Czech Republic

Czech Legislation Update August 2015

31 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 miore.

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 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.

 


CTK: Transport Minister:Motorway D8 to be opened to traffic before Christmas 2016

28 August 2015

Motorway D8 to Germany will be opened to traffic before the end of next year so that it can be used for travelling to the Christmas Markets in Dresden in 2016, Czech Transport Minister Dan Tok said after today´s meeting with his German counterpart Alexander Dobrindt... Read more.

Radio Prague: Dvůr Králové Zoo opens first lion safari in Central and Eastern Europe

26 August 2015

The Dvůr Králové Zoo which is known for its valiant efforts to try to save the Northern White Rhino, has a new attraction. End July it opened a lion safari – the only one of its kind in Central and Eastern Europe...Read more.

The Economist Intelligence Unit: Political pressure on foreign-exchange regime intensifies

24 August 2015

Political pressure on the Czech National Bank (CNB, the central bank) has increased, but we do not expect this to affect policymaking during the next year, with the foreign-exchange intervention regime remaining in place until at least mid-2016. This forecast is informed by the CNB's high level of independence and solid record of resistance to external pressures, and by the fact that inflation remains well below the 2% target. A change of central bank governor after July 2016 will mean that there is greater uncertainty over policy beyond this date, as the new governor will be appointed by the president, Milos Zeman, who has expressed vocal opposition to the currency ceiling. Our core view remains that the intervention regime will be concluded in the second half of 2016.

On August 11th Mr Zeman, as well as chairman of the Chamber of Deputies (the lower house of parliament) Jan Hamacek and president of the Senate (the upper house) Milan Stech, publicly urged the CNB to stop intervening in the foreign-exchange markets and allow the koruna to appreciate beyond its current ceiling of Kc27:€1.

The challenge to the CNB's policy stance has come at a moment when the Czech economy is rebounding strongly. GDP growth in the second quarter of 2015 came to 4.4% year on year, inflation has strengthened since the start of the year, unemployment is falling and exports are reaching record highs. In response, the koruna has strengthened, trading between Kc27.02:€1 and Kc27.04:€1 for most of August. In this context, Mr Zeman, Mr Stech and Mr Hamacek (who is also the deputy chairman of the ruling Czech Social Democratic Party) argue that there is no longer any need artificially to weaken the currency. A recent survey by CSOB, a major bank, showed that 42% of business leaders also now consider the intervention regime to be harmful.

Inflation targeting

The foreign-exchange regime was launched in November 2013, following two years of recession, in order to boost exports and raise inflation by weakening the currency. Following an initial intervention, the koruna weakened by 7% against the euro, and remained weak thereafter, with only verbal reiterations of policy from the CNB until mid-July, when it was again forced to intervene in the foreign-exchange markets to maintain the ceiling. Since then, the currency has remained close to Kc27:€1, and it is likely that the CNB has been intervening further, although no official confirmation of this has yet been made.

In its August meeting statement, the CNB repeated that conventional monetary policy will not resume until inflation has returned sustainably to its 2% target, which it now does not expect to occur until early 2017, given the anti-inflationary pressures arising from the strengthening of the koruna. The CNB re-emphasised that the foreign-exchange intervention regime would not be discontinued before the second half of 2016. Given that annual inflation in July was still well below the target, at just 0.5%, and in view of the CNB's clear and consistent rhetoric on this point, we believe this outlook to be credible and consider an exit from the regime before mid-2016 to be unlikely. Our forecast in this case is unchanged by the recent increase in political pressure, as the CNB has a high level of independence and a solid record of resistance to external pressures.

After mid-2016, the outlook for policy is less certain. The CNB governor, Miroslav Singer, reaches the end of his second term at end-July 2016 and, according to the central bank's rules, cannot remain for a third term. CNB board members are appointed by Mr Zeman, who has previously stated that he favours appointing Jiri Rusnok, one of the current board members, as the next governor. Mr Rusnok is a long-term ally of the president, having served as finance minister in 2001-02 when Mr Zeman was prime minister, and as prime minister of a caretaker government appointed by Mr Zeman in 2013-14, in an unusual move that bypassed parliament.

Changes to the CNB board

Changes to the central bank board may lead to a gradual shift in the prevailing CNB opinion on monetary policy. The mandate of board member Kamil Janacek also expires in July 2016, while those of Lubomir Lizal and Pavel Rezabek expire in February 2017 (although both Mr Janacek and Mr Lizal would be eligible to stay on for a second term). Mr Zeman has repeatedly said that he will not appoint anyone to the board who is in favour of the devaluation policy, on the grounds that this is not in line with his preference for the adoption of the euro. During his election campaign in 2013, Mr Zeman mentioned Jaroslav Ungerman and Martin Fassmann as possible future CNB board appointees; both have expressed reserved or negative opinions on the intervention regime. Mr Rusnok, however, revealed earlier this year that he does not consider the exchange-rate commitment to be antithetical to euro adoption. This suggests that his appointment as governor by Mr Zeman is, as yet, far from certain.

Interventions expected to continue

We expect the CNB to maintain its Kc27:€1 ceiling until at least July 2016, under the governorship of Mr Singer, as inflation gradually rises back towards the 2% target. The strengthening of the economy means that this will probably necessitate further interventions, but we do not consider this to be problematic, given the current low level of foreign-exchange reserves. After July 2016 we see greater uncertainty surrounding the expected end-date of the intervention regime, with inflationary pressures from the accelerating economy contending with anti-inflationary pressures from the stronger koruna. Our core view remains that the regime will conclude in the second half of 2016.

Radio Prague: Czech arms exporters doing good business

21 August 2015

After several lean years Czech arms exporters are once again doing good business. According to the Defense and Security Industry Association 2014 brought a 47 percent increase in arms exports. Czech firms found buyers around the world, selling arms to the tune of 11.5 billion crowns. Exports to countries in North Africa and the Middle East saw a 100 percent increase that year...Read more. Click here to view destinantions.

Ministry launches project to explain pupils consumer rights, protection

18 August 2015

The Ministry of Industry and Trade launched a project, series of lectures between 2015 and 2020 for secondary schools across the country with the aim to help pupils understand better their consumer rights and consumer protection in the Czech Republic, and in and outside the European Union. The initial topic for 2015-2016 presented by lecturers from the Czech Trade Inspection Authority (ČOI) will be online shopping...Read more.

CZECH POINT issues copies of cadastral maps

17 August 2015

As of 6 August 2015, the CZECH POINT contact points in the country and abroad can issue certified copies of parts of cadastral maps. Before, individuals has to visit cadastral offices according to the place of residence to obtain the copies. Read more here and here.

E15/Radio Prague: Czech Uranium Industry set to become major player in Mongolia

11 August 2015

Czech company Uranium Industry is pushing to become a major player in uranium mining in Mongolia through its own research and mining projects and a pending US 200 million dollar buy-out of one of its Canadian rivals on the ground. Read more.

Czech Statistical Office: Tourism: Occupancy grows fifth quarter in row

10 August 2015

In Q2 2015, the number of guests in collective accommodation establishments increased by 9.3% year-on-year and the number of overnight stays by 7.8%. Occupancy has been growing five quarters now. The highest number of foreign guests came from Germany, followed by the United States of America, and Slovakia. Russians (y-o-y decrease by 34.4%) took fifth place right behind arrivals from Poland (+3.8%). The number of visitors from China surged by more than 46% y-o-y. An average length of stay in surveyed establishments was 2.6 nights in Q2 2015, equal for domestic and foreign guests. Read more. More details here and here.

Czech Statistical Office: Share of self-employed in Czech Republic one of the highest in EU28

07 August 2015

Total employment in the Czech Republic is affected by the self-employed in a significant manner. The percentage of the self-employed, i.e. employers and own-account workers is fifth highest in EU28. There are higher shares in Greece, Italy, Romania, and in Poland, only. The share of the self-employed younger than 65 reached in total 14.4% in the EU28 in 2014 yet in the Czech Republic it was 17%. Also, since 1993 the average age of all working persons has prolonged by almost 4.8 years to almost 44 years (in the category of self-employed the average age grew by 6 years, whereas in the category of employees the average rose by 4 years). Read more.

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