Czech Republic: When expenses are tax deductible | KPMG | GLOBAL

Czech Republic: Case law expands when expenses are tax deductible

Czech Republic: When expenses are tax deductible

A new case law development may afford more opportunities with respect to claiming tax deductible expenses in the Czech Republic.

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A provision of the income tax law allows taxpayers to treat expenses with “directly related revenue” as tax deductible even when such expenses would otherwise be regarded as non-tax deductible under the income tax law. Although worded quite broadly, the income tax law provision has been interpreted restrictively by the tax administration in the past years. As a result, taxpayers often have adopted a conservative approach to claiming deductions for expenses—an approach that is in line with the tax administration’s interpretations.  

The recent case law examines the connection between the write-off of a receivable and the insurance settlement received in connection with receivables insurance in a specific case.

KPMG observation

The reasoning from the case law may be extended to numerous other practical situations, and while each case is unique, specific arguments for linking expenses and revenues must always be reviewed. The case law applies to the wording in effect until 2014, but there could be some arguments that it would also be applied analogously to later periods as well. 

 

Read an August 2017 report [PDF121 KB] prepared by the KPMG member firm in the Czech Republic

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