Tax on unexpected profit

A new tax on unexpected profit should become effective on 1 January 2023. The third reading of the relevant parliamentary bill - which includes voting on individual amendments - was held on Friday 4 November 2022.

The administrator of the new tax will be the Specialised Financial Office and the tax itself will have to be reported in a special unexpected profit tax return. The unexpected profit tax rate will be 60 per cent. The unexpected profit tax will be due by the same deadlines as corporate income tax and calculated from the general tax base. Also, a deposit in respect of tax on unexpected profit tax will be introduced, which will be payable during 2023.

Payers of tax on unexpected profit tax will include institutions such as a bank which receives net yearly interest revenues in the amount of CZK 6 billion during the first accounting period ending 1 January 2021 and whose net yearly interest revenues amounts to at least CZK 50 million between 2023 and 2025.

A taxpayer can become also a non-bank entity if either it itself or all members of the consolidated group to which it belongs received decisive revenues amounting to at least CZK 2 billion during the first accounting period ending January 2021 and those revenues are generated by the following decisive activities: (i) coal mining and coal processing, or oil and gas extraction, (ii) the production of coke or refined petroleum products, (iii) the generation, transmission and distribution of electricity (with certain exceptions), (iv) the production of gas or the distribution of gas fuel through networks, (v) the sale of liquid and gas fuels and related products on a wholesale basis, or (vi) pipeline transportation by oil pipeline or gas pipeline. At the same time, it must have realised (on its own) revenues from the above-mentioned activities amounting to at least CZK 50 million.

An even stricter regime will be applied to mining companies and companies that produce coke and refined oil products. Such companies will be subject to the unexpected profit tax if their revenues from the given activities are at least CZK 50 million during the period 2023-2025 and at the same time their revenues from the given activities constitute at least 25 per cent of their annual aggregate net turnover during the first accounting period ending 1 January 2021.