31st August 2015

Czech Legislation Update August 2015

The Chamber of Deputies passed amendment to the Act on Free Access to Information on 8 July. The Senate, the Upper Chamber of the Czech Parliament greenlighted the bill at its August session. The bill was subsequently submitted to the President, on 18 August. The stated intent of the Bill is to harmonize Czech legislation with the EU’s Public Sector Information Directive (2013/37/EU) on re-use of public sector information. The PSI Directive focuses on the economic aspects of re-use of information rather than on the access of citizens to information. The re-use of public sector information covers commercial and non-commercial use by users outside the public sector (businesses, NGOs, academic research). The public sector information could be accessible also via remote access, for example.

The Senate adopted amendment to the Act on Accounting on 12 August and sent the material to the President on 18 August. The aim of the material is to harmonize accounting rules and practices with the European Union rules. Read more details here.

Also, on 23 July, the Senate endorsed amendment to the Act on Employment and the President signed it on 4 August. The amendment introduces the so- called „kurzarbeit“. The intent behind the measure is to secure at least part-time work for employees with at least 70% of wage paid out during the critical period. The government will assist companies in crisis by covering 20% of wages whereas employers will cover 50% of wages. The bill was submitted to the President who signed it on 4 August. More information available here.

The Senate approved amendment to the Labor Code on 23 July and the material was submitted to the President. The provisions governing liability of an employer for damage caused as a result of work-related accidents and occupational disease that were are placed among transitional provisions of the Labor Code, will become an integral part of the Labor Code (in force from 1 January 2009). Originally, the administration of the employee accident insurance was meant to be transferred from employers to the social security system, based on the separate Act on Employee Accident Insurance which never took effect.

Also, on 23 July, the Senate accepted PM Sobotka’s National Program of Reforms.

The draft amendment to the Act on Business Activities on the Capital Market Business (Capital Market Undertakings Act) will be reviewed by the Committees of the Chamber of Deputies (Bill no. 571). The aim of the proposal is to harmonize the Czech law with EU legislation. The proponents suggest provision of more informatio about the ownership structure of a company; shareholdres of companies with basic capital exceeding 500 mil CZK should be obliged to report to issuer and the Czech National Bank it their share of the company exceeds 1%. There should also be changes of administrative fees connected with capital market. Read more.

At its session on 29 July, the the Government passed draft amendment to the Act on Association in Political Parties and Political Movements that includes the issue of political party financing. The Bill no. 569 will be reviewed by the Committees of the Chamber of Deputies. The stated intent of the draft act is to introduce more transparent control of financing of political parties and political movements. This includes using transparent bank accounts, setting limits for donations from physical and legal entities, providing detailed overview of incomes and expenditures within annual reports, including elections-related expenditures, and publishing annual reports on the internet. The draft act also gives political parties and movements the opportunity to set up research-oriented political institutes or think-tanks that would be eligible for state contributions. The draft act also provides for the foundation of an independent authority for controlling financing of political parties, based on GRECO (Group of States against Corruption under Council of Europe) recommendations. According to the draft amendment, the limit for a donation of an individual to a political party is set at 3 million CZK. The proposed limits for election campaign financing are following: 90 million CZK for general elections, 40 million CZK for presidential elections, 7 million CZK for regional elections, No limits were set for municipal elections, including the Prague Magistrate. The limit for elections to the European Parliament remains at 50 million CZK. Also, the Government passed draft act introducing changes to election-related acts and other related acts.

The Government also passed draft amendment to the Act on the Conflict of Interest. The Bill no. 564 will be reviewed by the Committees of the Chamber of Deputies.The material proposes the introduction of an obligation to submit a declaration proving the origin of assets owned by public service officers/politicians on the very first day of his/her service in the new function. The current obligation requires submission of such declaration after one year in office.

On 29 July, the Government greenlighted stricter regulation of hazard and the material was submitted to the Chamber of Deputies of the Parliament (bills no. 578, 579, 580).

Draft amendment to the Act on Criminal Liability of Legal Entities, Bill no. 304, is having its second reading. It had its first reading in the Chamber of Deputies in November 2014 and its review at the level of standing committees of the Chamber was interrupted (in January and again in March 2015). The Committee for Constitution will review the bill at its session on 2 and 3 September 2015. The Act entered into force on 1 January 2012 and comprises a list of acts for which a legal entity bears criminial liability. The intent of the draft amendment is to replace this list (comprising a limited number of criminal acts) by a list of criminal acts with which legal persons cannot be charged. This approach should cover a much wider range of criminal breaches, the proponents suggest.

The draft Act on Proving the Origin of Assets is having its first reading in the Chamber of Deputies (Bill no. 235). The Government submitted its position (neutral) on the bill to the Chamber of Deputies on 15 July.

At its session on 6 May 2015 the Government passed a draft amendment to the Act on the Support of Research, Experimental Development and Innovation. The material is having its first reading in the Chamber of Deputies (Bill no. 489). The aim of the bill is to harmonize the Czech law with the new EU legislation and thus increase clarity and applicability of the national legislation. The draft amendment comprises changes in terminology, definitions (industrial research, applied research, experimental development, research organizations), conditions for subsidies and cummulation thereof, etc.

The draft Act on Online Sales Reporting (EET) is having its first reading in the Chamber of Deputies (Bill no. 513). The Economic and Budget Committees of the Chamber will review the Bill on 2 September. The stated intent of the Bill is to address tax evasion and increase the effectivity of tax collection (income tax, VAT). The new rules should be effective as of mid-2016. Read more.

The draft Act on State Prosecution is having its first reading in the Chamber of Deputies (Bill no. 432).

The Government approved on 9 March 2015 a draft amendment to the Act on Significant Market Power for the Sale of Agricultural and Food Products and Abuse thereof. The Bill no. 444 is being reviewed by the Committees of of the Chamber of Deputies (Committee for Agriculture on 15 July and Economic Committee on 2 September).The Bill extends the list of banned practices of retail chains, such as charging of listing fees, for example. Newly, according to the draft act, sanctions for violation of the law by retail chains could be as high as 10% of their net turnover or 10 million CZK. At its session on 3 June, the Government rejected another draft amendment to the Act (Bill no. 478). Proponents (a group of MPs) suggest termination of the Act, as, among other reasons, it only addresses the issue of dominance on the part of buyers without mentioning the dominant position of suppliers in buyer-supplier relationships. This is a discriminatory approach, and in their words, the best regulation would be no regulation in the case of the Czech retail market.

The draft amendment to the Insurance Act, Bill no. 414, was reviewed by the Chamber of Deputies on 16 June and is heading to the third reading. As of 1 January 2016 EU Directives 64/225/EHS, 73/239/EHS, 73/240/EHS, 76/580/EHS, 78/473/EHS, 84/641/EHS, 87/344/EHS, 88/357/EHS, 92/49/EHS, 98/78/ES, 2001/17/ES, 2002/83/ES and 2005/68/ES will be abolished and replaced by the Solvency II Directive, the aim of which is harmonization of the rules for the insurance and reinsurance businesses within the EU. The Solvency II Directive establishes the so-called EU Passport, which is a single licence for insurers to operate in all EU member states, given that they fulfill conditions set by the EU. The issuance of the passport-licence in the Czech Republic will fall under the competence of the Czech National Bank. The conditions for application and the process of licence issuance for entities with residence in the Czech Republic will stay more or less unchanged and the administrative burden related to the application for licence will be lower, the proponents of the draft amendment suggest. The licence will apply either to insurance or reinsurance business activities, i.e. it won’t cover both. The aim of the Directive is to minimize insolvency risks, too.

The Government passed a draft amendment to the Act on Universities, at its session on 15 April 2015. The draft amendment is currently being reviewed by the Chamber of Deputies (Bill no. 464); the debate was interrupted and the draft amendment will be discussed in the Committee for Science, Education, Culture, Youth and Sport on 24 September. The intent of the bill is, among others, to regulate accreditation activities and ensure high quality of tertiary education in the Czech Republic, as well as regulate activities of branches of foreign universities operating in the Czech Republic. The Czech Republic experienced a surge in the number of university students between 2000 and 2014. In 2000, there were 8 private universities, compared with 44 private universities in 2014. The number of public universities increased by 2 (from 24 to 26) and the number of state universities decreased from 4 to 2 (3 army schools merged into 1) in the last 14 years. The number of new students entering Czech universities rised by 86 percentage points in that period and the share of those having tertiary education in the Czech population aged 25 to 64 grew from 10,96% to 19,28%. The diversity of study fields is high, with around 8829 study study fields in 2700 study programs (as of 30 June 2014).


From the sessions of the Government:

In the upcoming period,within the framework of its Action plan to foster economic growth and employment, the Government will focus on passing draft amendment to the Building Act (prompter decisions on building permits), draft amendment of the Act on Employment, new Act on Public Procurement, support to Research and development and social residence, for example, PM Sobotka said after the mid-July meeting of the economic ministers (source: CTK).

On 8 July the Government approved the pilot project of three preferential industrial zones - in Ostrava-Mošnov, Holešov and Most-Joseph - with more than 150ha and 40% of available space each. The project is a part of the amendment to the Investment Incentives Act that came into effect in May 2015. More such zones could be proposed by the Ministry of Industry and Trade after the pilot project evaluation. Click here to read more about the new economic zones and here to read more about the current state of investment incentives.

At its session on 1 July the Government approved the Strategy of Digital Literacy for the Period 2015-2020. The intent of the strategy is to develop digital literacy of Czech citizens in such a way that they become more and more capable of using the potential of digital technologies for their lifelong personal growth and increasing quality of life. Read the Strategy and related World Internet Project 2014 report for the Czech Republic  published by the expert team at the Charles University, Prague.

At its session on 1 July 2015 the Government passed draft amendment to the Act on Elections to the Parliament of the Czech Republic. The intent of the draft amendment is to introduce minimum tresholds for the representation of female and male candidates on lists of candidates in the regional and general elections. These measures would not apply to the elections to the Senate (the Uppet Chamber of the Parliament) and presidential elections. The suggested threshold is 40% of women and 40% of men on each list of candidates. First two places on each candidate list should be given to one female and one male candidate.


Legislation drafts:

The Ministry for Regional Development has been reviewing comments from the inter.ministerial review of its draft amendment to the Construction Act.

The Criminal Code draft amendment has been prepared by the Ministry of Justice. Among other proposals, presence of defendants as judges read verdict will be obligatory. More details here.

The Ministry of Finance in cooperation with the Ministry of Justice drafted an amendment to the Act on Money Laundering; it is currently being debated within the interministerial review. The material introduces a register of real owners of businesses, among others. Read more here.

The Ministry for Regional Development submitted draft Act on Public Procurement (Zákon o zadávacím řízení) to the Legislative Council of the Government on 10 July.

The interministrerial review of the draft amendment to the Insolvency (Bankruptcy) Act ended on 12 June. The stated intent of the draft amendment is to increase the control over insolvency administrators, courts and transparency of insolvency proceedings, including  better protection against bullying behavior in insolvency and strengthening of delivery of documents into data boxes. Click here to view the draft amendment.

The interministerial review of the draft amendment to the Act on Employment ended on 9 June. The purpose of the amendment is to regulate temporary employment, including chaining of fixed-term contracts, quotas for temporary employees and protection of temporary employees against insolvency of their employer. Click here to read the draft amendment.

The interministerial review of the draft amendment to the Act on the Residence of Foreigners in the Czech Republic ended on 6 June. The stated intent of the draft amendment is to make the Act simple, compact and user-friendly. For example, the proponents of the bill suggest separation of the EU agenda (entry, residence) from the agenda related to third countries' nationals. The new system should pass more responsibility on foreigners/applicants and/or entities that need these foreigners to enter and reside in the Czech Republic. Click here to read the draft amendment.


Members of the American Chamber of Commerce in the Czech Republic