In late September, the Government approved a Ministry of Finance proposal requiring oil refineries to remit a portion of extraordinary profits generated in recent months due to conditions on the crude oil market to the state. The proposal has not yet been enacted into law; it remains subject to legislative approval, and its final wording may still be subject to change.
The state is introducing the tax due to the geopolitical crisis and the associated volatility of global crude oil prices. While the price of crude oil itself gradually declined, diesel and gasoline prices remained high. Consequently, refineries purchased cheaper crude while selling finished fuels at higher prices, driving their margins to record levels. The Ministry of Finance argues that these earnings were not generated through improved operational performance, but rather resulted from extraordinary market conditions, while households, businesses, and the state bore the burden of high fuel costs. Therefore, the tax aims to target excess, windfall profits rather than ordinary business returns—applying a principle similar to the windfall tax implemented by the Ministry of Finance in the past.
The tax will not apply to every taxpayer operating in the oil sector. It will be levied solely on entities that physically process crude oil and refine it into fuels, and only if they meet additional financial criteria: specifically, total annual revenues of at least CZK 2 billion and, at the same time, annual revenues from refining activities of at least CZK 50 million. Petrol stations and fuel distributors are explicitly excluded from the tax.
The tax will not apply to the entire margin, but only to the portion by which it increased compared to 2025. The state will collect half of this increase, setting the effective tax rate at 50%. The tax is set to apply for the tax years 2026 and 2027, and affected companies will be entitled to deduct it as a tax-deductible expense for corporate income tax calculation purposes.
According to Ministry estimates, the measure should yield approximately CZK 5.5 billion for the state budget in the current year.
During the legislative approval process, debates are expected to focus primarily on the tax applying retroactively to 2026—a period that has already largely elapsed. While the Ministry of Finance argues that windfall profits are being generated specifically in 2026 and that companies could otherwise structure their operations in advance to mitigate the tax, retroactive taxation is unlikely to meet with a favorable response from affected entities or industry experts.
This text was translated by AI.
