17.3.2020

Legislative Changes in 2020 Applicable to Natural Persons

SOCIAL INSURANCE ACT

2020 has brought a change in the minimum and maximum assessment base for social security payments. The new minimum assessment base in 2020 is EUR 506.50. The amount of payments calculated from this assessment base is EUR 167.89 per month. The new maximum assessment base for 2020 is EUR 7 091. The amount of payments calculated from this base is EUR 2,350.66.

HEALTH INSURANCE ACT

The minimum amount of health insurance advance payments has increased to EUR 70.91 in 2020.

INCOME TAX ACT

The amendment to the Income Tax Act has introduced a number of changes. We point out some of them particularly applicable to natural persons.

Personal tax rate for 2020 is as follows:br> 19% - of the part of the tax base not exceeding EUR 37,163.36
25% - of that part of the tax base exceeding EUR 37,163.36 for 2020

Since 2020, a new 15% tax rate has been introduced. This tax rate applies to legal entities with a turnover of up to EUR 100,000 a year and to entrepreneurs – natural persons with the same turnover limit. When the taxpayer is obliged to pay income tax prepayments, the tax rate applicable to turnover over EUR 100,000 will apply, as it is not known in advance, if the taxpayer will exceed a turnover of EUR 100,000.
Since 2020, the non-taxable portion of the tax base has been increased to 21 times the subsistence minimum, i.e. EUR 4 414,20.
Further changes apply to deducting the tax loss. Tax loss will only be deductible up to 50% of the tax base. It will be possible to deduct tax loss for 5 years and it will not have to be deducted evenly. The new tax deduction rules apply to losses generated after 1 January 2020.

As Regards Amendments to the Income Tax Act since 1 January 2020, we Would Like to Draw Your Attention to the Following Issues:

New depreciation group

A new depreciation group with a depreciation period of 2 years for tax purposes has been introduced since 2020. The depreciation group is identified in the Income Tax Act as depreciation group 0. It will be used to record depreciation solely of battery electric vehicles (BEV) or plug-in hybrid electric vehicles (PHEV). The source of power of BEV or PHEV may be combined with another type of fuel or power source.

Recognition of tax-deductible expenses only when paid

The extent of expenses recognised as tax-deductible only when paid has been amended. The amendment again allows the recognition of contractual penalties, late payment charges and default interest, if paid. At the same time, the range of expenses on advisory services and legal services that will only qualify as tax-deductible when paid, has been substantially extended. They include advisory services classified under Product Classification Codes 69.1, 69.2, 70.1 and 70.22, namely - Advisory and legal services, including audit, accounting and tax advice
- Business management
- Business and other management advisory services

Income tax prepayments from the limit of EUR 5,000

Since 2020, the amendment has changed the lower limit for the payment of income tax prepayments from the original EUR 2,500 to EUR 5,000. Natural persons – entrepreneurs and legal entities whose tax does not exceed EUR 5,000 will not be obliged to pay income tax prepayments for the next period.

Settlement of an obligation by a bill of exchange

The Income Tax Act expressly stipulates that the replacement of an obligation by a bill of exchange is not considered as the settlement of the obligation.

Hybrid mismatches

The amendment defines hybrid mismatches that will lead to an adjustment (increase) of the tax base of related parties as well as unrelated parties, where hybrid mismatches result in tax base reduction.