peter Chrenko Lead Tax amp Legal Services Partner +420 251 152 600

Věra Vyacutetvarovaacute Lead Assurance Services Partner +420 251 152 099

Miroslav Bratrych PwC Advisory Partner +420 251 152 084

Michael Mullen PwC Legal Partner +420 251 152 700

Prague Office Hvězdova 2c 140 00 Prague 4+420 251 151 111

Brno Officenaacuteměstiacute Svobody 20 602 00 Brno+420 542 520 111

Ostrava OfficeZaacutemeckaacute 20 702 00 Ostrava+420 595 137 111

copy 2014 PricewaterhouseCoopers Českaacute republika sro All rights reserved In this document ldquoPwCrdquo refers to PricewaterhouseCoopers Českaacute republika sro which is a member firm of PricewaterhouseCoopers International Limited each member firm of which is a separate legal entity

Tax legal and business news in your mobile phone or tablet for free

We invite youStudy The AcademyEmployees AccountingLawTax