The changes brought by the consolidation package concern a wide range of users, including legal entities. We offer a summary of the fundamental changes in this article.
Mode of exclusion of unrealized exchange rate differences
According to the original legislation, which was effective until the end of 2023, exchange rate differences formed part of the tax base. Whether it was realized or unrealized exchange rate differences, in the case of exchange rate losses, it was a tax-effective expense. In the case of exchange rate gains, it was always taxable income. However, the approval of the consolidation package brought about a new regime regarding the taxation of unrealized exchange rate differences, where accounting entities can exclude these exchange rate differences from the tax base.
The unrealized exchange rate difference arises as a result of the obligation to revalue foreign currency assets and liabilities as of the balance sheet date. On the basis of revaluation, exchange rate differences arise. Taxpayers can enter the so-called the regime of exclusion of unrealized exchange differences, when they have the option to exclude (not include) unrealized exchange differences in the tax base.
The essence of the exclusion of these unrealized exchange rate differences is that they become a tax expense, or taxable income, only at the moment of „transformation“ into a realized exchange rate difference. Entry into the regime, however, has its own rules – ie. timely notification of the intention to use the regime, within three months from the first day of the tax period, to the relevant tax administrator.
Functional currency
For many years, it was mandatory by law to keep accounts in Czech currency. If the accounting unit also used a foreign currency for accounting, it had to keep accounting in Czech currency at the same time. The possibility of keeping accounts in the so-called functional currency. Accounting units can therefore keep accounts in euros or dollars, for example.
In order for accounting entities to keep accounts in another currency, it should be the functional currency of the accounting entity. The functional currency is then considered to be the currency that is the main currency of the given environment in which the accounting unit normally operates.
Although accounting entities can keep accounts in the functional currency, for tax purposes they must continue to use reporting in Czech crowns – for example, for the purposes of value added tax.
Changes in extraordinary depreciation
Relatively fundamental changes also occurred in the area of extraordinary depreciation. It is now possible to apply the so-called extraordinary depreciation only for emission-free vehicles that are or will be purchased in the period from January 1, 2024 to December 31, 2028. Taxpayers who want to apply this regime must meet the conditions set by law.
It must be a taxpayer who is the first depreciator, the property must be depreciated without interruption up to 100% of the entry price, within 24 months. In the first twelve months, taxpayers apply depreciation evenly up to 60% of the entry price, in the immediately following twelve months they apply depreciation evenly up to 40% of the entry price.
The important thing is that extraordinary depreciation cannot be interrupted and is determined with precision for whole months. In addition, the taxpayer has the obligation to start depreciation in the month following the day on which the conditions for depreciation were met. Calculated depreciation is rounded up to whole crowns.
