A new set of income tax amendments was passed by the parliament at the end of May. If approved by the Senate in June, most of the amendments would be effective for the 1998 tax period.

The amendments in particular cover the following areas:

* Mortgage interest deductions

More specific conditions for tax deductions of interest for individuals on construction loans, mortgage loans and other loans are stated. The interest deduction is capped at 300,000 Kc per year per immovable.

Individuals having dependent activity income will be entitled to monthly deductions of estimated interest payments against their income when calculating tax withheld by their employers.

The proposed law further provides details as to what documentation must be presented by a taxpayer to claim the deduction.

* Thin capitalisation rules

The provision regarding non-deductibility of interest on loans provided by unrelated foreign persons if the amount of the loan exceeded 10 times equity was abolished.

As result of this, if passed by the Senate, only related party financing will be subject to thin capitalisation limits. This fact may significantly increase the acceptability of financing sources from foreign banks and investors.

* Securities

A number of amendments were made in the area of securities taxation. They were mainly intended to clarify tax treatment of certain transactions such as treatment of options, accrued interest on securities, etc.

* Fixed assets

The threshold amount for qualification of expenditure as a fixed asset was increased from 20,000 to 40,000 Kc. The same limit will be used for classification of technical improvement either to expense or fixed asset categories.

As a result of this increase, if passed by the Senate, taxpayers may find it tax beneficial to review their fixed asset policies and planning.

* Social security

The provisions regarding corporate tax deductibility of unpaid social security were changed to allow deduction of late payments on a cash basis, i.e. in the tax period in which the payment was made.

Further, the amendments address the issue of such payments in the case of a legal successor.

* Tax Collection Act - provision of information

The Tax Collection Act was changed to allow a tax administrator in specific circumstances to disclose information which is generally subject to a duty of confidentiality. These circumstances relate mainly to criminal prosecutions. Further, the tax administrator is required to provide information about taxpayers to the Ministry of Interior, health insurance companies and other ministries upon request.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

For further information on the above, please contact Mr Richard Fletcher by telephone on +420 2 2440 1300 or E-mail directly to Click Contact Link