Windfall profits tax

Published: 08.12.2022 Related countries:  Belgium Belgium

The Chamber of Deputies of the Czech Republic has approved a windfall profits tax for energy companies and banks. This tax revenue will cover the state’s extraordinary costs associated with the energy price cap.

The Chamber of Deputies of the Czech Republic approved on 24th of November a windfall profits tax for energy companies and banks. This tax is based on the parameters of an EU regulation. The tax will apply for three years, from 2023 to 2025, to highly profitable companies in the banking, energy trading and production, fossil fuel processing, and extraction or petroleum industries. The rate will be 60 %, which will apply to these companies' excess profits, which will be determined as the difference between the tax base in the years 2023-2025 and the average tax for the last four years plus 20 %. The proposal for a windfall profits tax is related to the government's response to the need to raise additional revenue for the state budget, primarily to compensate companies and citizens for high energy prices. Under the European Commission regulation, all Member States are to introduce equivalent measures, Spain and Italy have already done so, and Belgium, Germany, and Austria are actively preparing the introduction. An acceptance test has also been created to ensure that the tax windfall atargets only large businesses and does not increase the tax burden on small and medium-sized enterprises. The rate, set at 60 %, is applied to companies as a surcharge on the maximum 19 % corporation tax rate on their excess profits. The Ministry of Finance of the Czech Republic estimates windfall tax revenues for 2023 at CZK 85 billion, and the draft budget for the following year already counts with it.

Prepared by foreign office CzechTrade Belgium

Source: MF CR