The government submitted to the discussion process an amendment to the Act on the Support of Research, Experimental Development and Innovations. The amendment will be revised after the discussion process and further dealt with by the government. It is suggested that the amendment will become effective on 1 April 2015. The fundamental change is the establishment of the Ministry of Education, Youth and Sports as the authority responsible for maintaining the list of research organisations. The list will also be a suitable tool for identifying research organisations for the purposes of tax-deductible items in research and development. It will now be possible to get support in the form of refundable financial assistance or a grant with a conditional payback period in

addition to the usual non-refundable subsidies. The suggested changes should simplify the financing of research and development and bring new possibilities for support. Among other things, they should lead to the simplification of the public competitions in research, development and innovation administration and a better definition of the international cooperation possibilities in research and development. The amendment was prepared in connection with the new Strategy for the International Competitiveness of the Czech Republic for the period 2012 to 2020 and development in the area of support for research and development in the EU.

David Borkovec +420 251 152 561

Did you receive an appeal to remove doubt in which the tax authorities determined specific evidence you should present to remove this doubt? This procedure is incorrect. It is namely you who carries the burden of proof and specifies which evidence will constitute proof of the alleged facts. It can be different from the authorities’ viewpoint. At the same time, it is always necessary to keep in mind the constitutional prohibition against self-incrimination even despite the potential risks, such as the determination of the tax by using available materials and information.

David Borkovec +420 251 152 561

The excise duties on cigarettes and other tobacco products will probably increase again this year. The reason is the deterioration in the development of the exchange rate of the Czech crown against the euro, the result of which is that the minimum limit of taxation laid down in European regulations is not fulfilled. The excise duty will be increased by CZK 2 to 3 per pack of cigarettes; the total price increase for a pack of cigarettes should be CZK 3 to 4. The excise duty will increase by CZK 0.08 for each cigar or cigarillo. The excise duty on smoking tobacco will increase by CZK 96 per kilogram. The amendment also expects a three-month transition period during which you can sell cigarettes with a tobacco label at the current tax rate.

Martin Diviš +420 251 152 574

www.pwc.cz/tbnTax, Legal & Business NewsSummary

› Amendment will bring new tools to support research and development

› Are the tax authorities requiring you to submit particular evidence?

› Excise duty on cigarettes will increase again

› List of unreliable VAT payers can be easily generated - it contains 54 firms

› Surcharges beyond the registered capital of the company — now faster and cheaper

› The deadline for submitting the insurance return is approaching. Does it apply to you?

› Labour inspectorates will likely increase the frequency of checks

› Accounting of levies according to IFRS

› Study - Economic crime is increasingly coming from the virtual world

› PwC CR’s Corporate Responsibility Report for 2013

› We invite you

Topic of the month Tax

March/April 2014

Amendment will bring new tools to support research and development

Are the tax authorities requiring you to submit particular evidence?

Excise duty on cigarettes will increase again

Tax, legal, accounting, advisory and assurance newsletter

If you are interested in receiving Tax, Legal & Business News, please contact Michal Horáček, michal.horacek@cz.pwc.com.

2

Tax Law Employees

List of unreliable VAT payers can be easily generated - it contains 54 firms You can very easily generate an up-to-date list of all unreliable VAT payers published by the Ministry of Finance to date in the VAT payers register. The list is generated automatically by choosing „YES“ in the cell „Unreliable payer“. It contains the Tax Identification Number, name of the firm and the date it was published. This way you can quickly check whether any of your suppliers is listed as an unreliable VAT payer.

Martin Diviš +420 251 152 574

Surcharges beyond the registered capital of the company — now faster and cheaper New legislation has simplified and, in particular, accelerated the process of increasing equity capital by a partner’s contribution in excess of the registered capital of the company at the beginning of this year. The loan provided to the partner can still be transferred to the company’s equity offsetting it against the surcharge.However, for this purpose, you no longer have to call a general meeting to give consent to the provision of a voluntary surcharge. You just have to get a more flexible written consent from the director. The law also cancels the requirement of a notarial deed in the realization of both the voluntary and the mandatory surcharge. Companies will thus save a significant amount, which may be used for the original purpose of the surcharge, and the debt-equity swap can take place almost immediately. Mandatory surcharges

The law no longer lays down any limit on the amount of the mandatory surcharges. Everything is left to the articles of association, which must include the competence of the general meeting to impose the surcharge liability and its maximum amount.

It is now possible to ask for the mandatory surcharge even against the

partner’s will. If he disagrees, he has a right to withdraw from the company under certain conditions. The articles of association can, however, eliminate this right completely.

If you are thinking about providing capital to your company in the form of a surcharge beyond the registered capital or you want to know more about the possibilities of the new legislation, do not hesitate to contact our PwC Legal team.

Vladimír Zemaník +420 251 152 955

The deadline for submitting the insurance return is approaching. Does it apply to you? The participants of the II. pillar of pension savings might be obliged to submit an insurance return. The deadline for its submission is the same as the deadline for submitting the personal income tax return, i.e. 1 April 2014, or 1 July 2014 in case the payer filed a power of attorney authorizing the tax adviser to submit the return.

The obligation to submit an insurance return arises for, among others, taxpayers whose employers are not liable to pay their premiums on pension savings. In other words, this means employers that are not paying income tax on dependent activities and that are obliged to pay insurance premiums on pension insurance. It concerns, for example, employees of foreign employers or employees of embassies of foreign countries.

If the taxpayer is obliged to submit a personal income tax return at the same time (e.g. a taxpayer with income from self-employment that is involved in the II. pillar of pension savings), the insurance return should be a mandatory appendix to it. Otherwise, the taxpayer should submit a separate insurance return.

The liability to submit an insurance return does not apply to a payer whose insurance premiums on pension savings are paid by the employer or to a payer whose insurance premiums for the whole year are CZK 0 (e.g. due to sickness, maternity leave, unemployment, etc.).

Tomáš Hunal +420 251 152 516

Labour inspectorates will likely increase the frequency of checks We can expect an increased frequency of checks from labour inspectorates in the Czech Republic following the January session of the European Parliament (EP).These checks will function as a transparent instrument by which the Czech Republic can prove the fulfilment of the EP challenge. The interest of the EU is to capture evasions which would normally be part of the tax system and social security system. The EP’s intention is to strengthen national controlling authorities and to create an EU central supervisory authority in the future. We recommend that employers get well prepared for the possible checks.

Jana Zelová +420 251 152 567

Employees

We invite youStudyAccountingEmployeesLawTaxTopic of the month

3

Study

Economic crime is increasingly coming from the virtual world PwC‘s global economic crime survey, which is the largest study of its kind in the world, showed that 48% of companies became victims of economic crime in the Czech Republic in the past two years. But it was “only” 29% in 2011.

Like elsewhere in the world, Czech companies are increasingly being attacked by perpetrators via the internet. The significance of computer crime, which occupies the second place (31%) in the Czech Republic, is growing on a global as well as a Central European scale, but not as dramatically as it is here.

The reason for the massive increase in cybercrime is the intensifying use of modern technologies, web applications, remote accesses or the cloud. However, the speed of technological progress does not always go hand in hand with adequate security.

Study for download is available here (link can also be found on the home page www.pwc.cz)

PwC CR’s Corporate Responsibility Report for 2013 PwC CR is presenting the report on sustainable business and socially beneficial activities carried out for financial year 2013.

Our vision is to approach corporate social responsibility as an important component of our brand and make every effort to reflect this in our business focus.

We consider the knowledge, skills and experience of our people across many disciplines to be our greatest value.

With this in mind, we focus our activities on developing education and sharing experience not only via responsible business but also professional volunteering. Our key activity is mentoring programs focused in particular on newly emerging social enterprises. We help prepare business plans, and we provide consulting services in the areas of finance, tax and law. Thus, we facilitate the sustainability and competitiveness of social enterprises in the long term.

You will find more details on particular activities in our Corporate Responsibility Report for financial year 2013. www.pwc.cz/odpovednost.

“Cybercrime is dangerous also due to the fact that damaged companies need not detect ongoing attacks at all. We were advising firms to be prepared for attacks by hackers even at the turn of the millennium; now we recommend that they assume it has occurred already,”

Filip Volavka, expert on cybercrime from PwC Czech Republic

Accounting

Accounting of levies according to IFRS Companies reporting under IFRS should focus on analysing the fees, taxes and other levies to public budgets in the course of 2014. Thus, they can identify all the transactions which are to be subject to one-off reporting of expenses compared to the traditionally used uniform distribution throughout the year. The interpretation IFRIC 21 brought a new perspective on accounting obligations according to IAS 37. A number of levies paid regularly (e.g. once a year) have so far been subject to adjustments. IFRIC 21 says that the obligation arising from payment of the levy is to be reported as of the date set up by the legislation as applicable. A deeper analysis of each individual payment or fee is necessary to correctly apply the interpretation. However, if the fee is non-refundable, it is usually reported as a one-off cost as of the date when the obligation to pay it arose.

The property tax can serve as an example. The status as of 1 January is decisive. A company with a fiscal year from 1 February to 31 January will not report the prepaid property tax as an asset at the end of its fiscal year (in the amount of 11/12 of the annual tax), but the annual payment of property tax will become a one-off cost in the month of January. The property tax is not the only levy subject to IFRIC 21. It’s only one example, and it’s undeniable that there are a number of other fees and charges whose accounting will have to change. Therefore, we recommend that you do not leave the analysis of the company’s specific situation to the last minute when preparing the financial statements for 2014.

Milan Zelený

+420 251 152 088

We invite youStudyAccountingEmployeesLawTaxTopic of the month

4

We invite you

10th International Conference on Safety Management 2014 24 April 2014 in Prague, 9:00 – 19:00 Dorint Don Giovanni Prague, Vinohradská 157a, Prague 3 Registration: dph.seminare@cz.pwc.com PwC is a partner of the event

Start up your Strategic Workforce Planning 24 April in Prague, 9:30 – 12:00 PwC, Hvězdova 1734/2c, Prague 4 Seminar will be held in Czech and English Registration: zuzana.slaichova@cz.pwc.com

Spring offer of practical VAT seminars 7 April 2014 - VAT from Alpha to Omega

14 April 2014 - VAT in International trade in goods - Basic Course

28 April 2014 - Specific transactions not only for VAT specialists

6 May 2014 - VAT in International trade in goods - Advanced Course

13 May 2014 - VAT specifics for companies with a coefficient

You can find details about these and other events at www.pwc.cz/events

We invite youStudyAccountingEmployeesLawTaxTopic of the month

Contact

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

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

Věra Výtvarová 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 Officenáměstí Svobody 20, 602 00 Brno+420 542 520 111

Ostrava OfficeZámecká 20, 702 00 Ostrava+420 595 137 111

© 2014 PricewaterhouseCoopers Česká republika, s.r.o. All rights reserved. In this document, “PwC” refers to PricewaterhouseCoopers Česká republika, s.r.o., which is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity.

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