Following the introduction of the windfall tax, the government is continuing to combat the consequences of the energy crisis caused by the war in Ukraine by preparing an amendment to the Energy Act, which introduces into the Czech legal system the levy on taxable income and the so-called solidarity contribution regulated in Council Regulation (EU) 2022/1854 on emergency intervention to address high energy prices..
However, the this amendment has encountered an unexpected problems during its preparation - in the opinion of a specific groups of lawyers (including the Compatibility Department of the Office of the Government of the Czech Republic during the comment procedure), the regulation of the solidarity contribution contained therein is poorly implemented due to two problematic points.
The first of these problematic points relates to the subjects of the levy, which, in the opinion of the Compatibility Department, are defined more broadly than in the regulation, according to which the solidarity contribution is to apply only to entities operating in the crude oil, natural gas, coal and refining sectors, but the amendment envisages that this includes all producers and any intermediaries participating in the wholesale electricity markets. The definition of entities is thus broader under the amendment.
The second point is that electricity producers will be newly taxed on the basis of the amendment to the Income Tax Act. However, the amendment to the Energy Act, through the solidarity contribution, prepares a new de facto tax and thus in effect double taxation of the same entities on the same subject matter, which, according to the Compatibility Department, is at least very difficult to defend. In the view of other lawyers, it is then even in violation of constitutionally guaranteed rights.
However, the draft amendment has been approved by the government in its original form and has now been registered in the Chamber of Deputies. It is questionable in what form the amendment will be finally approved, as it may be substantially amended during the legislative process However, if the amendment will be approved in its current form, an interesting legal dispute about its constitutionality can be expected at least.
How this dispute will turn out, however, will be a surprise.
