Foreign trusts in New ways to utilise Ministry of Finance the Czech Republic

Tax, Legal & Business News
www.pwc.cz/tbn
May/June 2014
Tax, legal, accounting, advisory and assurance newsletter
Summary
›› Foreign trusts in the Czech Republic
follow rules for trust funds, under
certain conditions…
›› New ways to utilise tax losses
›› Ministry of Finance plans to up the
ante in fight against tax evasion
›› Are you a lessor collecting security
deposits? Watch out for the interest
›› President signed amendment to
Foreigners’ Act
›› Capturing building rights in
accounting
›› Studie – PwC IPO Watch: On the
European market, IPOs live again
›› Studie – Wrong people in the wrong
places costs the global economy
USD 150 billion
›› Studie – PayWell Study
and HR Controlling
›› Studie – Corporate social responsibility
›› The Academy
›› We invite you
Tax
Foreign trusts in
the Czech Republic
follow rules for trust
funds, under certain
conditions…
Foreign trusts/foundations 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 doesn’t have a legal personality
(it doesn’t 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 41/2013 33)
indicates that if an entity has sufficient
losses from previous years and shows
a positive tax base, and the tax
administrator increases the entity’s 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.
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
entity’s 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.
Tomáš Urbášek
+420 542 520 255
If you are interested in receiving Tax, Legal & Business News, please contact Michal Horáček, [email protected].
Martin Diviš
+420 251 152 574
Tax
Law
Employees
Accounting
Law
Employees
Accounting
Are you a lessor
collecting security
deposits? Watch out
for the interest
President signed
amendment to
Foreigners’ Act
Capturing building
rights in accounting
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. It’s 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 don’t 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 Masařová
+420 251 152 912
A new amendment on foreigners’
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 card—a tool for highly qualified
experts and specialists—will 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 authorities.
The amendment, which the Czech
president signed on 6 May, should take
effect at the beginning of June. Its main
goals are to implement Directive 2011/98/
EU 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 Kleinová
+420 251 152 612
Jana Zelová
+420 251 152 567
Study
The Academy
We invite you
Study
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 duration.
The consideration of building rights
in accounting opens up three basic
possibilities:
• The building rights are recorded as
a stock, are not depreciated, and are
transferred to another person with the
real estate or without it.
• A company acquired the building
rights but has no plans to build on the
land. It uses the so-called blocking
right—preventing third parties from
building on the land—which is recorded
in accounting class 02 and depreciated
for the duration of the agreement on the
transfer of building rights.
• 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 02.
Building rights are always valued in the
total amount which the rights holder is
obliged to pay to the landowner for this
right (“acquisition cost of building rights”).
Martina Behenská
+420 251 152 231
2
PwC IPO Watch: On the European
market, IPOs live again
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
11.4 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 quarter.
The 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 hasn’t
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 2.8 billion.
In the second quarter, initial offerings of at least 25 other European
companies should be carried out with potential revenues of EUR
3.8 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
Tax
Law
Employees
Accounting
Study
The Academy
We invite you
Studie
Wrong people in the wrong places costs
the global economy USD 150 billion
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 today’s world.
They enable employers to search for the most suitable candidates according
to specific requirements – 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.
Ranking by country
PayWell Study
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 were:
• Company car for at least some employees
(89% of companies)
• 5 weeks of holiday (82% of companies)
• Supplementary pension insurance (76% of companies)
PayWell helps you:
• Get a tool for fair and reliable human resource
management
• Compare your company with the competition, and set the
remuneration of key people in relation to the competition
• Get objective data from the market for setting up
an optimal remuneration strategy
You can find details and application form on
www.pwc.cz/paywell
1. Netherlands, 2. Great Britain, 3. Canada, 4. Singapore, 5. USA,
6. Australia, 7. France, 8. Germany, 9. Brazil, 10. India, 11. China
Marek Richter
+420 542 520 170
Hana Farská
+420 251 151 608
3
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 Václav
Prýmek, a partner at PwC CR, accepting nontraditional notebooks from Markéta Borecka and
Zuzka Jurova of the socially beneficial project
Forewear, which they created thanks to the
charitable activities of PwC CR.
As last year’s 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 people’s 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 www.pwc.cz/odpovednost
Tax
Law
Study
Employees
The Academy
HR Controlling
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 companywide goals.
HR Controlling provides
you with:
• A database of indicators that can
be measured in human resources
• An external benchmark where
you can measure comparables
For more information please visit
www.pwc.cz/hrcontrolling
Hana Farská
+420 251 151 608
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
– Define, Measure, Analyse,
Improve and Control.
Date: 9 - 10 June 2014,
9:00 – 16:30
Place: City Green Court,
Hvězdova 1734/2c, Prague 4
Language: Czech
Price: CZK 9,900 + VAT
How to reserve a spot?
For more information and registration,
please visit our webpage
www.pwc.cz/academy. Should you
have any questions, please write
an email to [email protected]
or contact Daria Šašková,
tel.: +420 251 152 446.
www.pwc.cz/academy
Accounting
Study
The Academy
We invite you
Business breakfast:
Labour migration in the Czech Republic
5.6. 2014 in Brno, 10am - 12pm.
Barceló Brno Palace Hotel, Šilingrovo náměstí 2/265, Brno
Registration: [email protected]
You can find details on this and other events at
www.pwc.cz/events
Tax, legal and business news
in your mobile phone or tablet for free
We invite you
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
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 www.cenaviabona.cz
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 www.pwc.cz/odpovednost
4
Prague Office
Hvězdova 2c, 140 00 Prague 4
+420 251 151 111
Brno Office
náměstí Svobody 20,
602 00 Brno
+420 542 520 111
Ostrava Office
Zámecká 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.