Use the news in the Road Tax Act

The amendment to the Road Tax Act No. 16/1993, which was approved this July, has brought many important changes. The main goal of these changes was to encourage entrepreneurs to acquire and use more environmentally friendly vehicles and simultaneously increase the tax burden for those who use older vehicles.

The previous systemof tax rate decrease depended on emission limits (known as Euro 2 and higher) being met. The new system derives from the first registration of a vehicle. One important change is including all vehicles with maximumallowable weight above 3.5 tons (although they are not used for entrepreneurial activity) in the group of vehicles subject to road tax, broadening the group of vehicles that are exempt fromroad tax and enabling decrease of road tax for passenger cars.

The changes are applicable from 2009 except for the change in the system of decrease of the tax rate based on the first registration of a vehicle, which is already applicable starting from 2008.

As alreadymentioned, the systemof tax rate decrease based on meeting emission limits (Euro 2 and higher) was cancelled at the end of 2007. Based on the old system, the tax rate was decreased for all vehicles (except for passenger cars) by 40 percent if the Euro 2 emission limit was met, and by 48 percent if the Euro 3 emission limit or higher was met. This system is replaced by a new system derived from the first registration of a vehicle, regardless of whether this first registration occurred in the Czech Republic or abroad.

The tax rate is decreased for the first 108 months, or nine years, from the first registration of a vehicle. If an entrepreneur uses a vehicle that was imported to the Czech Republic, the decisive date for the tax rate decrease is the date when the vehicle was registered abroad.

The original tax rate (that is stipulated for each car in the Road Tax Act) is decreased by 48 percent for the first 36 months fromregistration of the vehicle, by 40 percent for the following 36months and by 25 percent for the last 36 months. After the nine-year period elapses, the full tax rate applies.

The tax rate decrease now also applies to passenger cars, whereas in the previous systemthe tax rate could not have been decreased for passenger cars even if theymet the emission limits (Euro 2 and higher).

It is not possible to determine the total impact of this change on entrepreneurs, as it depends on their vehicle fleet. If entrepreneurs have only passenger cars in their fleet that were registered less then nine years before, they will save on road tax. On the other hand, entrepreneurs with a large truck fleet that meet the Euro 2 or Euro 3 or higher emission limits but are older than six or three years respectively will pay higher road tax compared to previous years.
Entrepreneurs using vehicles that were registered prior to 1989 will pay higher tax. The original tax rate increase by 15 percent valid to the end of 2008 has been replaced with a 25 percent increase starting from 2009.
Vehicleweight requirements All vehicles with a maximum allowable weight above 3.5 tons that are used for transport of cargo are now subject to road tax regardless of whether they are used for entrepreneurial activity or not. Until 2008, this applies to vehicles with a maximum weight above 12 tons.

However, no tax is due from some vehicles with a maximum weight above 3.5 tons but below 12 tons, provided certain criteria are met: these vehicles must be used by individuals, nonprofit organizations or driving schools that use them for driver’s education. However, such vehicles cannot be used for entrepreneurial activity or for activities generating income that is subject to income tax, such as rental.

Entrepreneurs that are entitled to the above described decrease of tax rate do not have to file a road tax return provided that they have no other vehicles that are subject to road tax.

Tax due from vehicles with a maximum weight above 12 tons may be decreased by 48 percent provided the same conditions aremet as for decrease of the tax rate for vehicles with a maximum weight between 3.5 and 12 tons. This decrease in the tax rate cannot be combined with a decrease in the tax rate based on the first registration of a vehicle.

Environmentally friendly exemption The amendment to the Road Tax Act broadens the group of environmentally friendly vehicles exempt fromtax. Up to the end of 2008, only electric-powered vehicles are exempt fromroad tax. Starting from 2009, besides these vehicles hybrid-powered vehicles and vehicles that use liquefied petroleum gas (LPG) or Compressed Natural Gas (CNG) or have engines that use a blend known as E85 are also exempt from tax provided their maximum weight is lower than 12 tons.

Such vehicles are currently almost not used, and the intention is to support their use by entrepreneurs.