Czech Republic

Czech Legislation Update June 2015 (updated)

26 June 2015

President Zeman signed the act preventing new clients from entering the second pillar of the pension system.

At its session on 25 June, the Legislative Council of the Government passed the draft amendment to the Act on Association in Political Parties and Political Movements that includes the issue of political party financing. 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. The draft amendment will be debated by the Government. The Legislative Council of the Government also passed draft act introducing changes to election-related acts and other related acts. Read more.

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.

At its session on 3 June, the Government rejected the Bill no. 478, a draft amendment to the Act on Significant Market Power for the Sale of Agricultural and Food Products and Abuse thereof. Proponents (a group of MPs) suggest termination, 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. In their words, the best regulation would be no regulation in the case of the Czech retail market. The Government already approved on 9 March 2015 a draft amendment to the Act on Significant Market Power. 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. The Bill will have its first reading in the Chamber of Deputies at its session starting on 16 June.

The draft amendment to the Act on Free Access to Information, Bill no. 395, had its second reading and was debated in the Chamber of Deputies on 17 June. The bill was passed to the third reading. 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 draft amendment to the Insurance Act, Bill no. 414, was debated by the Chamber of Deputies on 16 June. Changing proposals were submitted to MPs and further debate will be possible after 1 July. 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 chamber of Deputies approved draft amendment to the Labor Code, Bill no. 376, on 19 June. The bill is heading to the Senate, the Upper Chamber of the Czech Parliament. The amendment suggests that provisions governing liability of an employer for damage caused as a result of work-related accidents and occupational disease, which are currently placed among transitional provisions of the Labor Code, should become an integral part of the Labor Code (in force from 1 January 2009). Originally, the administration of the employee accident insurance should have been transferred from employers to the social security system, based on the separate Act on Employee Accident Insurance. The Act should have come into force on 1 January 2010, but the actual date has been postponed several times - recently until January 2017. The Bill is heading to the second reading in the Chamber of Deputies.

Another draft amendment to the Labor Code, Bill no. 393 is having its first reading in the Chamber of Deputies. The intent of the Bill is to eliminate the institute of the so-called „karencni lhuta“. The employee, who has been recognized to be temporarily unfit for work (i.e. whose temporary incapacity for work has been recognized) or whose quarantine has been ordered, is entitled during the first 14 calendar days (or during the first 21 calendar days when it is from 1 January 2012 to 31 December 2013) of his temporary incapacity for work or quarantine to compensatory wage or salary. However, the employee is not entitled to compensation of wage or salary for the first three days of his/her temporary incapacity for work (the so-called karencni lhuta). The Czech Constitutiomal Court rejected the institute of “karencni lhuta“as unconstitutional in 2008, but it was re-introduced later.

The Government passed a draft amendment to the Act on Universities, at its session on 15 April 2015. The draft amendment is currently in the Chamber of Deputies as Bill no. 464 and is being debated by the Chamber Committees. Its intent 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).

At its session on 25 May 2015 the Government allocated 28,591 mil. CZK for 2016, 29 mil. CZK for 2017 and 29,166 mil. CZK for 2018 from the state budget for reasearch, experimental development and innovation. Clicke here to view the document. The Government also resolved that the Minster of Education submits an updated Czech Road Map of Large Infrastructural Projects of research, experimental development and innovation for 2016-2022 period by 30 September 2015.

Czech Statistical Office: Health care expenditures increase slows down

24 June 2015

According to the June edition of the Czech Statistical Office journal Statistika a my, health care expenditures in the Czech Republic rose from 219bn CZK in 2005 to 292bn CZK in 2013, with households health care spending amounting to 23bn CZK and 42bn CZK, respectively (i.e.+83%, while the expenditures of health insurance companies rose by 31% only).

The greatest part of expenditures of households covers medicaments, medical devices, direct dental procedures, various fees and certificates, and aesthetic surgery procedures. Since 2011, households expenditures on prescription drugs have been stable above 9bn CZK. Over-the-counter drugs sales peaked in 2012, reaching more then 12bn CZK. The state collected 5.49bn CZK on regulatory fees in 2013, an increase by 3 percentage points compared with 2012. The costs of treatment of oncology patients rose by almost one-fifth between 2012 and 2013, from 16.7bn CZK to 19.1bn CZK. Read more.

Czech Statistical Office: Optimism, relaxed budgets behind high investment dynamics in 2014

22 June 2015

In 2014, investment in the Czech Republic grew by 4.5% in real terms, compared with 1.0% growth in the Eurozone and 2.3% in the EU. For the first time since 2010, the Czech investment growth dynamics exceeded the dynamics in the United States of America. The investment rate for the Czech Republic in 2014 (25.3%) was much higher than the EU's rate of 19.3%.

In terms of investment volume, the greatest increase in investment was seen in the sectors of building and construction (+6.9%), technology (ICT, machinery, equipment +6.8%) and IPR products, including research and development and software purchase (+3.3%).

The main reasons behind the Czech 2014 investment growth were optimistic expectations and less tight budgets of businesses. Investment by non-financial and financial businesses increased by 5.7% and 8.7%, respectively. Volume of investment by government institutions rose by 17.6% (compared with 35.2% fall in 2010-2013).

Investment by households and non-governmenal organisations fell by 1.9% in 2014.

Click here to read more and view investment development in the Czech Republic in 1993-2014.

Source: June 2015 issue of the Czech Statistical Office journal Statistika a my

Liberal Institute: Today is Czech Tax Freedom Day

05 June 2015

According to the analysis of the Czech Liberal Institute based on the OECD methodology, the Czech Tax Freedom Day in 2015 is June 5. The number of working days needed to cover public expenditures has fallen to 155 in 2015, compared with 160 in 2014. The reason is fast growing GDP that reduces the ratio of public expenditures to GDP. According to a methodology used by Deloitte, the Tax Freedom Day in the Czech Republic is June 22.

To read more, click here and here.

ODS Party Congress resolutions

01 June 2015

The 26th Congress of the Civic Democratic Party (ODS) took place in Prague on 30 May 2015. No elections were on agenda. Among the resolutions of the week-end party congress was the aim at reduction of the tax burden in the Czech Republic (by elimination of three out of seventeen existing tax rates - road tax, real estate tax, real estate acquisition tax - and gradual introduction of a single VAT of 15%, or flat income tax of 19%, for instance). The party rejected President Miloš Zeman’s initiative supporting euro adoption and the EU’s refugee quotas. The party members proposed the introduction of the so-called index of freedom that would measure the level of interference of each new piece of legislation into personal freedom.

To read more in Czech click here and here. For details in English, click here.

Czech Legislation Update May 2015

29 May 2015

The draft amendment to the Act on Criminal Liability of Legal Entities, Bill no. 304, 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 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 Government received on 7 May 2015 the Bill no. 478draft Act on the termination of the Act on Significant Market Power for the Sale of Agricultural and Food Products and Abuse thereof. Proponents (a group of MPs) suggest termination, 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. In their words, the best regulation would be no regulation in the case of the Czech retail market. The Government already approved on 9 March 2015 a draft amendment to the Act on Significant Market Power. 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 6 May 2015 the Government passed a draft amendment to the Act on the Support of Research, Experimental Development and Innovation. 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. To view the draft act, click here.

 

At its session on 18 May 2015, the Government approved the termination of the second pillar of the pension system as of 1 January 2016. According to the bill, no further inflows to the second pillar will be allowed after this date and all funds will be paid back to citizens by the end of 2016. The Chamber of Deputies passed at the end of April 2015 the government bill the aim of which is to stop new clients from entering the second pillar.

 

The Czech government approved on 18 May 2015 a Bill on proving the origin of assests according to which the tax administration will ask for evidence if the value of unregistered property tops Kc7m and will possibly impose a tax on it. The bill is yet to be passed by parliament and signed by the president. It might take effect as of January 2016. Source: CTK. Click here to read the article.

 

At its session on 25 May 2015, the Government passed the program called Trio, a 6.15 billion CZK package to support applied research and experimental development in the 2016-2020 period, mainly in the areas of fotonics, micro- and nanoelectronics, nanotechnologies, industrial biotechnologies, and other high-tech industries. The program aims at increasing the applicability of research and development results in Czech businesses, including the Prague region. Applicants can apply for sums up to 20 million CZK. Calls for projects will be announced in 2015-2017. The program has been criticized by the Economic Chamber and the Czech Technology Agency. According to the Economic Chamber, there is no support allocated for the areas of environment and transportation. Also, most funds would flow into institutional support of research organizations, without putting emphasis on greater focus of these organizations on applied research, the Economic Chamber say. The Government promised funds for the Technology Agency CR program Epsilon for 2016, but no new call for projects will be announced in 2015. Click here to read more.

 


KDU-CSL Party Congress: Leaders re-elected

25 May 2015

KDU-CSL party members met in the South Moravian town of Zlin to elect party chairman (Pavel Bělobraádek – unopposed), first deputy chairman (current Minister of Agriculture Marian Jurečka – re-elected) and four chairmen (Zuzana Roithová, Jan Bartošek were re-elected, Ondřej Benešík and Jiří Mihola were newly elected). According to P.Bělobrádek, Christian Democrats should aim at victory in the 2016 regional elections. The party has already succeeded in the elections to the Chamber of Deputies, the Senate, municipal elections, and elections to the European Parliament.

For more information in English clck here and here.

To read more in Czech click here and here.

The party congress passed a number of resolutions, expressing support to the euro adoption, territorial integrity of Ukraine, Transatlantic Trade and Investment Partnership between the EU and the USA, among others. Resolutions were adopted in the areas of foreign policy, political islam, transportation, agriculture, healthcare, national security and postal service.

To read more click here.

Czech Legislation Update March-April 2015

01 May 2015

At its session on 16 March 2015, the Government passed a material intent of the new Act on Public Procurement. New Directives of the EU in the field of public procurement (2014/24/EU, 2014/25/EU, 2014/23/EU) introduce major changes. Their transposition, according to the authors of the material intent (the Ministry for Regional Development), creates the need for brand new Act on Public Procurement.  The deadline for submitting the draft act to the Government is 30 June 2015, according to the respective resolution of the Government. The Ministry for Regional Development already sent the draft to the inter-ministerial round of comments on 23 April. Ministries have 20 days for submission of their comments. The Chamber of Deputies could review the draft act in autumn 2015. To view the material intent, click here. To read more about the preparation of the act, click here and here.

 

The draft amendment to the Act on Free Access to Information, Bill no. 395, had its first reading in the Chamber of Deputies on 1 April 2015. 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 draft amendment to the Insurance Act, Bill no. 414, had its first reading in the Chamber of Deputies on 8 April 2015 and is currently being debated in Committees of the Chamber. 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 in the Chamber of Deputies as Bill no. 464 and its intent 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). Source: The Czech Ministry for Education.



At its session on 23 April 2015 the Government rejected the draft amendment to the Act on State Prosecution. The Bill no. 432 is heading to the first reading in the Chamber of Deputies. The intent of the Bill is to reform the basic organization and management structure of the State Prosecution System and thus increase its effectivity. The Bill comprises also measures that establish liability of state prosecutors for lapses or mistakes.



The Chamber of Deputies of the Parliament of the Czech Republic passed the draft amendment to the Labor Code, Bill no. 376, in the first reading on 11 February 2015. The amendment suggests that provisions governing liability of an employer for damage caused as a result of work-related accidents and occupational disease, which are currently placed among transitional provisions of the Labor Code, should become an integral part of the Labor Code (in force from 1 January 2009). Originally, the administration of the employee accident insurance should have been transferred from employers to the social security system, based on the separate Act on Employee Accident Insurance. The Act should have come into force on 1 January 2010, but the actual date has been postponed several times - recently until January 2017. The Bill is heading to the second reading in the Chamber of Deputies.



Another draft amendment to the Labor Code, Bill no. 393 is heading to the first reading in the Chamber of Deputies. The intent of the Bill is to eliminate the institute of the so-called „karencni lhuta“. The employee, who has been recognized to be temporarily unfit for work (i.e. whose temporary incapacity for work has been recognized) or whose quarantine has been ordered, is entitled during the first 14 calendar days (or during the first 21 calendar days when it is from 1 January 2012 to 31 December 2013) of his temporary incapacity for work or quarantine to compensatory wage or salary. However, the employee is not entitled to compensation of wage or salary for the first three days of his/her temporary incapacity for work (the so-called karencni lhuta). The Czech Constitutiomal Court rejected the institute of “karencni lhuta“as unconstitutional in 2008, but it was re-introduced later.

ČSSD weekend party congress

16 March 2015

ČSSD party members met during the annual conference in Ostrava on 13th and 14th of March to pass a resolution stipulating concrete requirements for the Czech Republic: clearer legal definition of confict of interest, tighter rules for party financing and election campaigns as well as precise media legislation. All these measurements need to be adopted, according to ČSSD, to ensure more democratic state. Bohuslav Sobotka has been re-elected as the Chairman of the party with 85% of votes from the delegates. Milan Chovanec has been elected as the First Vice Chairman. Prague candidates have got a strong representation in the top leadership of the party which however seems to be a problem for the regional Mayors. Yet, the Prime Minister and Chairman of the party has commented that ČSSD cohesive and stable management is considered to be a good news for the stability of the government.

For more information click here, here and here. For coverage in English click here.

Robert Pelikan and new insolvency law - ambitious task going forward

06 March 2015

New Minister of Justice Robert Pelikán proclaims that new strategy towards insolvency proceedings is the priority task in his sector. “The major weakness of the law is in the people who are involved”, he mentions. He pledges that the Ministry of Justice will make considerable efforts to improve the cooperation with the Ministry of Interior, the Police and Public prosecutors´ office and create a new team that would be able to effectively identify crime in this area and find evidence on people who continue to make a living out of frauds.

Solving insolvency proceedings is a complicated issue that requires specific knowledge of commercial law and business affairs that the police and inexperienced prosecutors do not always possess. It is alarming that there are problems on so many levels, which the new ambitious minister however promises to deal with. For example, insolvency administrators are establishing new fictitious offices to get more cases and more remuneration; companies are filing bullying petitions to harm their competitors and exclude them from bidding for a public contracts; firms are changing their addresses on purpose just before the petition is filed; or certain companies go to a particular court where they have “good contacts”.

Read more about the issue of insolvency and Robert Pelikán click here and here

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