1) Tangible fixed assets (mobile phone, laptop, camera, car)

Almost all of you probably know what these are. Assets over CZK 40,000 excluding VAT for VAT payers and including VAT for non-VAT payers, which are not expensed immediately but through depreciation.

The threshold for recording these assets for income tax purposes has risen from CZK 40,000 to CZK 80,000. Even more interestingly, we will be able to use this increase retrospectively from 1 January 2020. 

The same rules will apply to capital improvements to tangible assets (for example, “tuning” a car).

If you bought assets worth CZK 40,000–80,000 in 2020, or made capital improvements worth CZK 40,000–80,000, those assets or improvements can be reclassified directly as 2020 expenses. Naturally, I will consider this option for my clients and automatically offer it to those affected. For 2020, retrospectively increasing the depreciation threshold is only an option; from 2021, this threshold will be fixed and I will automatically account under the new rules.

2) Intangible fixed assets (software, applications)

This category is fairly simple – the previous CZK 60,000 threshold has been abolished. All intangible assets will now be expensed directly without amortisation. Again, this can be applied retrospectively from 1 January 2020 and is mandatory from 1 January 2021.

3) Extraordinary depreciation

This is another form of COVID support – you can significantly shorten the depreciation period for fixed assets. Specifically, tangible assets in depreciation groups 1 and 2 purchased between 1 January 2020 and 31 December 2021.

Depreciation group 1

This mainly includes phones, computers and other office equipment. Extraordinary depreciation allows these assets to be depreciated evenly over 12 months instead of 3 years.

Depreciation group 2

For most of you, this means cars. Here, extraordinary depreciation shortens the period to 24 months, with 60% of the price depreciated in the first year and the rest in the next. The usual depreciation period is 5 years.

If I may add a comment, the increase in the depreciation threshold was long awaited and I am pleased about it. Personally, at today’s prices, depreciating the latest iPhones, for example, makes little sense to me. A CZK 80,000 threshold seems entirely appropriate for fixed assets. As for extraordinary depreciation, do not hesitate to use it if your tax base is higher. It is an entirely legal tax optimisation tool introduced to prevent companies facing large tax balances in these difficult times.

If you would like advice on fixed assets or extraordinary depreciation, we can work it out together in a consultation  🙂