Implementation of the Anti Tax Avoidance Directive

In connection to the implementation of the Anti Tax Avoidance Directive (further only ATAD), the draft law which provides for changes in some laws on taxes starting in 2019 has been sent by the Ministry of Finance for a follow-up. The draft contains changes regarding not only the Act on Income Tax but also the Tax Code, for example. The experts are now awaiting further developments in suspense.

One of the proposed changes are restrictions on eligibility of excessive loan expenditure. The current wording of the Act on Income Tax does not include a general rule limiting the eligibility of loan expenditure, i.e. the possibility of stating them in the tax base. The draft suggest a provision which demands the economic revenue to be increased by the difference between excessive loan expenditure and the limit of eligibility of the excessive loan expenditure. The limit of eligibility of this expenditure is stated at 30 % of the earnings before interest, taxes, and depreciation (EBITDA) or the amount of CZK 80.000.000, depending n which of these amounts is higher. Excessive loan expenditure is to be understood as tax eligible loan expenditure reduced by taxable loan revenue.

This is only the first draft of the new law. We will keep you informed about the future developments.