NSS k tvorbě daňových rezerv

SAC on the creation of tax provisions for repairs

Recently, the Supreme Administrative Court (SAC) issued a judgment 2 Afs 131/2021-39 concerning the creation of tax-deductible provisions for repairs of fixed assets.

The tax payer treated the creation of the provision for repairs as a tax-deductible expense.

The tax authorities disputed the creation of the provisions as the tax payer had not transferred the funds to a separate account within the meaning of section 7(4) of the Act on Reserves. In its decision, the Supreme Administrative Court upheld the tax administrator's view that the creation of the provisions for repairs can be considered a tax-deductible expense only if all the statutory conditions are met, including the transfer of the amount to a separate account by the deadline for filing the tax return.

The Supreme Administrative Court further stated that compliance with this condition does not only mean that the taxpayer has the required amount of funds in his bank account but points out that a separate account must be created exclusively for the deposit of funds in connection with the creation of provisions for repairs.

We would be happy to discuss this case law and its application to specific practical situations with you. If you have any questions, please contact the authors of this article or the EY tax team you are working with.

Authors:

Barbora Ptošková

Ladislava Zamazalová