Dodanovani neuhrazenych zavazku

Taxation of outstanding liabilities

Today we will focus on overdue liabilities arising from the acquisition of fixed assets.

Simply put, the Income Tax Act requires the debtor to increase the current period's accounting profit by the amount of the outstanding liabilities recorded in the debtor's accounts that are 30 months past due. Such liabilities must therefore be taxed in the income tax return.

However, the above rule does not apply to debts for which the debtor has not claimed a tax deductible expense. In this context, the question arises as to how to proceed in the case where an overdue liability (e.g. a retention payment) relates to the acquisition of fixed assets which are included in tax deductible expenses gradually by way of tax depreciation.

This issue was discussed by the Coordination Committee No 205/17.12.07. In it, the Ministry of Finance confirmed that in the given case, the procedure whereby the taxpayer taxes the overdue liabilities in one lump sum may be accepted. Only if the taxpayer proves that the conditions for a one-off taxation are not met (i.e. no tax deductible expense has been claimed or only partially claimed in respect of the liability), it is possible to tax the individual amounts in the tax returns gradually, in line with the gradual inclusion of the relevant assets into tax depreciation.

It should be noted that the conclusions of the coordination committees are not legally binding, but are generally respected by tax authorities in practice.

For the sake of clarity, we would just like to stress that the above brief commentary cannot replace a detailed tax assessment of a specific tax situation. We will be happy to help you with these and other tax aspects.

If you have any questions, please contact the authors of this article or the EY tax team with whom you regularly work.

Authors:

Vladislav Pejchal

Markéta Soukupová