Masaryk University
Faculty of Economics and Administration
Department of Finance
MPF_ATAX TAXATION
WORKBOOK
Brno 2017
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CONTENT
Part I. Fundamentals of international taxation ……………………………………………………………………………….. 3
Task I.1. Multiple choice questions ……………………………………………………………………………………….... 3
Part II. Personal income tax ………………………………………………………………………………………………………..... 13
Task II.1. Multiple choice questions ……………………………………………………………………………………… 13
Task II.1. Examples with calculus …………………………………………………………………………………………. 15
Part III. Corporate income tax ………………………………………………………………………………………………………. 28
Task III.1. Multiple choice questions ……………………………………………………………………………………... 28
Task III.1. Examples with calculus ………………………………………………………………………………………… 30
Part IV. Value added tax …………………………………………………………………………………………………………………37
Task IV.1. Multiple choice questions ……………………………………………………………………………………….37
Task IV.1. Examples with calculus ………………………………………………………………………………………… 43
Part V. Excise duties …………………………………………………………………………………………………………………….. 47
Task V.1. Multiple choice questions ……………………………………………………………………………………… .47
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Part I. Fundamentals of international taxation
Task I.1. Give answers to multiple choice questions. Only one correct answer is possible.
1. Which of the following statements correctly explains the difference between tax evasion and tax
avoidance?
a) Both tax evasion and tax avoidance are illegal, but tax evasion involves providing National Tax Office
with deliberately false information.
b) Tax evasion is illegal, whereas tax avoidance involves the minimization of tax liabilities by the use of
any lawful means.
c) Both tax evasion and tax avoidance are illegal, but tax avoidance involves providing National Tax
Office with deliberately false information.
d) Tax avoidance is illegal, whereas tax evasion involves the minimization of tax liabilities by the use of
any lawful means.
2. Which of the following statements correctly explains the difference between tax and fee?
a) Both tax and fee are obligatory irrecoverable amounts collected by the National Tax Office, but tax is
more or less regularly collected from the incomes of economic subjects.
b) Both tax and fee are collected by the National Tax Office, but tax is obligatory amount which arises
from the incomes of economic subjects.
c) Both tax and fee are irrecoverable amounts collected regularly by the National Tax Office, but in case
of fee economic subjects are eligible to ask for some consideration.
d) Both tax and fee are collected by the National Tax Office, but fees are recoverable amounts.
3. Which of the following statements correctly explains substance of particular tax functions?
a) All three functions – fiscal, regulation and stimulation – affect the effectiveness of economy, but only
fiscal function deals with redistribution of funds raised.
b) All three functions – fiscal, regulation and stimulation – affect the effectiveness of economy, but only
stimulation function is designed to insure incomes for state and municipal budgets.
c) Regulation function allows to transfer money between economical subjects and public funds.
d) Stimulation function allows to transfer money between economical subjects and public funds.
4. Which of the following statements correctly explains substance of correction components?
a) Correction components are some lawful possibilities for the taxpayer to minimize his tax liabilities,
which, however, may sometimes have a reverse effect.
b) Correction components are some unlawful possibilities for the taxpayer to minimize his tax
liabilities.
c) Correction components are some lawful and unlawful possibilities for the taxpayer to minimize his
tax liabilities.
d) Correction components are some lawful possibilities for the taxpayer to avoid his tax liabilities.
5. Czech tax administration knows two types of taxpayers:
a) (1) a natural person whose income, property or legal acts (legal transactions) are objects of taxation,
and (2) a legal entity that has responsibility to calculate the tax, collect it or withheld it and transfer it
in time to the tax administrator.
b) (1) a legal entity whose income, property or legal acts (legal transactions) are objects of taxation, and
(2) a legal entity that has responsibility to calculate the tax, collect it or withheld it and transfer it in
time to the tax administrator.
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c) (1) a natural person and legal entity whose income, property or legal acts (legal transactions) are
objects of taxation, and (2) a legal entity that has responsibility to calculate the tax, collect it or
withheld it and transfer it in time to the tax administrator.
d) (1) a natural person and legal entity whose income, property or legal acts (legal transactions) are
objects of taxation, and (2) a natural person and a legal entity that has responsibility to calculate the
tax, collect it or withheld it and transfer it in time to the tax administrator.
6. Which of the following statements correctly explains substance of tax base?
a) Tax base stands for the quantity of the object of taxation.
b) Tax base stands for the condition of tax payment.
c) Tax base stands for the amount of tax payment
d) Tax base stands for the quantity of tax reductions and exemptions.
7. Which of the following statements correctly explains substance of particular tax rates?
a) Regressive tax rate sets lower percentage for higher tax base.
b) Digressive tax rate sets lower percentage for higher tax base.
c) Digressive tax rate sets lower percentage for lower tax base.
d) Regressive tax rate sets higher percentage for lower tax base.
8. Which of the following statements correctly explains substance of conditions of tax payment?
a) Conditions of payment stand for terms of tax payment; some taxes are paid in one term, others can
be paid in several part payments; advance payments are not allowed.
b) Conditions of payment stand for terms of tax payment; some taxes are paid in one term, others can
be paid in several part payments; some payments are made in advance.
c) Conditions of payment stand for terms of tax payment; all payments are paid in one term and
advance payments are not allowed.
d) Conditions of payment stand for terms of tax payment; all payments are paid in several terms and
advance payments are not allowed.
9. Which of the following statements correctly names tax administrators in the Czech Republic?
a) In the Czech Republic there is only one tax administrator – National Tax Office.
b) In the Czech Republic there are several tax administrators – National Tax Office, courts or customs
offices.
c) In the Czech Republic there are several tax administrators – National Tax Office, courts or customs
offices - and the latter two (courts and customs) are subjected to the National Tax Office.
d) In the Czech Republic there are several tax administrators – National Tax Office, courts or customs
offices - and all are equally subjected to Ministry of Finance.
10. Which of the following statements correctly explains the difference between direct and indirect taxes?
a) Both direct and indirect taxes are paid by an individual or organization to the imposing entity, but an
indirect tax cannot be shifted to another individual or entity.
b) Both direct and indirect taxes are paid by an individual or organization to the imposing entity, but a
direct tax cannot be shifted to another individual or entity.
c) Both direct and indirect taxes are paid by an individual or organization to the imposing entity, but
direct taxes can also be defined as fees that are levied equally upon taxpayers, no matter their
income.
d) Both direct and indirect taxes are paid by an individual or organization to the imposing entity, but
direct taxes increase the overall price of labor, consumption and capital.
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11. Which of the following statements correctly describes the success of convergence of systems of direct and
indirect taxation across EU member-states?
a) Both systems – DT and inDT – have been harmonized to a large extent across EU member-states.
b) Both systems – DT and inDT – remain almost the sole responsibility of individual EU member states.
c) inDT system has been harmonized to a large extent across EU member-states and DT system remains
almost the sole responsibility of individual EU member states.
d) DT system has been harmonized to a large extent across EU member-states and inDT system remains
almost the sole responsibility of individual EU member states.
12. Which of the following statements correctly defines tax resident in the Czech Republic?
a) Tax residents – natural persons with a residential or permanent address in the CR and taxable
income arising from sources in the CR.
b) Tax residents – natural persons with a residential or permanent address in the CR and taxable
income arising from sources in the CR and abroad.
c) Tax residents – natural persons and legal entities with taxable income arising from sources in the CR
regardless of their residential or permanent address (for natural persons) and country of domicile
(for legal entities).
d) Tax residents – legal entities domiciled in the CR with taxable income arising from sources in the CR.
13. Which of the following statements correctly describes the role of OECD and EU in international
regulation of double taxation and tax planning activities of MNCs?
a) Due to its longstanding expertise (e.g. Model Tax Treaty of 1963, Model Tax Convention of 1992,
BEPS project of 2012) today OECD is playing a leading role in international regulation of double
taxation and tax planning activities of MNCs, including regulation of such relations between OECD
member countries, between OECD member countries and non-member countries, and even between
non-member countries.
b) Due to its longstanding expertise (e.g. Model Tax Treaty of 1963, Model Tax Convention of 1992,
BEPS project of 2012) today EU is playing a leading role in international regulation of double taxation
and tax planning activities of MNCs, including regulation of such relations between EU member
countries, between EU member countries and non-member countries, and even between nonmember
countries.
14. Which of the following statements correctly describes substance of transfer price?
a) A transfer price is what one unit of a business charges another unit of the same business for a good or
service. The transfer price is usually close to the prevailing market rate when different divisions of
the same business are evaluated separately for profit and loss.
b) A transfer price is what one independent business charges another independent business for a good
or service. The transfer price is market rate when individual businesses are evaluated for profit and
loss.
c) A transfer price is what one unit of a business charges another unit of the same business for a good or
service. The transfer price is substantially above the prevailing market rate when different divisions
of the same business are evaluated separately for profit and loss.
d) A transfer price is what one independent business charges another independent business for a good
or service. The transfer price is substantially below the prevailing market rate when individual
businesses are evaluated for profit and loss.
15. What is the change in consolidated profit and overall tax rate paid by MNC if a manufacturer, which is a
resident in country A with CIT of 40%, changes its selling unit price for finished product for an associated
distributor, which is a group company resident in country B with CIT of 10%, from 550 to 350. Cost of a
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manufacturer in country A and selling price of an associated distributor in country B are 300 and 600
respectively?
a) The consolidated profit remains 200, but the overall tax rate increases from 15% to 35%.
b) The consolidated profit changes from 195 to 255 and the overall tax rate increases from 15% to 35%.
c) The consolidated profit changes from 195 to 255 and the overall tax rate decreases from 35% to
15%.
d) The consolidated profit remains 200, but the overall tax rate decreases from 35% to 15%.
16. Which of the following statements correctly describes BEPS?
a) BEPS is special project launched by OECD addressing six key areas of concern in field of base erosion
and profit shifting: mismatches in entity and instrument characterization, taxing profits from the
delivery of digital goods and service, intra-group debt financing and captive insurance, transfer
pricing, harmful preferential tax regimes, preferential selective regimes in countries attracting
investment away from countries with an ordinary tax system.
b) BEPS is special project launched by EU addressing six key areas of concern in field of base erosion
and profit shifting: mismatches in entity and instrument characterization, taxing profits from the
delivery of digital goods and service, intra-group debt financing and captive insurance, transfer
pricing, harmful preferential tax regimes, preferential selective regimes in countries attracting
investment away from countries with an ordinary tax system.
c) BEPS is special project launched by EU addressing six key areas of concern in field of base erosion
and profit shifting: tax revenues, tax sovereignty, tax fairness for EU member and non-member
countries, tax competition, tax discrimination, taxation of labor and capital.
d) BEPS is special project launched by OECD addressing six key areas of concern in field of base erosion
and profit shifting: tax revenues, tax sovereignty, tax fairness for OECD member and non-member
countries, tax competition, tax discrimination, taxation of labor and capital.
17. Which of the following statements correctly describes the arm’s length principle?
a) The arm's length principle is based on the comparison of conditions that are made or imposed
between two related enterprises (seller and buyer) with conditions which would be made between
two independent enterprises, then any profit which would, but for those conditions, have accrued to
one of the enterprises, but, by reason of those conditions, have not so accrued, may be included in the
profits of the enterprise (seller) and taxed accordingly.
b) The arm's length principle is based on the comparison of conditions that are made or imposed
between two independent enterprises (seller and buyer) with conditions which would be made
between two related enterprises, then any profit which would, but for those conditions, have accrued
to one of the enterprises, but, by reason of those conditions, have not so accrued, may be included in
the profits of the enterprise (seller) and taxed accordingly.
c) The arm's length principle is based on the comparison of conditions that are made or imposed
between two related enterprises (seller and buyer) with conditions which would be made between
two independent enterprises, then any profit which would, but for those conditions, have accrued to
one of the enterprises, but, by reason of those conditions, have not so accrued, should not be included
in the profits of the enterprise (seller) and taxed accordingly.
d) The arm's length principle is based on the comparison of conditions that are made or imposed
between two independent enterprises with conditions which would be made between two related
enterprises, then any profit which would, but for those conditions, have accrued to one of the
enterprises, but, by reason of those conditions, have not so accrued, should not be included in the
profits of the enterprise (seller) and taxed accordingly.
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18. Which of the following statements correctly describes four freedoms upon which the European Union is
based?
a) free movement of goods and services, free movement of people and free capital flows.
b) free competition, free trade, free financial markets and free justice.
c) free fiscal and monetary policies, free trade and free capital flows
d) free fiscal and monetary policy, free competition and free employment
19. Which of the following institutions ensure functioning of the EU fiscal system? a)
the EU Council through Economic and Financial Affairs Configuration (EcoFin) and the EU Court of
Justice.
b) the EU Council through Tax Office and the EU Court of Justice.
c) the EU Council through Financial Markets Supervisory Board and the EU Court of Justice,
d) the EU Council through Commerce Chamber and the EU Court of Justice
20. Which of the following statements correctly describes the success of convergence of systems of direct and
indirect taxation across EU member-states?
a) Both systems – DT and inDT – have been harmonized to a large extent across EU member-states.
b) Both systems – DT and inDT – remain almost the sole responsibility of individual EU member states.
c) inDT system has been harmonized to a large extent across EU member-states and DT system remains
almost the sole responsibility of individual EU member states.
d) DT system has been harmonized to a large extent across EU member-states and inDT system remains
almost the sole responsibility of individual EU member states.
21. Which of the following directives are aimed to harmonize DT across EU member-states?
a) the parent-subsidiary directive, the merger directive, the interest and royalty directive.
b) the profit shifting directive and base erosion directive.
c) the merger directive, the goodwill directive, the interest and royalty directive.
d) the parent-subsidiary directive, the profit shifting directive.
22. Which of the following statements correctly explains the difference between tax systems in the EU and in
the OECD member-states?
a) Both tax systems in the EU and OECD member-states are developed according to the same pattern major
tax burden is placed on labor, but in the one of the EU such burden is lower than that one in
the OECD.
b) Both tax systems in the EU and OECD member-states are developed according to the same pattern major
tax burden is placed on labor, but in the one of the EU such burden is higher than that one in
the OECD.
c) Both tax systems in the EU and OECD member-states are developed according to the same pattern major
tax burden is placed on consumption, but in the one of the EU such burden is lower than that
one in the OECD.
d) Both tax systems in the EU and OECD member-states are developed according to the same pattern major
tax burden is placed on consumption, but in the one of the EU such burden is higher than that
one in the OECD.
23. Which of the following statements correctly explains the difference between the efficiency of tax systems
in the EU and in the OECD member-states?
a) Tax rates across EU are higher than in OECD, but overall EU economy’s growth rate is lower than that
one of OECD.
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b) Tax rates across EU are lower than in OECD, but overall EU economy’s growth rate is higher than that
one of OECD.
c) Tax rates across EU are the same as in OECD, but overall EU economy’s growth rate is lower than that
one of OECD.
d) Tax rates across EU are higher than that one in OECD, but overall EU economy’s growth rate is the
same as that one of OECD.
24. Which of the following statements correctly describes the state the EU fiscal system?
a) Despite some small remaining differences, in general, the tax systems of the European countries are
highly harmonized.
b) There seems to have been relatively little movement toward tax harmonization except in a few areas.
c) Some parts of EU fiscal system are highly harmonized (e.g. tax ratios, tax structure by legal and
economic categories), while others still require further convergence (e.g. allocation of revenues
across levels of government).
d) There is no convergence between fiscal systems of EU member-states – they are subject of
sovereignty.
25. Which of the following statements correctly describes the state fiscal systems in groups of European
countries at the beginning of 1970s (pre-convergence state)?
a) Nordic countries had the highest fiscal burden, given by heavy taxation of consumption; Rhine
countries had above average fiscal burden (in terms of cross-European comparison), given mainly by
heavy social contributions; Anglo-Saxon countries and Mediterranean countries had an average and
below average fiscal burdens respectively.
b) Nordic countries had the highest fiscal burden, given by heavy taxation of consumption; Anglo-Saxon
countries had above average fiscal burden (in terms of cross-European comparison), given mainly by
heavy social contributions; Rhine countries and Mediterranean countries had an average and below
average fiscal burdens respectively.
c) Nordic countries had the highest fiscal burden, given by heavy taxation of labor and capital; AngloSaxon
countries had above average fiscal burden (in terms of cross-European comparison), given
mainly by heavy social contributions; Rhine countries and Mediterranean countries had average
fiscal burdens.
d) Nordic countries had the highest fiscal burden, given by heavy taxation of consumption; Anglo-Saxon
countries had above average fiscal burden (in terms of cross-European comparison), given mainly by
heavy social contributions; Rhine countries and Mediterranean countries had average fiscal burdens
respectively.
26. Which of the following statements correctly describes the effect which a shift to “dual income tax system”
had on fiscal systems of individual groups of European countries at the beginning of 1970s?
a) The shift to the “dual income tax system” had the largest effect for fiscal systems of Mediterranean
countries by rising their national tax burdens up to the European average; the lowest effect was for
Anglo-Saxon and Nordic countries, whose tax burdens were left at the starting point.
b) The shift to the “dual income tax system” had the largest effect for fiscal systems of Rhine countries
by rising their national tax burdens up to the European average; the lowest effect was for AngloSaxon
and Mediterranean countries, whose tax burdens were left at the starting point.
c) The shift to the “dual income tax system” had the largest effect for fiscal systems of Nordic countries
by rising their national tax burdens even further; the lowest effect was for Anglo-Saxon and
Mediterranean countries, whose tax burdens were left at the starting point.
d) The shift to the “dual income tax system” had the largest effect for fiscal systems of Mediterranean
countries by rising their national tax burdens up to the European average; the lowest effect was for
Anglo-Saxon and Rhine countries, whose tax burdens were left at the starting point.
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27. Which of the following statements correctly describes the changes in fiscal policies of EU member-states
which were for first time introduced in 1980s and implemented in 1990-2000s?
a) rate-cutting in combination with base-broadening reforms both in the personal and corporate
income taxes; reduction of the tax burden on lower-paid labor; the reorientation of business tax
incentives to selective objectives and the use of the tax system to correct market failures (for
instance R&D, SMEs etc).
b) rate-increase in combination with base-cutting reforms both in the personal and corporate income
taxes; increase of the tax burden on high-paid labor; the reorientation of business tax incentives to
selective objectives and the use of the tax system to correct market failures (for instance R&D, SMEs
etc).
c) rate-cutting in combination with base-broadening reforms both in the labor and consumption taxes;
reduction of the tax burden on lower-paid labor; the reorientation of business tax incentives to
selective objectives and the use of the tax system to correct market failures (for instance R&D, SMEs
etc).
d) rate-increase in combination with base-cutting reforms both in the corporate income and capital
income taxes; increase of the tax burden on high-paid labor; the reorientation of business tax
incentives to selective objectives and the use of the tax system to correct market failures (for
instance R&D, SMEs etc).
28. Which of the following statements correctly describes modern challenges which fiscal systems of EU
member-states face today?
a) Decreasing European economy’s growth rate in combination with the highest in the world tax
burden.
b) High tax burden imposed on SMEs and intangible assets.
c) Tax competition between EU member-states, base evasion and profit shifting by MNCs.
d) All mentioned above.
e) All mentioned in A and B.
29. Which of the following statements correctly describes the modern tax mix of EU?
a) Taxes on labor contribute for more than half of the total tax revenue, consumption taxes for about
one-third and taxes on capital for just about a quarter of the total tax revenue.
b) Taxes on consumption contribute for more than half of the total tax revenue, labor taxes for about
one-third and taxes on capital for just about a quarter of the total tax revenue.
c) Taxes on corporate income contribute for more than half of the total tax revenue, consumption taxes
for about one-third and taxes on personal income for just about a quarter of the total tax revenue.
d) Taxes on labor contribute for more than half of the total tax revenue, consumption taxes and capital
taxes account for the remaining share in the equal proportion.
30. Which of the following statements correctly describes the modern state of PIT (personal income tax) in
EU?
a) The average effective tax rate on labor in the EU area appears to be higher than in the OECD area,
even if during the 1990s and 2000s many EU countries introduced measures to lower the tax burden,
mainly financed through the shifting of the tax burden from labor to capital and to activities that
cause pollution.
b) The average effective tax rate on labor in the EU area appears to be lower than in the OECD area as a
result of measure which during the 1990s and 2000s many EU countries introduced in order to lower
the tax burden mainly through the shifting of the tax burden from labor to capital and to activities
that cause pollution.
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c) The average effective tax rate on labor in the EU area appears to be lower than in the OECD area as a
result of measure which during the 1990s and 2000s many EU countries introduced in order to lower
the tax burden mainly through the shifting of the tax burden from personal income to corporate
income and to activities that cause pollution.
d) The average effective tax rate on labor in the EU area appears to be higher than in the OECD area,
even if during the 1990s and 2000s many EU countries introduced measures to lower the tax burden,
mainly financed through the shifting of the tax burden from personal income to corporate income
and to activities that cause pollution.
31. Which of the following statements correctly describes the modern model of PIT in EU?
a) Today all EU member states use the pure comprehensive personal income tax model.
b) Today all EU member states use hybrid personal income tax model.
c) Today some EU member states the pure comprehensive personal income tax model, others use
hybrid personal income tax model.
32. Which of the following statements correctly describes the effect of family status on personal income tax
liability in EU?
a) Family status is taken into account, but only in form of tax schedule that varies according to family
status (tax unit is an individual or a family).
b) Family status is taken into account, but only in form of tax credits and allowances related to the
presence of dependent children.
c) Family status is taken into account, but only in form of cash transfers related to the presence of
dependent children.
d) Family status is taken into account in all forms - tax schedules, tax credits and allowances, and cash
transfers.
33. Which of the following statements correctly describes the modern model of CIT in EU?
a) Majority of EU countries have adopted a digressive corporate income tax. Generally these measures
are targeted to stimulate entrepreneurship and to correct financial market failures that can create
obstacles to SMEs in raising new capital.
b) Majority of EU countries have adopted a flat corporate income tax. Generally these measures are
targeted to stimulate entrepreneurship and to correct financial market failures that can create
obstacles to SMEs in raising new capital.
c) Majority of EU countries have adopted a progressive corporate income tax. Generally these measures
are targeted to stimulate entrepreneurship and to correct financial market failures that can create
obstacles to SMEs in raising new capital.
34. Which of the following statements correctly describes the substance of tax competition among EU
member states?
a) Due unanimity of requirement in the area of direct taxation, particularly corporate income taxation,
many states start to compete with each other for attraction and retention of investments.
b) Due unanimity of requirement in the area of direct taxation, particularly personal income taxation,
many states start to compete with each other for attraction and retention of human capital and
investments.
c) Due unanimity of requirement in the area of indirect taxation, particularly VAT, many states start to
compete with each other for attraction and retention of capital.
d) Due unanimity of requirement in the area of direct taxation, particularly social contributions, many
states start to compete with each other for attraction and retention of human capital and
investments.
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35. Which of the following statements correctly defines Central and Eastern European economies (given by
V4 countries)?
a) CEE - a group of countries that underwent a transformation, or a transition, from being centrally
planned to becoming market economies. Today all of them are EU members.
b) CEE - a group of countries that underwent a transformation, or a transition, from being centrally
planned to becoming market economies. Today most of them are EU members.
c) CEE - a group of countries that underwent a transformation, or a transition, from being centrally
planned to becoming market economies. All of them are CIS (Commonwealth of Independent States)
members, many of them are also EU members.
d) CEE - a group of countries that underwent a transformation, or a transition, from being centrally
planned to becoming market economies. All of them are CIS (Commonwealth of Independent States)
and EEU (Eurasian Economic Union) members, many of them are also EU members.
36. Which of the following statements correctly describes the USSR economic model?
a) All of the nation’s wealth was owned by the state. The citizens were not expected to save and
accumulate assets because the state, often through the public enterprises in which most citizens
worked, would take care of them in old age or in illness. They did not need to save as a precaution for
being unemployed, because there was no official unemployment. The state enterprises were required
to absorb any citizen who wanted a job.
b) Most of the nation’s wealth was owned by the state. Although the citizens were not expected to save
and accumulate assets because the state, often through the public enterprises in which most citizens
worked, would take care of them in old age or in illness, nevertheless all were required to pay social
contributions into National Pension Fund.
c) Most of the nation’s wealth was owned by the state. Although the state enterprises were required to
absorb any citizen who wanted a job, still there was hidden unemployment – there were always some
number of people who were working in an industry that didn't utilize their skills properly and those
who refused to work.
d) All of the nation’s wealth was owned by the state. The citizens were not expected to save and
accumulate assets because the state, often through the public enterprises in which most citizens
worked, would take care of them in old age or in illness. Although the state enterprises were required
to absorb any citizen who wanted a job, still there was hidden unemployment – always there was
some number of people who were working in an industry that didn't utilize their skills properly and
those who refused to work.
37. Which of the following statements correctly describes the USSR labor tax model?
a) Taxes on labor income were collected directly from the state enterprises, by simply adjusting the
cash transfers that they received from the central bank to pay the wage bill.
b) Taxes on labor income were paid by the state enterprises, by transferring some fraction of gross
profit into national and local budgets.
c) There were no labor income taxes in the USSR.
38. Which of the following statements correctly describes the modern particularities of CEE tax systems?
a) CEE tax burdens are at EU average, high budgetary deficits, above average taxation of labor and
consumption, move towards fiscal decentralization, large number of environmental taxes.
b) CEE tax burdens are above EU average, low budgetary deficits, below average taxation of labor and
consumption, move towards fiscal decentralization, large number of environmental taxes.
c) CEE tax burdens are below EU average, high budgetary deficits, below average taxation of labor and
consumption, move towards fiscal centralization, large number of environmental taxes.
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d) CEE tax burdens are at EU average, low budgetary deficits, taxation of labor, consumption and capital
is at EU average, move towards fiscal decentralization, large number of environmental taxes.
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Part II. Personal income tax
Task II.1. Give answers to multiple choice questions. Only one correct answer is possible.
1. Which of the following statements gives correct example(s) of income from dependent activity?
a) agriculture production, forestry and fish farming.
b) winnings from lotteries, betting and other similar games.
c) rewards paid to members of the authorities of legal entities.
d) private life insurance benefit.
2. Which of the following statements correctly describes income from dependent activity?
a) The income is even 1% of the market price of a motor vehicle in each month if the employee can use
it for business.
b) The income is even 1% of the input price of a motor vehicle in each month if the employee can use it
for business and for himself.
c) The income is even 1% of the market price of a motor vehicle in each month if the employee can use
it for business and for himself.
d) The income is even 1% of the input price of a motor vehicle in each month if the employee can use it
for business.
3. Which of the following statements gives correct example of income that is not liable to the personal
income tax from dependent activity?
a) motor vehicle for work and personal needs.
b) contribution to school tuition.
c) meal vouchers.
d) rent of a flat (over 3500 CZK).
4. Which of the following statements gives correctly describes the withhold payroll advance (tax advance
from employee’s wage)?
a) The withhold advance is 15% of sum of the net wage and social security and health insurance which
the employer has to pay for the employee.
b) The withhold advance is 15% of sum of the gross wage and social security and health insurance
which the employer has to pay for the employee.
c) The withhold advance is 15% of sum of the net wage and social security and health insurance which
the employee has to pay for the employee.
d) The withhold advance is 15% of sum of the gross wage and social security and health insurance
which the employee has to pay for the employee.
5. Which of the following statements gives correct example(s) of income from self-employment?
a) agriculture production, forestry and fish farming.
b) winnings from lotteries, betting and other similar games.
c) rewards paid to members of the authorities of legal entities.
d) private life insurance benefit.
6. Which of the following statements gives correctly describes the approach applied to calculation of
expenses incurred while generating income from self-employment?
a) Taxpayer must always estimate accurately direct expenses incurred to generate, assure and maintain
the incomes. Lump sum expenses are not allowed in the Czech Republic.
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b) Taxpayer must always estimate accurately direct and indirect expenses incurred to generate, assure
and maintain the incomes. Lump sum expenses are not allowed in the Czech Republic.
c) Taxpayer must always estimate accurately direct expenses incurred to generate, assure and maintain
the incomes. Lump sum expenses are allowed in the Czech Republic.
d) Taxpayer must always estimate accurately direct and indirect expenses incurred to generate, assure
and maintain the incomes. Lump sum expenses are allowed in the Czech Republic.
7. Which of the following statements gives correct example(s) of income from capital assets?
a) agriculture production, forestry and fish farming.
b) winnings from lotteries, betting and other similar games.
c) rewards paid to members of the authorities of legal entities.
d) private life insurance benefit.
8. Which of the following statements gives correctly describes rental income?
a) Income from rent is income from the rent of immovable and movable property, except for occasional
rent.
b) Income from rent is income from the rent of immovable property, except for occasional rent.
c) Income from rent is income from the rent of movable property, except for occasional rent.
d) Income from rent is income from the rent of immovable and movable property.
9. Which of the following statements gives correct example(s) of other income (i.e. not from employment,
self-employment, capital assets or rent)?
a) agriculture production, forestry and fish farming.
b) winnings from lotteries, betting and other similar games.
c) rewards paid to members of the authorities of legal entities.
d) private life insurance benefit.
10. Which of the following statements gives correctly describes condition(s) under which gratitous income
can be tax-exempt in the Czech Republic?
a) Gratitous income can be tax-exempt if it is obtained from: (1) relative in a straight line; (2) the
person with whom the taxpayer has lived for at least 3 years before obtaining gratuitous income in
joint household; and (3) acquired on occasion provided their value does not reach 15 000 CZK.
b) Gratitous income can be tax-exempt if it is obtained from: (1) relative in a secondary line; (2) the
person with whom the taxpayer has lived for at least 2 years before obtaining gratuitous income in
joint household; and (3) acquired on occasion provided their value does not reach 15 000 CZK.
c) Gratitous income can be tax-exempt if it is obtained from: (1) relative in a straight and secondary
line; (2) the person with whom the taxpayer has lived for at least 1 year before obtaining gratuitous
income in joint household; and (3) acquired on occasion provided their value does not reach 15 000
CZK.
d) Gratitous income can be tax-exempt if it is obtained from: (1) relative in a straight and secondary
line; (2) the person with whom the taxpayer has lived for at least 3 years before obtaining gratuitous
income in joint household; and (3) acquired on occasion provided their value does not reach 15 000
CZK.
11. Which of the following statements gives correctly describes the participation in the Czech social security
system?
a) Foreigners who work for a Czech employer or are on the payroll of a branch office of a foreign
company do not participate in the Czech social security system.
15
b) All foreigners who work for a Czech employer or are on the payroll of a branch office of a foreign
company participate in the Czech social security system.
c) Foreigners who work for a Czech employer do not participate in the Czech social security system, but
those who are on the payroll of a branch office of a foreign company in the Czech Republic participate
in the Czech social security system.
d) Foreigners who work for a Czech employer participate in the Czech social security system, but those
who are on the payroll of a branch office of a foreign company in the Czech Republic – they do not
participate in the Czech social security system.
12. Which of the following statements gives correctly describes the assessment bases of social security and
health insurance for employees in the Czech Republic?
a) The assessment base of social security and health insurance for employee is sum up of his income
that is subjected of the personal income tax.
b) The assessment base of health insurance for employee is sum up of his income that is subjected of the
personal income tax. The assessment base of social security is his partial tax base for the income
from dependent activity.
c) The assessment base of social security for employee is sum up of his income that is subjected of the
personal income tax. The assessment base of health insurance is his partial tax base for the income
from dependent activity.
d) The assessment base of social security and health insurance for employee is his partial tax base for
the income from dependent activity.
Task II.2. Provide calculus and give answers to examples below.
Example No. 1
Vladimir works as CFO for Sreder Brno, a.s. (here and after “Sreder”). He lives in Hradec Kralove, but he
works in Brno five days per week. Vladimir has signed the declaration for personal tax credits with Sreder. He
earns CZK110,000 per month. He does not have children and he is not married. He pays mortgage: in 2017 he
paid CZK240,000, CZK198,000 out of which were used for reduction of his mortgage liability.
The following information is applicable to the calculation of Vladimir’s 2017 payroll tax:
(1) Sreder rented a flat in Brno for Vladimir and paid CZK12,500 per month for it.
(2) Sreder provided Vladimir with a business car Skoda Fabia for business and private use. Skoda was
acquired by the Company in 2012 for CZK270,000. It accounting residual vale in 2017 is CZK120,000
and its tax residual value is CZK85,000.
(3) Sreder paid 50% of Vladimir’s 6-months membership in Big One Fitness club. The total price of the
membership was CZK5,000.
(4) Sreder paid CZK250 per 1 hour each month for Vladimir’s massage session with physiotherapist.
(5) Sreder contributed CZK60,000 to Vladimir’s private health insurance during the year.
(6) During the year Vladimir was sent on a business trip to Graz and Linz. The whole business trip had
duration 5 working days. Sreder provided Vladimir with meal voucher in amount of CZK1500 per
each day of the business trip. Additionally to this Sreder also provided cash for daily needs in amount
of CZK700 per each day of the business trip. Vladimir participated neither on meal vouchers nor on
cash for daily needs. Note: the ER between EURO and CZK on the date of meal voucher and cash issue
slip was 1 euro = 27 CZK.
(7) Sreder paid exam fee in amount of CZK2,100 for Vladimir to become a certified accountant.
(8) Sreder paid CZK25,500 for Vladimir’s weekend stay in Grand hotel in Munich as business annual
partners meeting organized by Sreder.
16
Task 1: Calculate the amount of social security and health care insurance contributions payable by
Vladimir and by Sreder for 2017.
Task 2: Calculate the payroll tax payable by Vladimir in 2017.
Example No. 2
Pavel works as project manager for Siemens, a.s. (here and after “Siemens”). He lives in Rousinov, but he
works in Brno five days per week. Pavel has signed the declaration for personal tax credits with Siemens. He
earns CZK58,000 per month. He is married to Jana and they have two children: 10-year-old daughter and 2
year-old son. Jana is housewife and in 2017 she had occasional annual income in amount of CZK34,000.
The following information is applicable to the calculation of Pavel’s 2017 payroll tax:
(1) Siemens paid private carrier for Pavel’s 125 round trips from Rousinov where he has permanent
residence to Brno in 2017. The contract price paid by the company was CZK27,000.
(2) Siemens paid 100% of Pavel’s 6-months membership in Big One Fitness club. The total price of the
membership was CZK5,000.
(3) Siemens contributed CZK1,000 each month starting from September for placement of Pavel’s 10-year
daughter in private secondary school.
(4) Siemens contributed CZK3,000 each month starting from May for placement of Pavel’s 2-year son in
private kindergarten.
(5) During the year Pavel was sent on three business trips: to Prague, Olomouc and to Ostrava. Each trip
had duration 1 working day. Siemens provided Pavel with meal voucher in amount of CZK140 per
each business trip. Pavel contributed CZK57 to each meal voucher.
(6) Siemens paid CZK1,500 for Pavel’s rent of canoe for participation in canoe race at Prehrada in Brno
as team building activity of the Company.
(7) Siemens paid Pavel CZK50,000 as bonus for bringing his friend as new colleague in IT.
Task 1: Calculate the amount of social security and health care insurance contributions payable by
Pavel and by Siemens, a.s. for 2016.
Task 2. Calculate total tax basis of Pavel for 2017.
Example No. 3
Jakub works as assembling specialist for Zetor, a.s. (here and after “Zetor”). He lives and works Brno five days
per week. Jakub has not signed the declaration for personal tax credits with Zetor. He earns CZK35,000 per
month. He lives with Veronika in common household but they are not married yet. Veronika is high-school
student.
The following information is applicable to the calculation of Jakub’s 2017 payroll tax:
(1) Zetor rented a room for Jakub in the dormitory in Prague where Jakub spends 2 days per week while
working in Prague new manufacturing facility of Zetor. The rest of time (3 days) Jakub works in Brno.
Zetor paid CZK3,500 per accommodation in Prague per each month.
(2) Zetor provided Jakub with a business car Skoda Roomster for business use. Skoda was acquired by
Zetor in 2012 for CZK270,000. It accounting residual vale in 2017 is CZK120,000 and its tax residual
value is CZK141,000.
(3) Zetor paid 30% of Jakub’s 1-hour massage session with physiotherapist each month. Total price of 1hour
session was CZK350.
17
(4) Zetor often supplies tractors and their spare parts to CIS countries. Its assembling specialists are
often sent on business trips to these countries. Because of this Zetor contributed CZK1,500 each
month from September to December for Jakub’s participation in Russian language courses organized
by private language school.
(5) During the year Jakub was sent on a business trip to Tokyo. The whole business trip had duration 15
working days. Zetor provided Jakub with meal voucher in amount of CZK1,625 per each day of the
business trip. Additionally to this Zetor also provided cash for daily needs in amount of CZK650 per
each day of the business trip. Jakub participated neither on meal vouchers nor on cash for daily
needs. Note: the ER between USD and CZK on the date of meal voucher and cash issue slip was 1 usd =
27 CZK.
(6) Zetor paid CZK6,500 for Jakub’s participation in 2-day training at private courses about changes in
TUD and GOST 2016.
(7) Zetor paid CZK500 for Jakub’s participation in 5-day Healthy days program organized Zetor.
Task 1: Calculate the amount of social security and health care insurance contributions payable by
Jakub and by Zetor for 2017.
Task 2: Calculate the payroll tax payable by Jakub in 2017.
Example No. 4
Jan works as technical engineer for ABB, a.s. (here and after “ABB”). He lives in Slavkov u Brna, but he works
in Brno five days per week. Jan has not signed the declaration for personal tax credits with ABB. He earns
CZK35,000 per month. He is divorced and he has 5-year old son who lives with his ex-wife.
The following information is applicable to the calculation of Jan’s 2017 payroll tax:
(1) ABB paid private carrier for Jan’s 250 round trips from Slavkov u Brna where he has permanent
residence to Brno in 2017. The contract price paid by the company was CZK50,000.
(2) ABB paid 50% of Jan’s’s 6-months membership in Big One Fitness club. The total price of the
membership was CZK5,000.
(3) ABB contributed CZK31,000 to Jan’s private health and CZK18,000 to Jan’s private pension insurance
during the year.
(4) During the year Jan was sent on three business trips: to Prague, Olomouc and to Ostrava. Each trip
had duration 1 working day. ABB provided Jan with meal voucher in amount of CZK200 per each
business trip. Jan contributed CZK50 to meal vouchers.
(5) ABB paid CZK1,500 for Jan’s rent of canoe for participation in canoe race at Prehrada in Brno as team
building activity of ABB.
(6) ABB paid Jan CZK20,000 as bonus for bringing his friend as new colleague in IT.
Task 1: Calculate the amount of social security and health care insurance contributions payable by Jan
and by ABB for 2017.
Task 2. Calculate total tax basis of Jan for 2017.
Example No. 5
Libor works as senior financial controller for EXE, a.s. (here and after “EXE”) He lives in Hradec Kralove, but
he works in Brno five days per week. Libor has signed the declaration for personal tax credits with EXE. He
earns CZK89,000 per month. Libor is married to Marta and they have two sons: 2-year-old Filip and 7-yearold
Kristof. Marta is housewife. Libor pays mortgage: in 2017 he paid CZK240,000, CZK198,000 out of which
were used for reduction of his mortgage liability.
18
The following information is applicable to the calculation of Libor’s 2017 payroll tax:
(1) EXE paid 100% of Libor’s 6-months membership in Big One Fitness club. The total price of the
membership was CZK5,000.
(2) EXE paid 50% of Libor’s 1-hour massage session with physiotherapist each month. Total price of 1hour
session was CZK300.
(3) EXE contributed CZK53,000 to Libor’s private health insurance and CZK37,000 to Libor’s private
pension insurance during the year.
(4) EXE contributed CZK3,000 each month starting from September for placement of Libor’s 2-year son
in private kindergarten.
(5) EXE contributed CZK1,500 each month starting from September for placement of Libor’s 7-year son
in private elementary school.
(6) During the year Libor was sent on three business trips: to Prague, Olomouc and to Ostrava. Each trip
had duration 1 working day. EXE provided Libor with meal voucher in amount of CZK140 per each
business trip. Libor contributed CZK57 to each meal voucher.
(7) EXE paid exam fee in amount of CZK2,100 for Libor to become certified accountant.
Task 1: Calculate the amount of social security and health care insurance contributions payable by
Libor and by EXE, a.s. for 2017.
Task 2: Calculate the payroll tax payable by Libor in 2017.
Example No. 6
Filip works as IT specialist for Zdas, a.s. (here and after “Zdas”). He lives in Ostrava, but he works in Brno two
days per week. Filip has not signed the declaration for personal tax credits with Zdas. He earns CZK43,000
per month. Filip lives with Katka in common household (they are not married) with two children: 2-year old
Martin as their common child and 8-year-old Pavla from Katka’s previous marriage. Katka works as bank
clerk in KB, a.s. In his free time, Filip provides web design services as private entrepreneur.
The following information is applicable to the calculation of Filip’s 2017 payroll tax from employment in
Zdas:
(1) Zdas provided Filip with a business car Skoda Fabia for business and private use. Skoda was acquired
by the Company in 2012 for CZK270,000. It accounting residual vale in 2017 is CZK120,000 and its
tax residual value is CZK120,000.
(2) During the year Filip was sent on three business trips: to Prague, Olomouc and to Ostrava. Each trip
had duration 1 working day. Zdas provided Filip with meal voucher in amount of CZK200 per each
business trip. Filip contributed CZK50 to meal vouchers.
(3) Zdas gave to Filip two theater tickets in value of CZK300 each as Christmas gift.
(4) Zdas paid Filip CZK20,000 as bonus for bringing his friend as new colleague in IT.
The following information is applicable to the calculation of Filip’s 2017 payroll tax from self-employment as
web designer:
I. Incomes earned by Filip during 2017:
i. Filip designed 10 web pages for CZK5,000 each
ii. Filip designed 2 logos for CZK15,000 each
iii. Filip built 7 search engines for CZK7,500 each
iv. Filip built and installed 5 pay-per-click marketing systems for CZK18,000 each
19
v. Filip delivered 2 e-commerce integrations for CZK25,000 each
II. Filip’s documentary costs incurred while providing web design services during 2017:
i. a drive into town by car to meet some of Filip’s clients: total 12,000 km, to clients 7,800 km;
0.4 l * 31 CZK/l
ii. a trip to the shop for milk and bread during Filip’s work day: CZK150 per day, 231 days per
year
iii. cost of utilities when Filip used his home as his office: CZK3,500 per month
iv. cost of Internet when Filip used his home as his office: CZK800 per month
v. cost of mobile when Filip used his personal mobile for calls with his clients: CZK1,000 per
month
vi. cost of ticket to public transport when Filip travelled by public transport to meet some of his
clients: CZK4,600 per year
vii. an eye test to track Filip’s eyesight: CZK5,200 per year
Note: From November to March (inclusive) Filip had been travelling across South America. During this period
Filip had unpaid leave at work.
Task 1: Calculate the amount of social security and health care insurance contributions payable by
Filip as employee of Zdas and by Zdas for Filip for 2017.
Task 2. Calculate the payroll tax payable by Filip as self-employed web designer for 2017.
Example No. 7
Michal works as installation engineer at Skoda Mlada Boleslav, a.s. (here and after “Skoda”). He lives and
works in Mlada Boleslav. Michal has signed the declaration for personal tax credits with Skoda, a.s. He earns
CZK37,000 per month. He is married to Nadia and they have two daughters: 6-year-old Anna and 18-year old
Olga. Nadia works as HR specialist at Klaydon International, a.s. and she doesn’t use child tax credits (i.e. child
tax credits are used by Michal).
As part of its employment benefit program Skoda contributed CZK12,000 to Michal’s private health insurance
during the year. Also Skoda gave to Michal two theater tickets in value of CZK300 each as Christmas gift.
In his free time, Michal provides car repairing services as private entrepreneur and on performance
agreement. In 2017 Michal provided 5 hours of car repairing service each month for Kladno, s.r.o. for CZK500
per hour.
The following information is applicable to the calculation of Michal’s 2017 payroll tax from self-employment
as private car repairer:
I. Incomes earned by Michal during 2017:
i. Michal delivered 1,040 hours of break repairing works for CZK700 per hour
ii. Michal delivered 56 of oil changes for CZK1,500 per change
iii. Michal delivered 760 hours of tire repairs for CZK700 per hour
iv. Michal delivered 36 checkups of preventive maintenance for CZK1,000 per checkup
v. Michal delivered 18 pre-purchase checkups for CZK2,000 per checkup
II. Michal’s documentary costs incurred while providing car repairing services during 2017:
20
i. a drive into town by car to meet some of Michal’s clients: total 35,000 km, to clients 27,000
km; 0.4 l * 31 CZK/l
ii. a trip to the shop for milk and bread during Michal’s work day: CZK120 per day, 5*56 days
per year
iii. cost of utilities when Michal used his home as his office: CZK5,500 per month,
iv. cost of Internet when Michal used his home as his office: CZK300 per month
v. cost of mobile when Michal used his personal mobile for calls with his clients: CZK450 per
month
vi. cost of ticket to public transport when Michal travelled by public transport to meet some of
his clients: CZK1,600 per year
vii. vertebrologist test to track Michal’s degenerative disc disease: CZK7,200 per year
viii. instruments bought by Michal in 2017 for providing car repairing services: CZK89,000 per
year
ix. work supplies (e.g. oil, chemicals) bought by Michal in 2017 for providing car repairing
services: CZK77,030 per year
Task 1: Calculate the amount of social security and health care insurance contributions payable by
Michal as employee of Skoda and by Skoda for Michal for 2017.
Task 2. Calculate total tax basis of Michal for 2017.
Example No. 8
Lucie works at the position of Claims control associate at Knoft International, a.s. (here and after “Knoft”). She
lives permanently in Rousinov, but works in Brno five days per week. Lucie hasn’t signed the declaration for
personal tax credits with Knoft, a.s. She earns CZK25,000 per month. She is not married and she has no
children.
The following information is applicable to the calculation of Lucie’s 2017 payroll tax:
(1) Knoft paid private carrier for 125 round trips for Lucie from Rousinov where she has permanent
residence to Brno in 2017. The contract price paid by Knoft was CZK27,000.
(2) Knoft paid 50% of Lucie’s 6-months membership in Big One Fitness club. The total price of the
membership was CZK5,000.
(3) Knoft paid CZK300 for Lucie’s participation in the Christmas party organized by Knoft.
In her free time, Lucie as private entrepreneur provides services of dance instructor. The following
information is applicable to the calculation of Lucie’s 2017 payroll tax from self-employment as dance
instructor:
I. Incomes earned by Lucie during 2017:
i. Lucie provided 208 hours of group dance classes for CZK150 per hour
ii. Lucie provided 54 hours of individual dance classes for CZK350 per hour
iii. Lucie designed 6 dances for CZK5,000 per dance
iv. Lucie provided 186 hours of meditation classes for CZK800 per hour
v. Lucie provided 42 hours of lecture on dance history for CZK350 per hour
II. Lucie’s documentary costs incurred while providing dance instructor services during 2017:
i. a drive into town by car to meet some of Lucie’s clients: 7,200 km * 0.4 l * 31 CZK/l
ii. a trip to the shop for milk and bread during Lucie’s work day: CZK125 per day, 285 days per
year
21
iii. cost of utilities and Internet when Lucie used her home as her office (to work online and to
conduct meditation classes): CZK2,300 per month
iv. cost of mobile when Lucie used her personal mobile for calls with her clients: CZK350 per
month
v. cost of ticket to public transport when Lucie travelled by public transport to meet some of her
clients: CZK4,600 per year
vi. music and exercise videos bought by Lucie in 2017 for preparing and conducting of her
classes: CZK3,250 per year
vii. dancing wear and scenic costumes bought by Lucie in 2017 for preparing and conducting of
her classes: CZK21,400 per year
viii. continuing education courses and seminars bought by Lucie in 2017 for preparing and
conducting of her classes: CZK15,500 per year
Note: From June to August (inclusive) Lucie had been travelling across Central Asia. During this period Lucie had
unpaid leave at work.
Task 1: Calculate the amount of social security and health care insurance contributions payable by
Lucie as employee of Knoft and as self-employed dance instructor for 2017.
Task 2. Calculate the payroll tax payable by Lucie as employee of Knoft for 2017.
Example No. 9
Tomas works as constructor engineer for Siemens, a.s. (here and after “Siemens”). He lives and works in Brno.
He earns CZK35,000 per month. He is married to Linda and they have 7-year-old daughter. Linda teaches at
public primary school and she uses child tax allowance for their daughter.
The following information is applicable to the calculation of Tomas’s 2017 payroll tax:
(1) Siemens paid CZK250 per 8 hour each month for Tomas’s English classes in private language school.
(2) Siemens paid CZK1,500 for Tomas’s rent of canoe for participation in canoe race at Prehrada in Brno
as team building activity of Siemens.
In his free time, Tomas as private entrepreneur provides services of fitness trainer. The following information
is applicable to the calculation of Tomas’s 2017 payroll tax from self-employment as fitness trainer:
I. Incomes earned by Tomas during 2017:
i. Tomas provided 23 fitness consultations for CZK1,200 per consultation,
ii. Tomas provided 260 hours of group fitness training for CZK400 per hour
iii. Tomas provided 104 hours of individual fitness training for CZK700 per hour
iv. Tomas provided 15 nutrition consultations for CZK1,000 per consultation
v. Tomas delivered 156 hours of massage therapy for CZK500 per hour
II. Tomas’s documentary costs incurred while providing fitness trainer services during 2017:
i. a drive into town by car to meet some of Tomas’s clients: 11,400 km * 0.2 l * 31 CZK/l
ii. a trip to the shop for milk and bread during Tomas’s work day: CZK75 per day, 5*28 days per
year
iii. cost of utilities when Tomas used his home as his office (to store equipment, to do massage
and to work online): CZK4,200 per month
22
iv. cost of Internet when Tomas used his home as his office (to give on-line consultations):
CZK500 per month
v. cost of mobile when Tomas used his personal mobile for calls with his clients: CZK600 per
month
vi. cost of ticket to public transport when Tomas travelled by public transport to meet some of
his clients: CZK2,100 per year
vii. music and exercise videos bought by Tomas in 2017 for preparing and conducting of his
trainings: CZK3,250 per year
viii. sports wear bought by Tomas in 2017 for preparing and conducting of his trainings:
CZK4,100 per year
ix. continuing education courses and seminars bought by Tomas in 2017 for preparing and
conducting of his trainings: CZK7,500 per year
Task 1: Calculate the amount of social security and health care insurance contributions payable by
Tomas as employee of Siemens and as self-employed fitness trainer for 2017.
Task 2. Calculate the payroll tax payable by Tomas as self-employed fitness trainer for 2017.
Example No. 10
Josef works as IS architect for Malware Protection, s.r.o. (here and after “Malware”). He lives and works in
Brno. Josef has signed the declaration for personal tax credits with Malware. He earns CZK41,000 per month.
He is not married and he has no children.
The following information is applicable to the calculation of Josef’s 2017 payroll tax:
(1) Malware provided Josef with a business car (Skoda Fabia) for business and private use. Skoda was
acquired by the Company in 2012 for CZK270,000. It accounting residual value in 2017 is
CZK120,000 and its tax residual value is CZK56,000.
(2) Malware paid CZK500 Josef’s weekend stay in the Forest Camp as Team building activity organized
by Malware.
In his free time, Josef as private entrepreneur provides web development. The following information is
applicable to the calculation of Joesf’s 2017 payroll tax from self-employment as web developer:
I. Incomes earned by Josef during 2017:
i. Josef provided website management services: 3 one-time actions for CZK20,000 per action
and permanent annual maintenance for CZK3,000 per month for 2 permanent clients
ii. Josef delivered 2 website relocations for CZK18,000 per relocation
iii. Josef delivered social network management services: 3 one-time actions for CZK25,000 per
action and permanent annual maintenance for CZK3,500 per month for 1 permanent client
iv. Josef developed 2 custom apps for CZK 30,000 per app
v. Josef delivered 4 website disaster recoveries for CZK15,000 per recovery
II. Josef’s documentary costs incurred while providing web development services during 2017:
i. a drive into town by car to meet some of Josef’s clients: total 9,450 km, to clients 2,100 km;
0.2 l * 31 CZK/l
ii. a trip to the shop for milk and bread during Josef’s work day: CZK110 per day,
iii. cost of utilities when Josef used his home as his office: CZK5,000 per month
iv. cost of Internet when Josef used his home as his office: CZK800 per month
23
v. cost of mobile when Josef used his personal mobile for calls with his clients: CZK550 per
month
vi. cost of ticket to public transport when Josef travelled by public transport to meet some of his
clients: CZK4,600 per year
vii. vertebrologist test to track Josef’s degenerative disc disease: CZK5,200 per year
Note: From January to February (inclusive) Josef had been hiking in New Zealand. During this period Josef had
unpaid leave at work.
Task 1: Calculate the amount of social security and health care insurance contributions payable by
Josef as employee of Malware and by Malware for Josef for 2017.
Task 2: Calculate total tax basis of Josef for 2017.
Example No. 11
Marketa works at the position of HR manager for DSG International, a.s. (here and after “DSG”). She lives and
works in Prague permanently. Martina has signed the declaration for personal tax credits with DSG
International. She earns CZK43,000 per month. She is divorced and she lives with her 16-year-old daughter in
common household.
The following information is applicable to the calculation of Marketa’s 2017 payroll tax:
(1) DSG paid 50% of Marketa’s 6-months membership in Big One Fitness club. The total price of the
membership was CZK5,000.
(2) DSG paid 30% of Marketa’s 1-hour massage session with physiotherapist each month. Total price of
1-hour session was CZK350.
(3) During the year Marketa was sent on three business trips: to Prague, Olomouc and to Ostrava. Each
trip had duration 1 working day. DSG provided Marketa with meal voucher in amount of CZK200 per
each business trip. Marketa contributed CZK50 to meal vouchers.
(4) DSG paid exam fee in amount of CZK2,100 for Marketa to become certified HR manager.
(5) DSG paid CZK500 for Marketa’s participation in 5-day Healthy days program (class of smoothy
making, class of yoga, check with optometrist etc.) organized by DSG.
In her free time, Marketa provides couching and training services for 3d parties. In 2017 Marketa provided
the following services:
a) Under performance agreement with Origami, a.s., Marketa delivered 20 hours of HR training services
for total contract price of CZK27,000.
b) Under contract of employment with ABY, a.s. Marketa delivered 10 hours of couching services for
managers each month during 2017 for CZK500 per hour.
Task 1: Calculate the amount of social security and health care insurance contributions payable by
Marketa as employee of DSG and by DSG for Marketa for 2017.
Task 2: Calculate total tax basis of Marketa for 2017.
Example No. 12
Igor works as Data warehouse specialist for Erixon DSG, a.s. (here and after “Erixon”). He lives and works in
Prague. He earns CZK45,000 per month. He is married to Petra and they have 18-year-old daughter. Petra
works as Invoice control specialist in Erixon.
24
The following information is applicable to the calculation of Igor’s 2017 payroll tax:
(1) Erixon paid 50% of Igor’s 1-hour massage session with physiotherapist each month. Total price of 1hour
session was CZK300.
(2) Erixon paid CZK750 for Igor’s weekend stay in the Forest Camp as Team building activity organized
by Erixon.
In his free time, Igor provides web design and related services. In 2017 Igor provided 20 hours of web-design
services for CZK27,000 to Asko, s.r.o. under performance agreement.
The following information is applicable to the calculation of Igor’s 2017 payroll tax from self-employment as
web designer:
I. Incomes earned by Igor during 2017:
i. Igor designed 10 web pages for CZK5,000 per page
ii. Igor designed 2 logos for CZK15,000 each
iii. Igor optimized 7 search engines for CZK7,500 per engine
iv. Igor installed 5 pay-per-click marketing systems for CZK18,000 per installation
v. Igor delivered 2 e-commerce integrations for CZK25,000 per integration
II. Igor’s documentary costs incurred while providing web design services during 2017:
i. a drive into town by Igor’s private car to meet some of his clients: total 12,000 km, to clients
7,800 km; 0.4 l * 31 CZK/l
ii. a trip to the shop for milk and bread during Igor’s work day: CZK150 per working day
iii. cost of utilities when Igor used his home as his office: CZK3,500 per month
iv. cost of Internet when Igor used his home as his office: CZK800 per month
v. cost of mobile when Igor used his personal mobile for calls with his clients: CZK1,000 per
month
vi. cost of ticket to public transport when Igor travelled by public transport to meet some of his
clients: CZK4,600 per year
vii. an eye test to track Igor’s eyesight: CZK5,200 per year
Note: From January to April (inclusive) Igor had been travelling across South America. During this period Igor
had unpaid leave at work.
Task 1: Calculate the amount of social security and health care insurance contributions payable by
Igor as employee of Erixon and as self-employed web developer for 2017.
Task 2. Calculate the payroll tax payable by Igor as employee of Erixon for 2017.
Example No. 13
Jana works as IS fraud analyst for Vemos, a.s. (here and after “Vemos”). She lives and works in Ostrava, Jana
has not signed the declaration for personal tax credits with Vemos. Her gross wage is CZK32,000 per month.
Jana is divorced and she lives with her 15 year-old son in common household.
The following information is applicable to the calculation of Jana’s 2017 payroll tax:
(1) During 2017 Jana was sent on three business trips: to Prague, Olomouc and to Ostrava. Each trip had
duration 1 working day. Vemos provided Jana with meal voucher in amount of CZK200 per each
business trip. Jana contributed CZK50 to meal vouchers.
25
(2) Vemos gave to Jana two theater tickets in value of CZK300 each as Christmas gift.
In her free time, Jana provides web development and related services as private entrepreneur. The following
information is applicable to the calculation of Jana’s 2017 payroll tax from self-employment:
I. Incomes earned by Jana during 2017:
i. Jana delivered website management services: 4 one-time actions for CZK20,000 per action
and permanent annual maintenance for CZK3,000 per month to 2 permanent clients
ii. Jana delivered 2 website relocations for CZK18,000 each
iii. Jana delivered social network management: 1 one-time actions for CZK25,000 and permanent
annual maintenance for CZK3,500 per month to 4 permanent clients
iv. Jana developed 2 custom apps for CZK30,000 each
v. Jana delivered 4 website disaster recoveries for CZK15,000 per recovery
II. Jana’s documentary costs incurred while providing web development services during 2017:
i. a drive into town by car to meet some of Jana’s clients: total 9,450 km, to clients 2,100 km;
0.2 l * 31 CZK/l
ii. a trip to the shop for milk and bread during Jana’s work day: CZK110 per work day
iii. cost of utilities when Jana used her home as her office: CZK5,000 per month
iv. cost of Internet when Jana used her home as her office: CZK800 per month
v. cost of mobile when Jana used her personal mobile for calls with her clients: CZK550 per
month
vi. cost of ticket to public transport when Jana travelled by public transport to meet some of her
clients: CZK4,600 per year
vii. an eye test to track eyesight test to track Jana’s degenerative eye disease: CZK3,100 per year
Besides programming and machine learning, Jana is interested in investing. Five years ago she accomplished
investing courses from FIO Banka, a.s., and bought 53 stocks of AVG, a.s. In 2017 AVG, a.s. paid CZK150 of
dividend per each of its stocks issued and hold by shareholders.
Note: From September to October (inclusive) Jana had been hiking in New Zealand. During this period Jana had
unpaid leave at work.
Task 1: Calculate the amount of social security and health care insurance contributions payable by
Jana as employee of Vemos and by Vemos for Jana 2017.
Task 2: Calculate total tax basis of Jana for 2017.
Example No. 14
Martina works at the position of Logistics specialist at ABB, a.s. (here and after “ABB”). She lives and works in
Rousinov permanently. Martina has signed the declaration for personal tax credits with ABB, a.s. She earns
CZK29,000 per month. She is not married and she has no children.
The following information is applicable to the calculation of Martina’s 2017 payroll tax:
(1) During 2017 Martina was sent on three business trips: to Prague, to Olomouc and to Ostrava. Each
trip had duration 1 working day. ABB provided Martina with meal voucher in amount of CZK140 per
each business trip. Martina contributed CZK57 to each meal voucher.
(2) ABB paid CZK500 for Martina’s participation in 5-day Healthy days program (class of smoothie
making, class of yoga, check with optometrist etc.) organized by ABB.
26
Besides her flat in Rousinov, Martina also also owns a flat in Brno which she inherited from her grandparents
10 years ago and which she rents to three students studying in MU. During 2017/18 she received CZK14,000
from her tenants each month. Martina’s documentary costs incurred while renting her flat in Brno during
2017 were as follows: CZK26,000 for utilities, CZK5,000 for Internet, CZK2,100 for garbage cleaning,
CZK8,000 for refurbishing of kitchen.
In her free time, Martina as private entrepreneur provides services of dance instructor. The following
information is applicable to the calculation of Martina’s 2017 payroll tax from self-employment as dance
instructor:
I. Incomes earned by Martina during 2017:
i. Martina provided 210 hours of group dance classes for CZK150 per hour
ii. Martina provided 34 hours of individual dance classes for CZK250 per hour
iii. Martina designed 2 dances for CZK5,000 per dance
iv. Martina provided 186 hours of individual meditation classes for CZK200 per hour
v. Martina provided 12 lectures on dance history for CZK350 per lecture
II. Martina’s documentary costs incurred while providing dance instructor services during 2017:
i. a drive into town by Martina’s private car to meet some of her clients: 7,200 km * 0.4 l * 31
CZK/l
ii. a trip to the shop for milk and bread during Martina’s work day: CZK125 per day
iii. cost of utilities when Martina used her home as her office (to work online and to conduct
meditation classes): CZK2,300 per month
iv. cost of Internet when Martina used her home as her office: CZK350 per month
v. cost of ticket to public transport when Martina travelled by public transport to meet some of
her clients: CZK4,600 per year
vi. music and exercise videos bought by Martina in 2017 for preparing and conducting of her
classes: CZK3,250 per year
vii. dancing wear and scenic costumes bought by Martina in 2017 for preparing and conducting
of her classes: CZK21,400 per year
viii. continuing education courses and seminars bought by Martina in 2017 for preparing and
conducting of her classes: CZK15,500 per year
Task 1: Calculate the amount of social security and health care insurance contributions payable by
Martina as employee of ABB and as self-employed dance instructor for 2017.
Task 2: Calculate total tax basis of Martina for 2017.
Example No. 15
Lukas works as installation engineer at Tatra Koprivnice, a.s. (here and after “Tatra”). He lives and works in
Koprivnice. Lukas has signed the declaration for personal tax credits with Tatra. He earns CZK33,000 per
month. He is married to Kristina and they have 6-year-old daughter. Kristina is housewife. In her free time
Katka provides occasional German translations and proof-reading. In 2017 Katka earned CZK80,000 from
providing these occasional survives.
During 2017 Lukas was sent on a business trip to Graz and Linz. The whole business trip had duration 5
working days. Tatra provided Lukas with meal voucher in amount of CZK1500 per each day of the business
trip. Additionally to this Company also provided cash for daily needs in amount of CZK700 per each day of the
27
business trip. Lukas participated neither on meal vouchers nor on cash for daily needs. Note: the ER between
EURO and CZK on the date of meal voucher and cash issue slip was 1 euro = 27 CZK.
In his free time, Lukas provides car repairing services as private entrepreneur and on performance
agreement. In 2017 Lukas provided 2 hours of car repairing service each month for AutoService, s.r.o. for
CZK1,200 per hour.
The following information is applicable to the calculation of Lukas’s 2017 payroll tax from self-employment
as private car repairer:
I. Incomes earned by Lukas during 2017:
i. Lukas delivered 1,040 hours of break repair services for CZK700 per hour
ii. Lukas delivered 56 oil changes for CZK1,500 per change
iii. Lukas delivered 760 hours of tire repairs for CZK700 per hour
iv. Lukas delivered 36 preventive maintenance checkups for CZK1,000 per checkup
v. Lukas delivered 18 prepurchase checkups for CZK2,000 per checkup
II. Lukas’s documentary costs incurred while providing car repairing services during 2017:
i. a drive into town by Lukas’s private car to meet some of his clients: total 35,000 km, to clients
27,000 km; 0.4 l * 31 CZK/l
ii. a trip to the shop for milk and bread during Lukas’s work day: CZK120 per day
iii. cost of utilities when Lukas used his home as his office: CZK5,500 per month,
iv. cost of Internet when Lukas used his home as his office: CZK300 per month
v. cost of mobile when Lukas used his personal mobile for calls with his clients: CZK450 per
month
vi. cost of ticket to public transport when Lukas travelled by public transport to meet some of his
clients: CZK1,600 per year
vii. vertebrologist test to track Lukas’s degenerative disc disease: CZK7,200 per year
viii. instruments bought by Lukas in 2017 for providing car repairing services: CZK55,000 per
year
ix. work supplies (e.g. oil, chemicals) bought by Lukas in 2017 for providing car repairing
services: CZK27,120 per year
Lukas monthly transfers CZK1,000 to his saving account and once per year CZK2,500 to his fixed deposit
account. In 2017 Lukas received CZK120 of interests from his savings account at Komercni banka, a.s. and
CZK560 of interests from his fixed deposit account at FIO Banka, a.s.
Task 1: Calculate the amount of social security and health care insurance contributions payable by
Lukas as employee of Tatra and by Tatra for Lukas 2017.
Task 2: Calculate total tax basis of Lukas for 2017.
28
Part III. Corporate income tax
Task III.1. Give answers to multiple choice questions. Only one correct answer is possible.
1. Which of the following statements gives correct example(s) of taxpayers of corporate income tax?
a) companies (limited partnerships, limited liability companies, public limited companies and cooperative
societies), churches, schools, organizational components of state.
b) companies (limited partnerships, limited liability companies, public limited companies and cooperative
societies), churches, political parties, organizational components of state.
c) companies (limited partnerships, limited liability companies, public limited companies and cooperative
societies), churches, hospitals, organizational components of state.
d) companies (limited partnerships, limited liability companies, public limited companies and cooperative
societies), churches, theatres, organizational components of state.
2. Which of the following statements correctly describes tax base?
a) The taxpayer can read the final tax base from entity’s financial statements. It is the same as its
economic profit.
b) The taxpayer can read the final tax base from entity’s financial statements. It is not the same as its
economic profit - the later one should reduced by deductable items.
c) The taxpayer cannot read the final tax base from entity’s financial statements. It is not the same as its
economic profit - the later one should reduced by deductable items.
d) The taxpayer cannot read the final tax base from entity’s financial statements. It is not the same as its
economic profit - the later one should reduced by tax depreciation.
3. Which of the following statements gives correct example(s) of expenses which according to ITA are
considered as ineligible to generate, assure and maintain income:
a) shortages and damages within compensation.
b) representation expenses (treat, entertainment, gifts) exceeding the amounts stated by ITA
c) expenses connected with work use of motor vehicles by employees.
d) preschool facilities fees for employees’ children within the amounts stated by ITA and labor code.
4. Which of the following statements gives correct example(s) of items which according to ITA are
considered as deductable from the tax base:
a) tax loss which was recorded and assessed in one previous taxable period.
b) 100% of costs for R&D.
c) 100% of costs for the acquisition of assets for vocational training, if the assets are used for the
training of more than 60% of the time of its operation in three consecutive tax periods.
d) 50 % of costs for the acquisition of assets for vocational training, if the assets are used for the
training between 30% and 60% of the time of its operation in three consecutive tax periods.
5. Which of the following statements correctly describes the deadline for submission by the taxpayer its/his
tax return?
a) The taxpayer must submit its/his tax return at the latest one month following expiry date of the
taxable period.
b) The taxpayer must submit its/his tax return at the latest two months following expiry date of the
taxable period.
c) The taxpayer must submit its/his tax return at the latest three months following expiry date of the
taxable period.
29
d) The taxpayer must submit its/his tax return at the latest on the expiry date of the taxable period.
6. Which of the following statements correctly describes the position of CIT taxpayer toward the choice of
taxable period?
a) CIT taxpayer cannot choose, whether he will use a calendar year or an economic year as a taxable
period. He should use only calendar year.
b) CIT taxpayer cannot choose, whether he will use a calendar year or an economic year as a taxable
period. He should use only economic year.
c) CIT taxpayer can choose, whether he will use a calendar year or an economic year (which must begin
on the first day of any month and must be twelve months long) as a taxable period.
7. Which of the following statements correctly describes the role of tax depreciation (amortization)?
a) Tax depreciation (amortization) has to be considered for calculation of corporate income tax base
and, hence, corporate income tax liability. It reflects the actual condition of the real assets as well as
accounting depreciation (amortization) does.
b) Tax depreciation (amortization) has to be considered for calculation of corporate income tax base
and, hence, corporate income tax liability. Accounting depreciation (amortization) reflects the actual
condition of the real assets much better than it.
c) Tax depreciation (amortization) has to be considered for calculation of corporate income tax base
and, hence, corporate income tax liability. It reflects the actual condition of the real assets much
better than accounting depreciation (amortization).
8. Which of the following statements correctly describes the depreciation of the following items – land,
pieces of art, cultural heritage?
a) Land, pieces of art and cultural heritage are depreciated.
b) Pieces of art and cultural heritage are depreciated, land – not.
c) Land is depreciated, pieces of art and cultural heritage - are not.
d) Land, pieces of art and cultural heritage are not depreciated.
9. Which of the following statements correctly describes the obligation the combining entities to fill their
tax returns?
a) The defunct company has the no obligations regarding filing a tax return for the period preceding the
decisive day. The acquiring company has the obligation to file a tax return for the period preceding
the decisive day.
b) Both defunct and acquiring company has the obligation to file a tax return for the period preceding
the decisive day.
c) The defunct company has the obligation to file a tax return for the period preceding the decisive day.
The acquiring company has the obligation to file a tax return for the period preceding the decisive
day as well as for the period starting from that date.
d) Both defunct and acquiring company has no the obligation regarding filing a tax return for the period
preceding the decisive day.
10. Which of the following statements correctly describes the obligation of acquiring company to fill its tax
return?
a) Acquiring company has to submit the tax return according to normal rules for submitting the tax
return of corporate income tax.
b) Acquiring company has to submit the tax return for a period ending on the day, preceding the
decisive day by the end of the month following the month with the decisive day.
30
c) Acquiring company has two possibilities for submitting a tax return depending on the decisive day:
(1) if the decisive day is the 1st day of a calendar or an economic year, the company submits the tax
return according to normal rules for submitting the tax return of corporate income tax; (2) otherwise
the company must submit tax return of corporate income tax for a period ending on the day,
preceding the decisive day by the end of the month following the month with the decisive day.
11. Which of the following statements correctly describes the acquisition approach regarding tax provisions,
tax reserves, tax depreciation and amortization, tax loss and tax deductible items that have not yet been
claimed?
a) Items such as tax provisions, tax reserves, tax depreciation and amortization, tax loss, tax deductible
items that have not yet been claimed and others are disbanded together with defunct company.
b) Items such as tax provisions, tax reserves, tax depreciation and amortization, tax loss, tax deductible
items that have not yet been claimed and others are transferred from the defunct company to the
acquiring company.
12. Which of the following statements correctly indicates the moment when tax evasion takes place?
a) Most tax evasion takes place when taxpayers - individuals or firms – earn their income.
b) Most tax evasion takes place when taxpayers - individuals or firms – spend their income.
c) Most tax evasion takes place when taxpayers - individuals or firms – earn and spend their income.
d) Most tax evasion takes place when taxpayers - individuals or firms - are required to report income or
spending to the tax authorities.
13. What are the main possibilities for tax evasion?
a) declaration of exaggerated incomes received and underdeclaration of claims for deductions or
allowances against tax.
b) underdeclaration of incomes received and false or exaggerated claims for deductions or allowances
against tax.
c) underdeclaration of incomes received and claims for deductions or allowances against tax.
d) declaration of exaggerated incomes received and claims for deductions or allowances against tax.
14. Which of the following statements correctly names the category of personal income which is highly
exposed to tax evasion?
a) Nearly all tax systems are highly exposed to tax evasion by the employed.
b) Nearly all tax systems are highly exposed to tax evasion by the self-employed.
c) Nearly all tax systems are highly exposed to tax evasion by the people earning an income from rent.
d) Nearly all tax systems are highly exposed to tax evasion by people earning an income from capital
assets.
Task III.2. Provide calculus and give answers to examples below.
Example No. 1
Exor, a. s. (here and after “Exor”) is an entertainment agency organising sports events. Exor is a Czech tax
resident company using the calendar year as the fiscal year. Exor’s 2017 accounting profit amounted to CZK
3,125,000. All of the accounting profit items mentioned below are included in this figure:
(1) Exor purchased 12 used laptops for CZK4,100 each and 1 new projector for CZK10,250 each for
organizing internal training courses for its 109 employees in extent of 2 working days per each
31
employee during financial year. Note: in 2017 company employs 242 employees with regular
duration of working day set by Czech labor code
(2) Exor provided accommodation for its 23 business partners who came to Brno for signing of new and
prolongation of existing business contracts. Accommodation was arranged in local hotel and
company paid CZK1,200 per night per 1 person. In total guests spent 20 nights in the hotel.
(3) Exor signed a contract with private carrier about transportation of its 57 employees from
neighboring villages to Brno. The contract price paid by the company was CZK114,000.
(4) Exor created reserve in amount of CZK 40,000 for planned reconstruction of its administration
building in 2019 in total amount of CZK 100,000 which company started to create in 2017.
(5) Exor recognized accounting depreciation in amount of CZK96,000 for Skoda Octavia which it
acquired in January 2015 for CZK480,000. Company applies linear depreciation for tax purposes.
Task 1. Calculate Exor’s 2017 corporate income tax base (loss) as assessed by the tax authority, and
clearly show whether each of the above-mentioned accounting profit items is tax deductible or tax
non-deductible, and how each affects the tax base.
Example No. 2
Cutberry, a.s. (here and after “Cutberry”) is retailer with apparel. Cutberry is a Czech tax resident company
with fiscal year from May 1 to April 31. Cutberry’s 2017 accounting profit amounted to CZK9,230,000. All of
the accounting profit items mentioned below are included in this figure:
(1) Cutberry released reserves in amount of CZK 125,000 for planned two-year modernization of its
production capacities in 2017-2018 in total amount of CZK 220,000 which company started to create
in 2014.
(2) Cutberry recognized accounting depreciation in amount of CZK85,000 for Skoda Rapid which it
acquired in March 2016 for CZK321,000. Cutberry applies accelerated depreciation for tax purposes.
(3) Cutberry purchased 25 used laptops for CZK3,300 each and 10 new projectors for CZK7,250 each for
organizing internal training courses for its 185 employees from its sales department in extent of 80
working days per each employee in its sales department during financial year. Note: in 2016 company
employs 185 employees with regular duration of working day set by Czech labor code.
(4) Cutberry provided accommodation for members of its board of directors since all 7 members have
permanent residence in Hradec Kralove and come for 5 working days each week to Brno. Company
paid CZK12,500 per each flat per month for each director.
Task 1. Calculate Cutberry’s 2017 corporate income tax base (loss) as assessed by the tax authority,
and clearly show whether each of the above-mentioned accounting profit items is tax deductible or
tax non-deductible, and how each affects the tax base.
Example No. 3
Tiger, a. s. (here and after “Tiger”) is an entertainment agency organizing business conferences, meeting and
business summits. Tiger is a Czech tax resident company using the calendar year as the fiscal year. Tiger’s
2017 accounting profit amounted to CZK 3,125,000. All of the accounting profit items mentioned below are
included in this figure:
(1) Tiger recognized accounting depreciation in amount of CZK96,000 for Skoda Octavia which it
acquired in January 2015 for CZK480,000. Company applies accelerated depreciation for tax
purposes.
(2) As per year end of 2017 Tiger had the following trade receivables overdue:
32
Amount Overdue Provision
Raised in
court
Payment
received
CZK25,000
Invoice was issued on
November 15, 2016
No No No
CZK210,000
Invoice was issued on
April 2, 2016
No No No
CZK175,000
Invoice was issued on
September 10, 2015
No Yes
25,000 in
January
2016
(3) Tiger received dividends as share on profits of its associate company A7, s.r.o. for 2016 in amount of
CZK100,000.
(4) Tiger paid dividends to company Global solutions, a.s. as share on its profits for 2016 in amount of
CZK55,000.
(5) Tiger organized Christmas party and Spring barbeque day for key customers and paid for it
CZK255,000.
Task 1. Calculate Tiger’s 2017 corporate income tax base (loss) as assessed by the tax authority, and
clearly show whether each of the above-mentioned accounting profit items is tax deductible or tax
non-deductible, and how each affects the tax base.
Example No. 4
Erixon, s.r.o. (here and after “Erixon”) is a private pharmaceutical company. Erixon is a Czech tax resident
company with fiscal year from May 1 to April 31. Erixon’s 2017 accounting profit amounted to CZK
12,500,000. All the accounting profit items mentioned below are included in this figure:
(1) Erixon recognized accounting depreciation in amount of CZK85,000 for Skoda Rapid which it
acquired in March 2016 for CZK321,000. Company applies linear depreciation for tax purposes.
(2) Erixon sells its Warehouse Building for CZK12,450,000 Building was acquired in May 2013 for
CZK17,000,000. Over the building there have been conducted complex renovation works including
installation of new climate control system for CZK136,000 and fire alarm CZK221,000 in August
2016. Erixon recognized accounting depreciation in amount of CZK270,000 for the disposed Building.
Company applied accelerated depreciation for tax purposes.
Amount Overdue Provision
Raised in
court
Payment
received
CZK175,000
Invoice was issued on
September 10, 2015
No Yes
25,000 in
January
2016
CZK445,000
Invoice was issued on
April 9, 2015
Yes, in
January
2016, for
50%
Yes
105,000 in
July 2016
CZK75,000
Invoice was issued on
November 10, 2014
Yes, in
November,
2015, for
100%
No No
33
(3) Erixon received dividends as share on profits of its associate company Solar Winds, a.s., for 2017 in
amount of CZK85,000.
(4) Erixon organized Christmas party and Spring barbeque day for its employees and paid for it
CZK180,000.
Task 1. Calculate Erixon’s 2017 corporate income tax base (loss) as assessed by the tax authority, and
clearly show whether each of the above-mentioned accounting profit items is tax deductible or tax
non-deductible, and how each affects the tax base.
Example No. 5
Dixons, s.r.o. (here and after “Dixons”) is carrier organising international deliveries. Dixons is a Czech tax
resident company using the calendar year as the fiscal year. Dixons’s 2017 accounting profit amounted to
CZK11,125,000. All of the accounting profit items mentioned below are included in this figure:
(1) In August 2017 Dixons sold its Skoda Rapid for CZK285,000. Car was acquired in March 2015 for
CZK321,000. Dixons applied accelerated depreciation for tax purposes. At the yearend of 2017
company recognizes accounting depreciation in amount of CZK30,000 for the disposed car.
(2) Dixons recognized accounting depreciation in amount of CZK775,000 for Warehouse Building which
it acquired in May 2011 for CZK4,280,000 and over which it has been conducting regular servicing
and repairs including change of fire alarm system in May 2013 for CZK432,000 and air tubes
September 2014 for CZK224,000 as well as complex modernization including installation of new
temperature control system for CZK336,000 and automated lifting systems for CZK215,000 in August
2015. Dixons applied linear depreciation for tax purposes
(3) Dixons paid dividends as share on profits of its associate company Rodgers DSG, s.r.o., for 2017 in
amount of CZK42,000.
(4) For business meeting with key business partners which lasted two days Dixons rented conference
room for CZK50,000 per day and paid catering for CZK32,000 per day.
Task 1. Calculate Dixons’s 2017 corporate income tax base (loss) as assessed by the tax authority, and
clearly show whether each of the above-mentioned accounting profit items is tax deductible or tax
non-deductible, and how each affects the tax base.
Example No. 6
InVivo, s. r. o. (here and after “InVivo”), is a private research institute. InVivo is a Czech tax resident company
using the calendar year as financial year. InVivo’s 2017 accounting profit amounted to CZK 5,100,000. All the
accounting profit items mentioned below are included in this figure:
(1) InVivo recognized accounting depreciation in amount of 65,000 for solar panels which InVivo
acquired for CZK1,466,600 in January 2016 and put into operation in April 2016. Note: company
applies tax depreciation with per-month calculation.
(2) InVivo recognized accounting depreciation in amount of CZK210,000 for Parking Building which it
acquired in October 2015 for CZK5,320,000 and it has been conducting regular servicing and repairs
including change of fire alarm system in May 2013 for CZK515,000 and security system in September
2014 for CZK675,000 as well as complex modernization including installation of construction of two
new exits for CZK150,000 each in April 2016 and five lifts for CZK215,000 each in August 2016.
InVivo applied linear depreciation for tax purposes.
34
(3) InVivo sent its 15 full-time sales representatives on 15 business trips to Prague, Olomouc and
Ostrava. Each trip had duration 1 working day. Company provided each employee with meal voucher
in amount of CZK140 per each business trip. Employees contributed CZK57 to each meal voucher.
(4) InVivo regularly (once per each week) organized fruit days for its employees. Each week company
spent CZK1,000 on buying fruits and vegetables.
(5) InVivo donated CZK25,645 to dog and cat shelter “Tibet”.
Task 1. Calculate InVivo’s 2017 corporate income tax base (loss) as assessed by the tax authority, and
clearly show whether each of the above-mentioned accounting profit items is tax deductible or tax
non-deductible, and how each affects the tax base.
Example No. 7
Matt&Rett Czech Republic, s.r.o. (here and after “Matt&Rett”) is Czech branch of international retailer with
apparel. Matt&Rett is Czech tax resident with financial year starting on May 1. Matt&Rett’s 2017 accounting
profit amounted to CZK17,805,000. All of the accounting profit items mentioned below are included in this
figure:
(1) Matt&Rett recognized accounting depreciation in amount of CZK190,000 for Office Building which it
acquired in January 2015 for CZK1,480,000 and over which it has conducted complex renovation
including installation of new climate control system for CZK136,000 and fire alarm CZK221,000 in
August 2017. Matt&Rett applied linear depreciation for tax purposes.
(2) Matt&Rett sent its 50 full-time sales representatives on 50 business trips to Prague, Olomouc and
Ostrava. Each trip had duration 1 working day. Company provided each employee with meal voucher
in amount of CZK200 per each business trip. Employees didn’t contribute to meal vouchers.
(3) Matt&Rett sent its 5 full-time assembling specialist on a business trip to Tokyo. The whole business
trip had duration 15 working days. Company provided each employee with meal voucher in amount
of CZK1,625 per each day of the business trip. Additionally to this Matt&Rett also provided cash for
daily needs in amount of CZK650 per each day of the business trip. Employees participated neither
on meal vouchers nor on cash for daily needs. Note: the ER between USD and CZK on the date of meal
voucher and cash issue slip was 1 usd = 27 CZK.
(4) Matt&Rett regularly purchased tea and coffee to office kitchen for its employees. Each week company
spent CZK2,000 on buying tea and filling in coffee machine.
(5) Matt&Rett donated CZK75,120 to Center of Help to Families in Need.
Task 1. Calculate Matt&Rett’s 2017 corporate income tax base (loss) as assessed by the tax authority,
and clearly show whether each of the above-mentioned accounting profit items is tax deductible or
tax non-deductible, and how each affects the tax base.
Example No. 8
I-image, s.r.o. (here and after “I-Image”) is IT company, providing web design and web development services.
I-Image is Czech tax resident using the calendar year as financial year. I-image’s 2017 accounting profit
amounted to CZK9,115,000. All of the accounting profit items mentioned below are included in this figure:
(1) I-Image recognized accounting depreciation in amount of CZK47,000 for Skoda Fabia which it
acquired in July 2014 for CZK185,000. Company applies accelerated depreciation for tax purposes.
(2) I-Image sent its 50 full-time sales representatives on 50 business trips to Prague, Olomouc and
Ostrava. Each trip had duration 1 working day. Company provided each employee with meal voucher
in amount of CZK200 per each business trip. Employees contributed CZK50 to meal vouchers.
35
(3) I-Image regularly purchased bottled water to office kitchen and open spaces for its employees. Each
week company spent CZK1,500 on changing water gallons in water supplying machines.
(4) I-Image donated CZK1,800 to Wikipedia.
Task 1. Calculate I-Image’s 2017 corporate income tax base (loss) as assessed by the tax authority,
and clearly show whether each of the above-mentioned accounting profit items is tax deductible or
tax non-deductible, and how each affects the tax base.
Example No. 9
Fieria, s.r.o. (here and after “Fieria”) is travel company, providing booking, guiding and visa services. Fieria is
Czech tax resident using the calendar year as financial year. Fieria’s 2017 accounting profit amounted to
CZK5,614,000. All of the accounting profit items mentioned below are included in this figure:
(1) Fieria sells its Skoda Octavia for CZK154,000. Car was acquired in August 2015 for CZK480,000.
Fieria applied linear depreciation for tax purposes. At the yearend of 2017 company recognizes
accounting depreciation in amount of CZK96,000 for the disposed car.
(2) Fieria sent its 18 full-time sales representatives on a business trip to Graz and Linz. The whole
business trip had duration 5 working days. Company provided each employee with meal voucher in
amount of CZK1500 per each day of the business trip. Additionally to this Fieria also provided cash
for daily needs in amount of CZK700 per each day of the business trip. Employees participated
neither on meal vouchers nor on cash for daily needs. Note: the ER between EURO and CZK on the date
of meal voucher and cash issue slip was 1 euro = 27 CZK.
(3) Fieria donated CZK15,500 to Green forests association.
Task 1. Calculate Fieria’s 2017 corporate income tax base (loss) as assessed by the tax authority, and
clearly show whether each of the above-mentioned accounting profit items is tax deductible or tax
non-deductible, and how each affects the tax base.
Example No. 10
APP Czech Republic, a.s. (here and after “APP”) is Czech branch of international manufacturer of steam
turbines. APP is Czech tax resident with financial year starting on September. APP’s 2017 accounting profit
amounted to CZK32,115,000. All of the accounting profit items mentioned below are included in this figure:
(1) APP recognized accounting depreciation in amount of CZK190,000 for Office Building which it
acquired in January 2015 for CZK1,480,000 and over which it has conducted complex renovation
including installation of new climate control system for CZK136,000 and fire alarm CZK221,000 in
August 2017. Company applied linear depreciation for tax purposes.
(2) APP sent its 50 full-time sales representatives on 50 business trips to Prague, Olomouc and Ostrava.
Each trip had duration 1 working day. Company provided each employee with meal voucher in
amount of CZK200 per each business trip. Employees didn’t contribute to meal vouchers.
(3) APP sent its 5 full-time assembling specialist on a business trip to Tokyo. The whole business trip had
duration 15 working days. Company provided each employee with meal voucher in amount of
CZK1,625 per each day of the business trip. Additionally to this APP also provided cash for daily
needs in amount of CZK650 per each day of the business trip. Employees participated neither on
meal vouchers nor on cash for daily needs. Note: the ER between USD and CZK on the date of meal
voucher and cash issue slip was 1 usd = 27 CZK.
(4) APP regularly organizs fruit days for its employees. Each week APP spent CZK5,300 on buying fruits
and vegetables.
(5) APP donated CZK75,120 to Center of Help to Families in Need.
36
Task 1. Calculate APP’s 2017 corporate income tax base (loss) as assessed by the tax authority, and
clearly show whether each of the above-mentioned accounting profit items is tax deductible or tax
non-deductible, and how each affects the tax base.
37
Part IV. Value added tax
Task IV.1. Give answers to multiple choice questions. Only one correct answer is possible.
1. Which of the following statements correctly describes the modern state of international regulation in field
of VAT?
a) There is an international organization supervising the operation of value-added taxes among EUmember
states.
b) There is an international organization supervising the operation of value-added taxes among OECDmember
states.
c) There are several international organizations supervising the operation of value-added taxes among
all states.
d) There is no an international organization supervising the operation of value-added taxes among all
states.
2. Which of the following statements correctly describes the unique nature of the VAT?
a) The unique nature of the VAT is its potential scope in identifying and taxing the economic
contribution made by any economic operator in connection with any activity of a business or
commercial nature.
b) The unique nature of the VAT is its potential scope in identifying and taxing the economic
contribution made by any natural and legal person in connection with any activity of a business or
commercial nature.
c) The unique nature of the VAT is its potential scope in identifying and taxing the economic
contribution made by any legal person in connection with any activity of a business or commercial
nature.
d) The unique nature of the VAT is its potential scope in identifying and taxing the economic
contribution made by any natural person in connection with any activity of a business or commercial
nature.
3. Which of the following statements correctly describes the approach to calculation of VAT liability?
a) On each transaction, value added tax, calculated on the price of the goods or services at the rate
applicable to such goods or services, shall be chargeable before deduction of the amount of value
added tax borne directly by the various cost components.
b) On each transaction, value added tax, calculated on the price of the goods or services at the rate
applicable to such goods or services, shall be chargeable after deduction of the amount of value
added tax borne directly by the various cost components.
c) On each transaction, value added tax, calculated on the price of the goods or services at the rate
applicable to such goods or services, shall be chargeable before adding of the amount of value added
tax borne directly by the various cost components.
d) On each transaction, value added tax, calculated on the price of the goods or services at the rate
applicable to such goods or services, shall be chargeable after adding of the amount of value added
tax borne directly by the various cost components.
4. Which of the following statements correctly describes the situation with VAT on exports?
a) States that impose a VAT on imports remove exports from the charge to tax.
b) States impose a VAT on imports and exports.
c) States do not impose a VAT on imports and exports.
d) States that impose a VAT on exports remove imports from the charge to tax.
38
5. Which of the following statements correctly describes the right to recover input VAT?
a) Each physical person is allowed a deduction against the total VAT charged by the person to take
account of any VAT paid by the person on inputs related to transactions within the scope of the VAT.
b) Each legal person is allowed a deduction against the total VAT charged by the person to take account
of any VAT paid by the person on inputs related to transactions within the scope of the VAT.
c) Each taxable person is allowed a deduction against the total VAT charged by the person to take
account of any VAT paid by the person on inputs related to transactions within the scope of the VAT.
d) No one has right to deduct input VAT.
6. Which of the following statements correctly describes the normal approach to impose output VAT?
a) The normal approach is to impose output tax on transactions and persons if: (a) the transactions are
"supplies of goods”; (b) those supplies are "taxable" and not exempt from VAT; (c) those taxable
supplies are made by a "legal person," that is, a person within the scope of the charge to VAT; and (d)
the legal person makes those supplies as part of the person's business activities, and not as part of a
hobby or noncommercial activity.
b) The normal approach is to impose output tax on transactions and persons if: (a) the transactions are
"supplies of goods and services”; (b) those supplies are "taxable" and not exempt from VAT; (c) those
taxable supplies are made by a "taxable person," that is, a person within the scope of the charge to
VAT; and (d) the taxable person makes those supplies as part of the person's business activities, and
not as part of a hobby or noncommercial activity.
c) The normal approach is to impose output tax on transactions and persons if: (a) the transactions are
"supplies of services”; (b) those supplies are "taxable" and not exempt from VAT; (c) those taxable
supplies are made by a "legal person," that is, a person within the scope of the charge to VAT; and (d)
the legal person makes those supplies as part of the person's business activities, and not as part of a
hobby or noncommercial activity.
d) The normal approach is to impose output tax on transactions and persons if: (a) the transactions are
"supplies of goods and services”; (b) those supplies are "taxable" and not exempt from VAT; (c) those
taxable supplies are made by a "taxable person," that is, a person within the scope of the charge to
VAT.
7. Which of the following statements correctly describes the principle of nondiscrimination?
a) Principle of nondiscrimination - the products of the territory of any contracting party imported into
the territory of any other contracting party shall not be subject, directly or indirectly, to internal
taxes or other internal charges of any kind in excess of those applied, directly or indirectly, to like
imported products.
b) Principle of nondiscrimination - the products of the territory of any country imported into the
territory of any other country shall not be subject, directly or indirectly, to internal taxes or other
internal charges of any kind in excess of those applied, directly or indirectly, to like domestic
products.
c) Principle of nondiscrimination - the products of the territory of any contracting party imported into
the territory of any other contracting party shall not be subject, directly or indirectly, to internal
taxes or other internal charges of any kind in excess of those applied, directly or indirectly, to like
domestic products.
d) Principle of nondiscrimination - the products of the territory of any country imported into the
territory of any other country shall not be subject, directly or indirectly, to internal taxes or other
internal charges of any kind in excess of those applied, directly or indirectly, to like imported
products.
39
8. Which of the following statements correctly describes the taxable person of VAT?
a) A VAT law should include all legal persons created under the law of the state that engage in economic
activities of any kind.
b) A VAT law should include all legal persons created under the law of the state (or of a foreign country)
that engage in economic activities of any kind.
c) A VAT law should include all persons – legal and physical – which live and/or do business in the
country.
d) A VAT law should include all legal persons created under the law of the state (or of a foreign country)
that engage in economic activities of any kind, as well as all physical persons.
9. Which of the following statements correctly describes the threshold for becoming a taxable person of
VAT?
a) The usual measure of threshold for becoming a taxable person of VAT is the total turnover of taxable
goods and services supplied by the person over a set period.
b) The usual measure of threshold for becoming a taxable person of VAT is the net profit from sale of
taxable goods and services supplied by the person over a set period.
c) The usual measure of threshold for becoming a taxable person of VAT is the total value of assets of a
taxable person at the end of a set period.
d) The usual measure of threshold for becoming a taxable person of VAT is the average number of
employees of the person over a set period.
10.Which of the following statements correctly describes the threshold for becoming a taxable person of
VAT?
a) The total to be taken into account for the threshold is the total taxable supplies of that person.
b) The total to be taken into account for the threshold is the total taxable supplies of that person except
the exempted from VAT supplies and supplies that are outside the scope of VAT.
c) The total to be taken into account for the threshold is the total taxable supplies of that person except
the exempted from VAT supplies.
d) The total to be taken into account for the threshold is the total taxable supplies of that person except
the supplies that are outside the scope of VAT.
11.Which of the following statements correctly describes the VAT register?
a) States sometimes adopt an existing real-estate register to act as the VAT register.
b) States sometimes adopt an existing commercial register to act as the VAT register.
c) States sometimes adopt an existing commercial register or a general register of taxpayers to act as
the VAT register.
12.Which of the following statements correctly describes a taxpayer of VAT in the Czech Republic?
a) In the Czech Republic a taxable person becomes a taxpayer when his turnover in the last 12
consecutive months exceeds 1 000 000 CZK. This taxable person becomes a taxpayer since the 1st
day of the 1nd month after the month in which the turnover exceeds the limit.
b) In the Czech Republic a taxable person becomes a taxpayer when his turnover in the last 12
consecutive months exceeds 1 000 000 CZK. This taxable person becomes a taxpayer since the 1st
day of the 2nd month after the month in which the turnover exceeds the limit.
c) In the Czech Republic a taxable person becomes a taxpayer when his turnover in the last 12
consecutive months exceeds 1 000 000 CZK. This taxable person becomes a taxpayer since the 1st
day of the 3nd month after the month in which the turnover exceeds the limit.
40
d) In the Czech Republic a taxable person becomes a taxpayer when his turnover in the last 12
consecutive months exceeds 1 000 000 CZK. This taxable person becomes a taxpayer since the 1st
day of the 4nd month after the month in which the turnover exceeds the limit.
13.Which of the following statements gives correct definition of a supply of goods?
a) A transfer of the right to dispose of tangible movable or immovable property.
b) A transfer of the right to dispose of tangible movable property or of immovable property other than
land.
c) A transfer of the right to dispose of tangible movable property.
d) A transfer of the right to dispose of tangible movable property or of immovable property including
land.
14.Which of the following statements gives correct definition of a supply of services?
a) The use of all forms of property.
b) The right to dispose of intangible property.
c) The right to dispose of tangible property and the use of movable property.
d) The use of all forms of property and also transfers of the right to dispose of intangible property.
15.Which of the following statements gives correct definition of a mixed supply?
a) One broad practical rule is to treat any mixed supplies incidental to a main supply as part of that
main supply.
b) One broad practical rule is to treat any mixed supplies incidental to a main supply in proportion to it.
c) One broad practical rule is to treat any mixed supplies in proportion to their comprising parts
regardless of that whether such parts are equal or not.
16.Which of the following statements gives correct definition of time of a supply of goods?
a) A supply of goods takes place when warranty period for the delivered items ends.
b) A supply of goods takes place when goods are made available.
c) A supply of goods takes place when reclamation period for the delivered items ends.
d) A supply of goods takes place when advance payment for goods has been received.
17.Which of the following statements gives correct definition of place of a supply of goods?
a) A place of a supply of goods is the place where goods are physically handed over.
b) A place of a supply of goods is the place where the legal title for the deliver goods is handed over.
18.Which of the following statements gives correct definition of VAT?
a) VAT is a tax on supplies made in the course or furtherance of economic activity only.
b) VAT is a tax on supplies made in the course or furtherance of economic activity including
employment.
c) VAT is a tax on supplies made in the course or furtherance of economic activity including
employment and self-employment.
d) VAT is a tax on supplies made in the course or furtherance of economic activity including
e) personal hobbies of an individual, gifts made for personal reasons, or charitable activities.
19.Which of the following statements describes correctly the VAT treatment of particular transactions and
occasions?
a) The following transactions or occasions give a right for recovery of input VAT: (i) personal
consumption by an individual of goods purchased for the individual's business; (ii) gifts of goods, or
the use of goods, made by a taxable person where the goods were purchased solely for the person's
41
business, and the gifts are not themselves for business purposes and supplies of goods made without
charge to employees of the taxable person.
b) The following transactions or occasions do not give a right for recovery of input VAT: (i) personal
consumption by an individual of goods purchased for the individual's business; (ii) gifts of goods, or
the use of goods, made by a taxable person where the goods were purchased solely for the person's
business, and the gifts are not themselves for business purposes and supplies of goods made without
charge to employees of the taxable person.
20.Which of the following statements gives the correct list of VAT exemptions?
a) Land and buildings, financial services, diplomatic activities, special categories of exports.
b) Land and buildings, financial services, diplomatic activities, special categories of imports.
c) Land and antiques, financial services, exemption of diplomatic activities, special categories of
exports.
d) Land and antiques, financial services, exemption of diplomatic activities, special categories of
imports.
21.Which of the following statements describes correctly the way how a supply should be valued?
a) For VAT purposes a supply should be valued at the total of all cash payments that the supplier
receives or is entitled to receive as a result of the supply.
b) For VAT purposes a supply should be valued at the total of all non-cash payments that the supplier
receives or is entitled to receive as a result of the supply.
c) For VAT purposes a supply should be valued at the total of all invoiced payments that the supplier
receives or is entitled to receive as a result of the supply.
d) For VAT purposes a supply should be valued at the total of all payments that the supplier receives or
is entitled to receive as a result of the supply.
22.Which of the following statements describes correctly a VAT invoice?
a) All invoices are VAT invoices.
b) An invoice is a "VAT invoice" if it complies with the requirement of the VAT law. Invoices issued for
other purposes or that do not comply with these requirements do not count as VAT invoices.
23.Which of the following statements describes correctly a VAT tax basis and form of payment?
a) The duty to pay is usually on a self-assessment basis and often in form of advance payments.
b) The duty to pay is usually based on assessment by Tax Office and always in form of advance
payments.
c) The duty to pay is usually based on assessment by Tax Office. Advance payments are forbidden.
d) The duty to pay is usually based on assessment by independent auditor and always in form of
advance payments.
24.Which of the following statements describes correctly a VAT payment period?
a) The standard period is the calendar month; often, taxable persons with small levels of taxable
turnover are allowed to use longer periods of three months or a year.
b) The standard period is the calendar quarter; often, taxable persons with small levels of taxable
turnover are allowed to use longer periods of a year.
c) The standard period is the calendar month; often, taxable persons with larger levels of taxable
turnover are allowed to use longer periods of three months or a year.
d) The standard period is the calendar quarter; often, taxable persons with larger levels of taxable
turnover are allowed to use longer periods of a year.
42
25. Which of the following statements describes correctly a repayment of excess VAT credit?
a) Repayment of excess VAT credit - where the output tax collected for any VAT period exceeds the
input tax paid, there is an excess of VAT credit or of deductible output tax. As a direct result, the
taxable person will pay no VAT to the tax authorities for that period.
b) Repayment of excess VAT credit - where the input tax credit for any VAT period exceeds the output
tax collected, there is an excess of VAT credit or of deductible input tax. As a direct result, the taxable
person will pay no VAT to the tax authorities for that period.
c) Repayment of excess VAT credit - where the output tax collected for any VAT period exceeds the
input tax paid, there is an excess of VAT credit or of deductible output tax. As a direct result, the
taxable person will pay lower VAT to the tax authorities for that period.
d) Repayment of excess VAT credit - where the input tax credit for any VAT period exceeds the output
tax collected, there is an excess of VAT credit or of deductible input tax. As a direct result, the taxable
person will pay higher VAT to the tax authorities in the following periods.
26.According to VAT Act of the Czech Republic the exempted transactions without recovery of input VAT are:
a) basic postal services, radio and television broadcasting, financial, pension and insurance activity,
delivery and lease of immovable assets, health services, social assistance, education and learning etc.
b) basic postal services, radio and television broadcasting, portfolio management, pension and
insurance activity, delivery and lease of movable assets, health services, social assistance, education
and learning etc.
c) advanced postal services, radio and television broadcasting, tax advisory, pension and insurance
activity, auditing, health services, social assistance, education and learning etc.
27.According to VAT Act of the Czech Republic the exempted transactions without recovery of input VAT are:
a) delivery of goods to another Member State, acquisition of goods from another Member State,
providing service to a third country.
b) delivery of goods to another Member State, acquisition of goods from another Member State, imports
of goods, providing service to a third country.
c) delivery of goods to another Member State, acquisition of goods from another Member State, exports
of goods, providing service to a third country, exemption in special cases.
28.Which of the following statements describes correctly a right to recovery input VAT at registration and
deregistration?
a) Right to recovery at registration and deregistration - taxable person is entitled to deduct the received
taxable supply acquired in the period of 6 consecutive months prior to the date, when he became
payer.
b) Right to recovery at registration and deregistration - taxable person is entitled to deduct the received
taxable supply acquired in the period of 12 consecutive months prior to the date, when he became
payer, if the transaction is to this day a part of his business assets.
c) Right to recovery at registration and deregistration - taxable person is entitled to deduct the received
taxable supply acquired in the period of 24 consecutive months prior to the date, when he became
payer.
d) Right to recovery at registration and deregistration - taxable person is entitled to deduct the received
taxable supply acquired in the period of 36 consecutive months prior to the date, when he became
payer, if the transaction is to this day a part of his business assets.
43
Task IV.2. Provide calculus and give answers to examples below.
Example No. 1
Zdenek is private tailor with its residential address in Prague. He purchases clothes from Italy, Spain and
Netherlands, sews apparel and sells it to wedding stores and theaters in Prague, Brno and Ostrava. Zdenek
started his business on January 1, 2017 and was not registered as Czech VAT payer so far. During the period
from January till June 2017 he had the following purchases of clothes from his Italian, Spanish and Dutch
vendors registered as VAT payers in their domicile countries:
Purchases from Italy
(CZK)
Purchases from Spain
(CZK)
Purchases from
Netherlands
(CZK)
January 110,000 75,000 38,000
February 24,000 18,000 15,000
March 30,000 34,000 21,000
April 55,000 76,000 40,000
May 85,000 60,000 46,000
June 68,000 41,000 55,000
During the period from March till August 2017 he had the following sales:
Sale of merchandise on
invoice (CZK)
Collection of invoice
issued (CZK)
Sale of merchandise in
cash (CZK)
March 40,000 0 50,000
April 130,000 120,000 80,000
May 150,000 100,000 70,000
June 120,000 160,000 100,000
July 160,000 100,000 80,000
August 100,000 70,000 60,000
Decide if Zdenek has to register as VAT payer based on his inputs and outputs during 2017. Decide if
yes, when Zdenek has to register as VAT payer based on his inputs from intercommunity acquisitions.
Decide if yes, when Zdenek has to register as VAT payer based on his outputs as local supplies.
Example No. 2
Roman is private designer of furniture with its residential address in Olomouc. He purchases wood and
clothes from Norway, Sweden and Italy, designs and manufactures furniture and sells it to hotels, restaurants,
business offices and private clients in Prague, Brno and Olomouc. Roman started his business on January 1,
2017 and was not registered as Czech VAT payer so far. During the period from January till June 2017 he had
the following purchases of wood and clothes from his vendors from Norway, Sweden and Italy which are
registered as VAT payers in their domicile countries:
Purchases from Norway
(CZK)
Purchases from Sweden
(CZK)
Purchases from Italy
(CZK)
January 195,000 175,000 150,000
February 110,000 97,000 89,000
March 91,000 134,000 100,000
April 76,000 101,000 91,000
May 85,000 60,000 74,000
June 133,000 98,000 146,000
44
During the period from March till August 2017 he had the following sales:
Sale of merchandise on
invoice (CZK)
Collection of invoice
issued (CZK)
Sale of merchandise in
cash (CZK)
March 97,000 0 65,000
April 156,000 85,000 112,000
May 201,000 115,000 95,000
June 187,000 203,000 75,000
July 223,000 187,000 101,000
August 192,000 256,000 89,000
Decide if Roman has to register as VAT payer based on his inputs and outputs during 2017. Decide if
yes, when Roman has to register as VAT payer based on his inputs from intercommunity acquisitions.
Decide if yes, when Roman has to register as VAT payer based on his outputs as local supplies.
Example No. 3
Stella, a.s., (here and after “Stella”) is producer of jewelry from precious metals and stones as well as highclass
bijouterie. It purchases gold and other precious metals from local suppliers, manufactures jewelry and
bijouterie at its production premise and sells its products in its stores as well as through its dealers and
distributers.
Stella owns all three buildings in Prague, Brno and Ostrava where its three shops are situated. Also it owns
one office and one production premise located in Modrice where whole production process takes place. Stella
uses its office and from time to time lets out part of its production premise to non-VAT payers.
(1) Stella has been a quarterly VAT payer since March 2016. The following information is applicable
to Stella’s for the three-month period 1 January to 31 March 2017 inclusive VAT:
(2) From Czech Gold, a.s., Stella purchased 2,300 ounces of raw gold for CZK31,000 per ounce.
(3) From Czech Crystal, a.s., Stella purchased garnet jewelers for total price of CZK510,000.
(4) From Kovosvit, a.s., Stella purchased new laser for processing precious stones for contract price
CZK2,030,000.
(5) From Soldis, a.s., Stella purchased renovated gas heater for processing precious metals for contact
price CZK1,112,000.
(6) From Makro Cash&Carry, a.s., Stella purchased coffee, tea and water to social zone for its
employees for total price CZK28,000.
(7) Stella paid participation fee of CZK35,000 for participation in Annual Jewelry Exhibition at Brno
Exhibition Center.
(8) Stella paid CZK18,000 to Fesar Auto Service, s.r.o., for transporting its products to its shops in
Brno, Prague and Ostrava.
(9) Stella sold 500 ounces of raw gold to private jewelry craftsmen from Tabor, Pardubice and Ceske
Budejovice for total price CZK42,000 per ounce on invoices: CZK15,000, CZK10,000 and
CZK17,000. First two invoices were paid in 2017, the last one was not paid till the end of 2017.
(10) Stella sold jewelries for total price CZK1,420,000 in its stores and for total price of CZK1,045,000
to Fairytale Jewelries, s.r.o., and Darya Jewelries, s.r.o.
(11) Stella delivered 27 hours of jewelry design work for Spacek, s.r.o. for CZK4,500 per hour.
(12) Stella delivered 98 hours of production process consultation for AKD, s.r.o. for CZK2,570 per hour.
(13) Stella delivered 256 hours of presale checkups for DGI Auction house, s.r.o. for CZK8,310 per hour.
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Example No. 4
ArtDeco, a.s., (here and after “ArtDeco”) is architect studio. It provides design and renovation services. It
purchases from local and foreign suppliers and delivers its services across whole Czech Republic. ArtDeco
owns four architect and design studios in Prague, Brno, Ostrava and Olomouc.
ArtDeco has been a quarterly VAT payer since August 2016. The following information is applicable to
Fortis’s for the three-month period 1 January to 31 March 2017. If not stated otherwise the indicated
amounts are states exclusive VAT.
(1) ArtDeco purchased wood panels from its vendors in Sweden for total price CZK1,211,000.
(2) ArtDeco purchased glass constructions from its vendors in Venice for total price CZK1,214,000.
(3) ArtDeco purchased wood cutting center from manufacturer from Turkey for CZK941,000.
(4) From Zdar, a.s., ArtDeco purchased renovated drying kiln for wood drying for contact price
CZK1,056,000.
(5) From Makro Cash&Carry, a.s., ArtDeco purchased coffee, tea and water to social zone for its
employees for total price CZK218,000.
(6) From Makro Cash&Carry, a.s., ArtDeco purchased 26 bottles of wine for CZK812 per bottle as
Crhistmas gifts for its key business partners.
(7) ArtDeco paid participation fee of EUR2,100 inclusive 20% VAT for participation in Annual
Architecture and Design Exhibition at Milan Exhibition Center. Note: the ER between EURO and CZK
on the date of payment of exhibition participation fee was 1 euro = 27 CZK.
(8) ArtDeco paid advertisement fee of CZK89,000 for radio advertisements of its services for 12 months
starting from June 2017 at local radio stations in Brno, Prague, Ostrava and Olomouc.
(9) ArtDeco purchased 15 laptops for CZK317,000 and 12 mobile phones for CZK65,000.
(10) ArtDeco provided dinning room renovation works for 5 customers for the following contract prices:
CZK135,000, CZK323,000, CZK185,000, CZK211,000 and CZK315,000. All works included
refurbishments and renovation of fireplaces.
(11) ArtDeco prepared design and its implementation in 78 m2 apartment in new apartment-house for
Sedlacek, s.r.o., for contract price CZK1,562,000.
(12) ArtDeco provided renovations of bathrooms for 3 customers for the following contract prices:
CZK98,000, CZK105,000 and CZK134,000. Renovation works included supply and installation of
three new baths for CZK15,000 each, three new washbasin for CZK9,000 each, and three new wall
cabinets for CZK2,500 each, the remaining contract price is allocated between work and
construction materials equally.
(13) ArtDeco delivered 58 hours of construction plans for Kudlicke, s.r.o. for CZK7,800 per hour.
(14) ArtDeco delivered 175 hours of and design works for 2 private customers for CZK51,000 and
CZK65,000 respectively.
Task 1. For each of ArtDeco’s transactions for Quarter 1 of 2017, for the purposes of value added tax
(VAT) state whether:
a) it is taxable and, if so, on what basis; or
b) exempt and, if so, whether exempt with or without recovery for input VAT.
Example No. 5
Global Electro, a.s., (here and after “Global Electro”) is retailer with laptops and mobile phones. It purchases
its merchandise from producers in China, Taiwan and South Korea. It sells its merchandise in its stores as
well as through its dealers and distributers. Besides sale of goods, it also sells customer support agreements
providing a wide range of post-sale value added services.
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Global Electro owns five shops in Prague, Brno and Ostrava and rents two more shops in Zlin and Olomouc.
Also it owns one office and two warehouses located in Kutna Hora. Stella uses its office and from time to time
lets out one of its warehouses to non-VAT payers.
Global Electro has been a quarterly VAT payer since August 2016. The following information is applicable to
Global Electro’ for the three-month period July 1 to September 30, 2017. If not stated otherwise the indicated
amounts are states exclusive VAT.
(1) Global Electro purchased 570 laptops for CZK18,000 per unit, 1,021 mobile phones for
CZK23,000 per unit and 45 desktop computers for CZK9,500 per unit from its Chinese vendors.
(2) Global Electro purchased spare parts for total price of CZK421,000 from its vendors in Taiwan.
(3) Global Electro purchased mobile and tablet covers as well as other accessories for total price of
CZK123,000 from its vendor in Portugal and Spain.
(4) Global Electro purchased spare memory chips for total price of CZK301,000 from its vendor in
Austria.
(5) Global Electro purchased 35 TB of cloud storage for 24 months for total price CZK2,575,000 from
its vendor in Canada.
(6) Global Electro sent its 20 sales representatives on a business trip to Moscow and St. Petersburg.
The whole business trip had duration 15 working days. Company paid accommodation costs and
10 business visits to restaurants in Moscow and St. Petersburg in total amount of CZK299,000.
(7) Global Electro sent its 5 sales representatives on a business trip to Rio-de-Janeiro. The whole
business trip had duration 10 working days. Company paid accommodation costs and 2 business
visits to restaurants in Rio in total amount of CZK121,000.
(8) Global Electro purchased 40 hours of translation services for its sales representatives in Rio for
CZK1,312 per hour from local translation agency in Rio.
(9) Global Electro purchased 15 hours of legal advice from legal agency in USA for USD1,150
inclusive 18% sales tax. Note: the ER between USD and CZK on the date of payment of fee for legal
advice was 1 USD = 24 CZK.
(10) Global Electro paid electricity and water supplies from Czech supplier for total price of
CZK715,000 and CZK301,000 respectively.
(11) Global Electro sold 20 laptops and 7 desktops in its shops in Brno, Prague and Ostrava for total
price of CZK876, 000.
(12) Global Electro supplied laptops and mobile phones to its Polish dealer for total price of
CZK2,675,000.
(13) Global Electro supplied laptops and mobile phones to its Ukrainian business partner for total
price of CZK1,523,000.
(14) Global Electro supplied laptops, desktops and mobile phones to its business partner in Hungary
for total price of CZK1,712,000.
(15) Global Electro supplied laptops, desktops and mobile phones to its business partner in Georgia
for total price of CZK1,236,000.
(16) Global Electro sold 56 term customer support agreements for 36 months with start date May
2017. Each agreement was sold for CZK1,250 through its shops to Czech customers.
Task 1. For each of Global Electro’s transactions for Quarter 3 of 2017, for the purposes of value added
tax (VAT) state whether:
c) it is taxable and, if so, on what basis; or
d) exempt and, if so, whether exempt with or without recovery for input VAT.
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Part V. Excise duties
Task V.1. Give answers to multiple choice questions. Only one correct answer is possible.
1. Which of the following statements describes correctly the modern role of excise taxation?
a) The difficulties in extracting revenue from the capital income tax base due to greater capital mobility
and the distortionary effects of high taxes on consumption have induced various governments to reexamine
the revenue-substituting potential of excise taxation.
b) The difficulties in extracting revenue from the capital income tax base due to greater capital mobility
have induced various governments to re-examine the revenue-substituting potential of excise
taxation.
c) The distortionary effects of high taxes on consumption have induced various governments to reexamine
the revenue-substituting potential of excise taxation.
d) The difficulties in extracting revenue from the capital income tax base due to greater capital mobility
and the distortionary effects of high taxes on labor supply and demand have induced various
governments to re-examine the revenue-substituting potential of excise taxation.
2. Which of the following statements describes correctly the substance of such objective of excise taxes as
reflection of external costs?
a) Excises have been enacted for revenue purposes, the main consideration being that they could be
administered more easily than other taxes.
b) Excises are often rationalized as charges for the external cost that consumers or producers of
excisable products impose on others.
c) Excises play an important role in regulating various external and other costs associated with road
transport.
d) Excises often restrain the consumption of products regarded as unhealthy.
3. Which of the following statements describes correctly the substance of a problem of undesired side effects
of imposing excises?
a) Imposing a higher excise tax on a particular good means that the relative price of a substitute good
increases at the same time, and that the former’s consumption increases.
b) Imposing a higher excise tax on a particular good means that the relative price of a substitute good
falls at the same time, and that the latter’s consumption increases.
c) Imposing a higher excise tax on a particular good means that the relative price of a substitute good
falls at the same time, and that the former’s consumption increases.
4. Which of the following statements describes correctly an “ideal” tax policy?
a) An ‘ideal’ tax policy assumes total prohibition of excises.
b) An ‘ideal’ tax policy assumes exclusive application of excises.
c) An ‘ideal’ tax policy assumes some middle way between total prohibition and exclusive application of
excises.
5. Which of the following statements describes correctly an EU legislation in field of excises?
a) EU legislation was adopted to ensure that excise duties for certain products were applied in the same
way throughout the Single Market, and that Member States applied (at least) a minimum rate of
excise duty.
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b) EU legislation was adopted to ensure that excise duties for certain products were applied to the same
products throughout the Single Market, and that Member States applied (at least) a minimum rate of
excise duty.
c) EU legislation was adopted to ensure that excise duties for certain products were applied in the same
way, and to the same products throughout the Single Market, and that Member States applied (at
least) a minimum rate of excise duty.
6. Which of the following statements are true about modern fiscal situation in the world?
a) A number of international studies have indicated that corporate and personal income taxes have the
least impact on growth. An equally strong reason for this ongoing development is that international
tax competition and the weakened economy simply do not allow for ever-increasing VAT and excises.
b) A number of international studies have indicated that value-added taxes (VAT) and excise taxes have
the least impact on growth. An equally strong reason for this ongoing development is that
international tax competition and the weakened economy simply do not allow for ever-increasing
corporate or personal income taxes.
c) A number of international studies have indicated that excise taxes have the least impact on growth.
An equally strong reason for this ongoing development is that international tax competition and the
weakened economy simply do not allow for ever-increasing VAT.
7. Which of the following statements are true about modern fiscal situation in the world?
a) A truly global trend that leads to higher direct tax revenue is the increase of excise taxes – both in
terms of rates and in terms of variety of types.
b) A truly global trend that leads to higher indirect tax revenue is the increase of excise taxes – both in
terms of rates and in terms of variety of types.
c) A truly global trend that leads to higher indirect tax revenue is the increase of excise taxes through
setting higher tax rates.
d) A truly global trend that leads to higher indirect tax revenue is the increase of excise taxes through
imposing new types of indirect taxes.
8. Which of the following statements are true about being or not being of a payer of excise taxes?
a) You are not the taxpayer if you purchase excise products for your own consumption (within
maximum permissible quantity).
b) You are not the taxpayer if you purchase excise products for your own consumption (within
minimum permissible quantity).
c) You are always a taxpayer regardless of purpose and quantity of purchase of excise products.
d) You are never a taxpayer regardless of purpose and quantity of purchase of excise products.
9. Which of the following statements are true taxable period and deadline for submission of excise tax return
in the Czech Republic?
a) A taxable period for excise taxes is one month. The taxpayer must submit his tax return by the 25th
day of the next month.
b) A taxable period for excise taxes is two months. The taxpayer must submit his tax return by the 25th
day of the third month.
c) A taxable period for excise taxes is three months. The taxpayer must submit his tax return by the
25th day of the fourth month.
10.In the Czech Republic the tax administrator is:
a) The tax administrator is locally relevant Tax Office.
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b) The tax administrator is locally relevant Customs Office.
c) The tax administrator is Security and Exchange Commission.