Tax Newsletter - Archive
Forvis Mazars Tax View - archive of tax articles
Taxation of Prostitution: Even the World’s Oldest Profession Has Tax Implications
At first glance, the question of whether income derived from prostitution can be taxed may seem like a marginal tax-law curiosity. In reality, however, recent case law of the Czech Supreme Administrative Court (hereinafter “SAC”) has opened up a much broader issue: where the moral assessment of a particular activity ends and the standard application of tax law begins.
Publication of Forms for the Top-up Tax
New Developments in the R&D Tax Deduction from 2026
As of 2026, significant changes have taken effect in the area of tax incentives for research and development (R&D). As of 2026, significant changes will take effect in the area of tax incentives for research and development (R&D). The amendment to the Income Taxes Act primarily changes the method for calculating the deduction, newly introduces the concept of a deduction groupunit, and at the same time extends the period for claiming unused deductions.
The Topic of Bad Debts and Unpaid Receivables in VAT Will Become Even More Important from 2027
The planned VAT changes in the area of bad debts and unpaid receivables linked to the Electronic Sales Reporting package (EET 2.0) will be relevant for many VAT payers, whether acting as creditors or debtors. The amended rules present an opportunity to improve cash flow on the creditor side, while at the same time increasing potential risks on the debtor side.
Proposed Changes to the Taxation of Individuals in Connection with the Introduction of EET 2.0
On 4 May 2026, the Czech government approved the draft Act on the Registration of Sales and on amendments to certain related acts, referred to as the EET 2.0 project. In addition to introducing a new legal framework for electronic sales registration, the proposal also contains relatively extensive amendments to the Income Tax Act. These changes affect not only entrepreneurs, but also employee benefits, tax reliefs and the taxation of tips.
Cross-border Remote Work and the Creation of a Permanent Establishment
In November 2025, the OECD published a long-anticipated update to the Commentary on Article 5 of the OECD Model Tax Convention on Income and on Capital (the “Commentary”). The update, among other things, significantly affects the assessment of the existence of a permanent establishment in connection with work performed from home (so-called home office arrangements) in another contracting state and responds to the increasing prevalence of flexible working arrangements in the international environment. For the first time, it provides more specific guidance intended to contribute to a higher level of legal certainty in the application of double taxation treaties.
Penalties for Failure to Notify Tax-Exempt Income in the Case Law of the Supreme Administrative Court
Tax-exempt income does not mean that no tax-related obligations arise in connection with it. Where an individual receives tax-exempt income exceeding CZK 5,000,000 in aggregate, an obligation arises under Section 38v of the Czech Income Taxes Act to notify such income to the tax authority. The notification must be submitted no later than till the end of the deadline for filing the personal income tax return for the tax period in which the income was received, regardless of whether the taxpayer is otherwise required to file a tax return.
Key Changes in Old-Age Pensions as of 2026
In 2024, a pension reform was adopted, with its individual measures being gradually implemented between 2025 and 2027. The primary objective of the legislative changes is to strengthen the financial sustainability of the pension system. At the same time, the reform was designed to preserve continuity with the existing legal framework and to avoid significant structural interventions. The reform is therefore primarily based on adjustments to specific system parameters. Below we provide an overview of the most significant changes that have already entered into force and whose effects will become more pronounced, in particular for insured persons and applicants for an old-age pension as of 1 January 2026, together with an outline of measures planned for 2027.
Changes in the Categorization of Accounting Entities and New Statutory Audit Thresholds
The recent amendment to Act No. 563/1991 Coll., on accounting introduces substantial changes intended primarily to reduce the administrative burden on small and medium-sized enterprises. The legislative initiative was largely driven by the significant inflationary pressures observed in 2021 and 2022, which resulted in nominal increases in companies’ revenues and asset values without a corresponding proportional expansion in their actual economic scale or operational activity. Consequently, many entities were formally reclassified into higher statutory categories and became subject to more stringent regulatory requirements, despite the absence of genuine structural growth.
Is the Reimbursement of Costs for Legal Representation by an Attorney Subject to VAT?
In its recent judgment in case C 744/23 Zlakov, the Court of Justice of the European Union stated that the reimbursement of legal costs by the opposing party, in a situation where a party to the proceedings is represented pro bono by an attorney, constitutes a taxable transaction for VAT purposes.