When calculating Czech taxable income, tangible assets and certain intangible assets owned by an enterprise may be depreciated over their normal useful life using the straight-line method or an accelerated depreciation method.
Further, assets having an economic useful life of more than one year and acquisition price greater than CZK 80,000 are considered as tangible assets for depreciation purposes. The threshold is increased from CZK 40,000 to CZK 80,000 in the tax package for 2021 and will apply retrospectively from 2020.
The assets are classified into 6 asset groups based on the depreciation rates or minimum depreciation period. The following are the applicable rates and the minimum depreciation period (years) for the 6 asset groups.
|Assets||Rates (%)||Minimum depreciation period (years)|
|Office equipment and certain light machinery (Group 1)||3%||3|
|Cars, trucks, buses, airplanes, tractors, furniture, and optical and electrical equipment (Group 2)||5%||5|
|Elevators, escalators, electric motors, and heavy machinery (Group 3)||10%||10|
|Wooden buildings, pipelines, and machinery and equipment providing energy (Group 4)||20%||20|
|General buildings (except those listed in Group 4 and 6), roads, bridges, tunnels (Group 5)||30%||30|
|Office buildings, hotel buildings, shopping malls (Group 6)||50%||50|
Intangible assets that are either acquired from a third party or developed internally for the purpose of trading, with an acquisition price greater than CZK 60,000 and an expected useful life of more than one year can be amortized for tax purposes. Intangible assets include software, valuable rights, intangible results of research and development (R&D), and similar rights.
As a part of the Tax Package for 2021, the intangible assets category is removed for amortization purposes. As such, accounting depreciation for intangible assets may be claimed as a deductible expense, which applies retroactively for intangible assets acquired in 2020.
Previously, amortization was calculated on intangible assets under the tax laws as follows:
- Where the license for the intangible asset was for a limited number of years, the annual tax amortization was based on the period of the license agreement; and
- In other cases, amortization was based on the type of asset as follows:
- audio-visual works were amortized over at least 18 months;
- software and results of R&D were amortized over at least 36 months; and
- other intangible assets were amortized over at least 72 months.
Under the accelerated method, depreciation for the first year is calculated by dividing the cost of the asset by the applicable coefficient. For subsequent years, accelerated depreciation is calculated by multiplying the residual tax value of the asset by two and then dividing by the applicable coefficient, which is reduced by the number of years for which the asset has already been depreciated.
The Tax Package for 2021, introduced accelerated depreciation for tangible assets included in the first and second groups (see above) acquired between 1 January 2020 and 31 December 2021 as follows:
- Tangible assets included in the first group i.e., office equipment and certain light machinery can be depreciated over 1 year instead of 3 years; and
- Tangible assets included in the second group i.e., cars, trucks, buses, airplanes, tractors, furniture and optical and electrical equipment can be depreciated over 2 years instead of 5 years. A depreciation of up to 60% of the entry price is allowed in the first year.