Intangible asset tax depreciation in the Czech Republic

Abstract

This paper aims to familiarize readers with the legislative development of intangible asset tax depreciation in the Czech Republic since 1993. The paper is divided into several basic chapters, of which the main chapter describes and analyzes the development of legislation in three thus-existing legal modes regulating intangible asset tax depreciation (the periods 1993-2000; 2001-2004; 2004- 2011). A separate sub-chapter deals with each of these three modes, which fundamentally differ in the concept of determining tax depreciations. For better clarity, changes in the legislation in question are described using tables. Over the first mentioned mode, i.e. the mode valid for assets acquired in the period 1993-2000, intangible asset tax depreciations were determined by the same manner as tangible asset tax depreciations. This period is characterized by gradual establishment (specification) of legislation that may be partially attributed to the stormy development of social conditions and the need for them to be reflected in law. For the period 2001-2003, standard amendments were contained in accounting regulations. The Income Tax Act (hereinAfter ITA) did not contain an amendment of intangible assets and its depreciations. It merely determined that accounting depreciations of intangible assets were a tax expense. Nevertheless, changes also occurred in this short time period, which this paper will later address. Effective from 2004, legislation on intangible assets and their tax depreciations returned to the ITA. Changes came in this mode of determining depreciations as well; nevertheless, one may consider the current legislative regulation to be stabilized. Later in this paper for the selected category of intangible assets (software), the authors describe and assess the dependence of the portion of the entry price entering tax expenses in the form of tax depreciations on the year of acquiring intangible assets. To achieve the stated objectives, the comparative method was applied (used mainly to describe and assess how legislation developed) and the modeling method (establishing models describing the impact of legislative regulation on the tax expenses of taxpayers). When elaborating this paper, the authors also chose to use so-called paired logic methods.