Income tax advance payments. In the framework of the measures adopted to combat the financial crisis, the Ministry of Finance has decided to cancel the obligation to pay  income tax advances for the year 2009. This decision applies to individuals with income from business activity or other self-employed activities and to corporations, provided the individuals or corporation employed a maximum of five employees as of 1 December 2008.
On its website the Ministry of Finance has answered some questions regarding the cancellation of the tax advance payments.  According to these answers, the taxpayer does not have to apply for the cancellation of prepayments which will be made automatically.
The cancellation applies to advance payments effective as of 16 March 2009 (if the taxpayer’s tax period corresponds to a calendar year) and it applies also to non tax residents.  The cancellation also applies to partners in unlimited and limited liability partnerships. Compliance with the conditions will be reviewed in respect of each individual partner.
Thin capitalisation rules. The Lower Chamber of the Czech Parliament has approved a relaxation of the rules on thin capitalisation. In future they will not apply to the financial cost of credits and loans between unrelated parties if these credits and loans are secured by a related party. The ratio between credits and loans from related parties and equity that ensures tax deductibility of financial costs is increased to 4:1. The tax non-deductibility of financial costs from subordinated credits and loans has been cancelled
The new thin capitalization rules will be valid for the tax period that started in 2009. However, according to transitory provisions, tax payers will be able to use these rules also for the tax period that started in 2008.
VAT. Furthermore Parliament approved an amendment to the VAT Act which allows the taxpayer to claim input VAT deduction on the purchase of passenger cars that will be used for business activities only. If the passenger car is used for business and non business activities, VAT deduction will be granted only to the extent in which the passenger car is used for business activities.