News: Czech Republic

Transformation Act. The Czech Parliament approved an amendment to the Transformation Act which will bring in particular greater flexibility regarding the determination of the effective date of a transformation and more opportunities for cross-border transformations within the EU.

The new rules eliminate transformation in case the accumulated losses of the successor company reach half of its capital. In this case, the effective date must not precede the date of registration of the transformation in the commercial register and the court must be presented with a report that the transformation will not cause the bankruptcy of the successor company.

The approved amendment of the Transformation Act also regulates the deadlines for submitting the income tax return. Tax losses, provisions, reserves and other deductible items of the company being dissolved can now also be taken over if these assets and liabilities are part of the foreign fixed establishment of the succession company. This legal regulation aims at supporting the inflow of foreign investment into the Czech Republic when a company establishes its seat in the country and maintains branches in other EU member states.

Social Security. In 2012 the annual maximum assessment base for social security will be reduced to 48 times the average wage. The ceiling for the payment of social security will thus drop from CZK 1,781,280 in 2011 to CZK 1,206,576 in 2012. The maximum assessment base for health insurance remains at 72 times the average wage and will amount to CZK 1,809,864 in 2012.

Amendment of Commercial Code. The amendment of the Commercial Code effective from 1 January 2012 has been approved. The main changes are that there must be a legal reason for the use of the registered seat, for example a rent contract, during the whole period this seat is registered in the Commercial register. It will be possible to entrust a person who works for the company in an employment relationship with the management of the company.

 

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