Schaffer & Partner: Experts to assess tax deductions for research and development
Investments in research and development can be used by companies as a major way to save money on taxes, because tax deductions for research and development may represent one of the significant items reducing the tax base. Until now the entitlement concerning tax deductions for research and development within tax returns has been assessed by tax administrators. Using the information available, tax administrators decided whether the companies really performed research and development and whether they were entitled to use such tax deductions. However, the judgment of the Supreme Administrative Court (SAC) Ref. No. 10 Afs 24/2014-119 has considerably changed the existing procedure used by tax administrators. The SAC came to the conclusion that tax administrators in most cases are not able to properly assess specific technical evidence based on which the entitlement to tax deductions should be considered. Therefore, in the SAC’s view, an independent expert should be appointed to adequately assess the relevant cases.
Raising the minimum wage
From January 2016, the monthly and hourly minimum wage will be increased in the Czech Republic due to a new government regulation. There will be an increase in the minimum hourly rate from the current CZK 55 to CZK 58.70 and in the monthly minimum rate from CZK 9,200 to CZK 9,900. This will be a further increase since the beginning of 2015. Despite this increase in the minimum wage, the Czech Republic is still among the countries with the lowest statutory minimum wage rate within the European Union, thereby allowing entrepreneurs to use skilled workforce while minimizing fixed costs.
What is also being discussed is a further increase in the minimum wage in the future. The minimum wage could thus rise up to 40 per cent of the average wage, which is currently CZK 25.306 per month. Although such an increase would motivate higher employment, it could in fact also lead to further use of illegal employment (“Švarc” system) and to the risk of inspections by the competent authorities. If perhaps some entrepreneurs want solve the increase in wage costs by reducing headcount, it is necessary to take into account the strict protection stipulated by the Labour Code so as to avoid risks of litigation for invalid termination of employment and compensation. Both of these situations (possibility of cooperation with sole traders and termination of employment contracts) require caution to ensure that the costs ultimately saved are not negligible compared to other costs incurred as a result of underestimating the risks.