The Constitutional Court found No. 236 / 2011 Coll.

The amount to be reported in column 060 of this row: Original deduction according to Article 36 (1) (b) of CRR In point 1 of the second sentence of Act No. 260 / 2002 Coll., amending Act No. 191 / 1999 Coll., on measures relating to the import, export and re-export of goods infringing certain intellectual property rights and amending certain other laws, as amended by Act No. 121 / 2000 Coll., Act No. 586 / 1992 Coll., on Income Tax, as amended, Act No. 593 / 1992 Coll., on provisions for the determination of the income tax base, as amended, and Act No. 569 / 1991 Coll., on the Land Fund of the Czech Republic, as amended, Act No. 593 / 1992 Coll., on the provisions for the determination of income tax base, as amended, and Act No. 569 / 1991 Coll.

1. On 29 February 2008, the application of the Regional Court in Brno ("the Regional Court ') to abolish the provisions of the second paragraph of Article 1 of the Treaty was served on the Constitutional Court. In Act No. 260 / 2002 Coll., amending Act No. 191 / 1999 Coll., on measures relating to the import, export and re-export of goods infringing certain intellectual property rights and amending certain other acts, as amended by Act No. 121 / 2000 Coll., Act No. 586 / 1992 Coll., on Income Taxes, as amended, Act No. 593 / 1992 Coll., on Reserves for the Determination of the Income Tax Base, as amended, and Act No. 569 / 1991 Coll., on the Regional Fund of the Czech Republic, as amended. The Regional Court states in its application that it is debating the action by which the applicant seeks the annulment of the decision of the Financial Directorate in Brno of 5.12.2005 No 3181 / 05 / FRO 110- 0107, as well as the previous decision of the Brno II Finance Office of 9.12.2005 No 178259 / 04289913 / 9780, whereby the claimant was charged an income tax for the 2002 tax period of CZK 87 028. By the contested decision, the defendant and the administrative body of the first instance have levied a tax on the applicants on the basis of the application of Articles IV and IV. In point 1 of Act No. 260 / 2002 Coll., which amended Act No. 586 / 1992 Coll., on Income Taxes. In the context of the proceedings before the Regional Court, the defendant's administrative authority delivered an opinion (see paragraphs I.45 and 46 of the case-law sp. v. 31 Ca 27 / 2006), in which he stated that, as an executive body, he was not entitled in administrative proceedings to assess the compliance of the law of lower legal force with the law or the law with the constitutional order, although that was required in administrative proceedings by the applicant. The defendant, as an administrative body, is not authorised to submit an application to the Constitutional Court for the annulment of a law or its individual provisions and the law did not allow the defendant, as well as the tax authorities of the first instance, any other procedure in the assessment of Article 4 (1) (c) of the Treaty. In point 1 of the second sentence of Act No. 260 / 2002 Coll., since the interpretation of that provision is clear.

2. The Regional Court also concluded in the present case that the contested provision of Article 4 (1) (a) (ii) of Regulation (EC) No 659 / 1999 was not applicable. In the second sentence of point 1, it establishes a genuine retroactivity which has resulted in a major disadvantage for natural persons trading in securities and accounting in a simple accounting system. He pointed out the finding of 12.3.2002, sp. zn. Therefore, the Regional Court suspended the action in accordance with Article 48 (1) (a) of the Administrative Rules of Procedure and submitted, pursuant to Article 95 (2) of the Constitution of the Czech Republic (hereinafter referred to as "the Constitution '), an application for an assessment of constitutional conformity in accordance with Article 95 (2) of the Constitution. In point 1 of the second sentence of Act No. 260 / 2002 Coll.

3. On behalf of the Chamber of Deputies of the Parliament of the Czech Republic, its President, Ing. Miloslav Vlček, who limited himself to a mere description of the progress of the draft Act No. 260 / 2002 Coll. He stated that the proposal (Chamber of Deputies. III vol. Press No. 1267) was submitted by the Government exclusively as an amendment to Act No. 191 / 1999 Coll. As part of the second reading on 23 April 2002, the contested provision was proposed as an amendment by Mr Antonín Macháček. The draft law was approved in the text of the amendments on 2 May 2002 by 162 of the 168 Members present. The nature of the amendment, which did not concern the issue of import, export and re-export of goods infringing certain intellectual property rights, was not addressed by the President of the Chamber of Deputies.

4. On behalf of the Senate of the Parliament of the Czech Republic, his President, MUDr. He stated that the draft law in question was referred to the Senate on 7 May 2002. After consulting the committees, the Senate adopted a resolution at the 18th meeting of 24 May 2002, which expressed its willingness not to deal with the draft law. 51 of the 54 senators present voted in favour of this proposal. The President of the Senate has supported this information with appropriate documentation from the deliberations of the Senate bodies.

5. The Constitutional Court concluded that, on a formal basis, the proposal complies with the requirements of Article 95 (2) of the Constitution and Article 64 (3) of Act No. 182 / 1993 Coll., on the Constitutional Court, as amended, (hereinafter referred to as the Law on the Constitutional Court). It is the duty of the Constitutional Court to first examine whether the provision in question was granted in a constitutional manner (Section 68 (2) of the Constitutional Court Act). The proposal of the Regional Court concerns the law to be applied directly by the Court in the resolution of the case, i.e. when deciding on an administrative action brought before the Regional Court under sp. zn. 31 Ca 27 / 2006, in order to assess the constitutionality of the proposed provision of Act No. 260 / 2002 Coll. the applicant's further action in this procedure depends. Therefore, the proposal was submitted by a legitimate appellant.

6. For the contested provision of Act No. 260 / 2002 Coll. (also for the Act as a whole), the constitutionally prescribed number of members of the Chamber of Deputies was expressed, with the Senate's constitutionally prescribed number of members expressing the will not to deal with the draft law (see Sub 3 and 4). The President of the Republic signed the Act on 11 June 2002 and the Act was published in the Collection of Laws on 28 June 2002 under No 260 / 2002. The contested provision has not been amended. The proposal is therefore admissible. In this context, the Constitutional Court considers it necessary to state that it did not consider it necessary to address the question of the nature of the amendment by Mr Antonín Macháček, who, at the 49th meeting of the Chamber of Deputies on 23.4.2002, "read the amendment to the Government Bill amending Act No. 191 / 1999 Coll., on measures relating to the import, export and re-export of goods infringing certain intellectual property rights and amending certain other laws, as amended by Act No. 121 / 2000 Coll. It points out its conclusions in the assessment of the so-called stickers found in its findings in sp. zn.

7. Similarly, it had to be taken into account that, although the application of the Regional Court is directed against an amending, rather than an amended law [see, from the caselaw, in particular, the finding of sp. zn. The President However, in the second sentence of point 1, the provision on the entry into force of the amended provisions of Act No. 586 / 1992 Coll., on Income Tax, as amended, and Act No. 593 / 1992 Coll., on provisions for determining the income tax base, as amended. Such a provision is of separate importance in contrast to the provisions of the Income Tax Act [in particular the provisions of § 24 (2) (r) and (w)] amended by Act No. 260 / 2002 Coll., but not subject to judicial review in this proceedings. It was therefore also not necessary to assess the amendments to the provisions of the Income Tax Act, as the Regional Court will assess the case in question according to the legal situation which is the subject of the proposal. The proposal is therefore also admissible in this regard.

8. In accordance with Article 44 (2) of the Law on the Constitutional Court, the Constitutional Court has waived oral proceedings, since further clarification of the case could no longer be expected of the case, and the parties to the proceedings to the annulment have given their consent.

9. On that basis, after examining the contested provision, In the second sentence of point 1, the Constitutional Court concluded that the proposal was justified. The contested provision as a whole reads:

1. The current legislation applies to the tax obligations for the years 1993 to 2001. Article IV shall apply for the first time to the 2002 tax period. ';

As mentioned above, only the second sentence of that provision is challenged, which is the result of which the amendment to the Income Tax Act is to be applied for the tax period 2002, although under Article IX of Act No. 260 / 2002 Coll. the Act takes effect until 1 September 2002. As a result of these intertemporal provisions, the tax authorities were already obliged to apply the following provisions of Section 24 (2) of the Income Tax Act, as amended by Article IV of Act No. 260 / 2002 Coll. These provisions (not subject to review) read as follows:

"10. Paragraph 24 (2) (r) reads as follows:

"(r) the value of the security on sale recorded in the accounts in accordance with special legislation20) on the date of its sale, with the exception of points (w) and (z),";

13. in § 24 (2) (w):

"(w) the acquisition price of a share which is not valued in accordance with special legislature20) at fair value, the acquisition price of a share in a limited company or limited company or in a limited company or cooperative, up to the amount of the proceeds from the sale of that share or share, '.

10. The Constitutional Court cannot, in the context of a specific check on the constitutionality of the laws, deal with its own subject-matter in an administrative action, as it would interfere with the independence of the exercise of judicial authority by general courts (here in the administrative judiciary). In the present case, its task is to assess whether the application of the provisions of § 24 (2) (r) and (w) of the Income Tax Act, as amended by Act No. 260 / 2002 Coll., has the character of genuine retroactivity from the perspective of the tax payer, as it has been claimed since the beginning of the applicant's administrative (complaint) proceedings, and how, in this case, the defendant's financial administration and the regional court agree with him, or whether the nature of retroactivity is incorrect, which may also be found under certain circumstances by the legislator.

11. The Constitutional Court notes that those provisions of the amendment to the Income Tax Act (also in connection with Act No. 563 / 1991 Coll., on Accounting, in its current version) mean that, within the meaning of Section 24 of the Income Tax Act (as applicable for the tax period 2002), the value of the security on sales recorded in the accounts in accordance with the special legislation (i.e. the Accounting Act) on the date of its sale, with the exception referred to in points (w) and (z) of paragraph 2, shall also be considered as expenditure (or expenses) incurred in order to obtain, secure income for the determination of the tax base (Article 24 (1). This means that the provision of Paragraph 24 (2) (w), which is based on the purchase price of shares and not on their fair value, must be applied to those accounting in the simple accounting system. This is because, in accordance with Paragraph 15 (6) of the Accounting Act, in the version in force at the time (currently repealed), the provisions of Sections 7, 14, 27 and 28 of the Accounting Act do not apply to entities accounting in the simple accounting system. Since Article 27 of the Accounting Act determined which of the individual components of the assets and liabilities at the time of the valuation pursuant to Paragraph 24 (2) (b) are measured at fair value, this meant that the entities accounting in the simple accounting system (in the present case, the plaintiff in the case at the Regional Court under point 31 Ca 27 / 2006) could not apply this method of valuation. The purchase price of the share should therefore have been decisive for them, not its fair value. In the event that the shares were sold below the price, this difference for the tax period 2002 could not be recognised as a tax loss under Section 24 (1) of the Income Tax Act, since, within the meaning of Section 24 (2) (w), it was an exception to the provisions of Section 24 (2) (r), according to which, on the contrary, the expenditure was also the value of the security "on sale recorded in the accounts in accordance with the special legislation on the date of its sale ', which was to be understood by the abovementioned provision of the Accounting Act. In this context, it must be stressed that this was reflected not only in the balance sheet of the entities accounting in the simple accounting system but also in their other payment obligations (e.g. in terms of health and social insurance payments).

12. The Constitutional Court considers it necessary to recall here that this regulation was only effective during 2002, namely from 1 September 2002, and should have been applicable for the tax period 2002. However, a further circumstance is of fundamental importance in view of the possible assessment of the constitutionality of the application of false retroactivity (closer to sub 14 to 16). It is essential in terms of assessing the constitutionality of the legislature's procedure in this case in relation to the position of income tax payers in the simple accounting system that Article 9 (4) of the Accounting Act, as in force in 2002, is the provision. In its view, the transition from a simple accounting system to a dual accounting system was mandatory if an entity no longer fulfils the conditions set out in paragraph 2 or 3 for accounting in a simple accounting system, and the fulfilment of the conditions set out in paragraphs 2 and 3 is assessed for the immediately preceding financial year. It was true that "Transitions according to previous sentences are only possible on the 1 day of the financial year following the accounting year in which the entity ascertained those facts." In this context, Paragraph 23 (10) of the Income Tax Act provided that, when determining the taxable amount, accounting is based on a special law, i.e. it is precisely under the provisions of Section 9 of the Accounting Act, which implies that during 2002 or subsequently, it was not possible to calculate the taxable amount in the system of double accounting, thereby cumulatively compensating for losses and gains from the sale of securities as before. In other words, in the 2002 tax period, an entity accounting for a system of simple accounting did not have the possibility of responding to an unexpected change in the Income Tax Act. If it is legally possible to carry out transitions between the simplified and full scope of the accounts only on the first day of the financial year, such income tax payer did not have the opportunity to adapt his accounts to the additional set-up conditions during 2002. Moreover, this change was hidden in the law with a completely different subject matter. Pursuant to Article 1 (1) of Act No. 191 / 1999 Coll., as amended by Act No. 260 / 2002 Coll., that Act regulates, in particular, the conditions under which measures are implemented by the customs office against persons who own, hold, store or sell goods which infringe intellectual property rights in the customs territory of the European Communities and in the protection of the internal market.

13. In accordance with Article 1 (1): The Constitution is the duty of state authorities to act in accordance with the requirements imposed on the rule of law when deciding on the legal position of an individual. These include a requirement that a State may require natural and legal persons to behave, the rules of which are established and declared in advance. Another procedure, if there are no particular reasons, constitutes a breach of the principle of legal certainty and the protection of trust in law, as is apparent from Article 1 (1) of the Constitution. In the present case, no such reason was found and was neither formulated during the legislative process. The amendment containing the contested provision was "loaded 'without any further legal justification. At the same time, such a procedure by the legislator constitutes an intervention in the protection of property rights pursuant to Article 11 (1), in conjunction with Article 11 (5) of the Charter of Fundamental Rights and Freedoms (" the Charter'). At the same time, such a practice is discriminatory as it lacks justification for the distinction between the accounting entities accounting in the simple accounting system (they could not measure the shares at fair value and thus could not exercise any loss for tax purposes) and the accounting entities accounting in the double accounting system. In doing so, the legislator has infringed the requirement of equality of content and the protection of ownership of all owners without distinction in accordance with Article 11 (1), while at the same time establishing inequality in the conditions of the right to do business and to conduct other economic activities under Article 26 (1) of the Charter, thereby violating Article 4 (3) of the Charter.

14. As regards the legal position of the tax entity in the present case, it should be noted that the Constitutional Court did not find, in the light of the facts, a full analogy to the situation it considered in the case of retroactive provision of Article III (1) of Act No. 210 / 1997 Coll., amending and supplementing Act No. 586 / 1992 Coll., on Income Tax, as amended. In the finding of sp. zn. Pl. ÚS 33 / 01, which the Regional Court refers to, this was a new obligation which the taxpayer could not have foreseen at the beginning of the tax period. In the present case, there has been an intervention in the legal position (and thus a disadvantage) of the taxpayer in the income tax, and the taxpayer could not even adjust to that intervention in the legal qualification of his legal conduct in the light of the fact that he would have had to do so before the statutory accounting and tax period for 2002 fixed. However, from the point of view of the constitutional assessment, it is possible to draw on the case exactly the conclusions on which, in the cited finding sp. zn. Pl. ÚS 33 / 01 of 12.3.2002 (N 28 / 25 of SbNU 215, 221 and 225; 145 / 2002 Coll.) The Constitutional Court has reached and reaffirmed when laying down the rules for the legislature's procedure for dealing with the time conflict of old and new legislation in the sp. zn. Pl. ÚS 53 / 10 of 19.4.2011 (published under No 119 / 2011 Coll.), see paragraphs 114 to 149. This legal view of the Constitutional Court had to be applied also in the present case. Thus, the concept of tax policy is a matter for the State to determine the tax burden on the taxpayer of a particular tax and to adjust its obligations to verify the correct assessment of the tax. Such a search and response to changing conditions was evidenced by the development of the legislation contained in Sections 23 and 24 of the Income Tax Act in their amendments from 1993 to 2002. However, even in this possible scope of legislative discretion, it is the legislature's duty to respect the rules resulting from the content of the rule of law (Article 1 (1) of the Constitution), as well as the related constitutionally guaranteed fundamental rights and freedoms in the field, i.e. in particular Articles 11 (1) and (5) and 26 of the Charter. Likewise, the requirement to comply with the rules of the ordinary legislative procedure, the infringement of which in the present case (here the reading of an amendment without reference to the Government Bill amending Act No. 191 / 1999 Coll., on measures concerning the import, export and re-export of goods infringing certain intellectual property rights and amending some other laws) opened the way for unconstitutional regulation. Moreover, in this context, the Constitutional Court must stress that the question of trust in law is not only that the legislator will not adopt laws that will alter the effects of the legal action of their addressees, but also in confidence that those addressees will be protected from any excesses by the legislator by the permanent case-law of the Constitutional Court. This is particularly true in the present case, when the contested provision of Law No 260 / 2002 Coll. was adopted immediately after the Constitutional Court qualified such a procedure as unconstitutional in a similar case.

15. Finally, the Constitutional Court addressed the appellant's claim on the retroactivity of the contested legislation. The contested scheme was approved until 24.5.2002, became valid on 28.6.2002 and became effective as of 1.9.2002, and was to apply for the tax period 2002. The case concerns the adoption of legislation during the tax period and its application for the same tax period. In such a case, however, the nature of the retroactive action is not clear; with a comparative reference to the case-law of the Federal Constitutional Court (e.g. judgment of 19.12.1961, BVerfGE v 13, p. 261; of 14.5.1986 sp. zn. 2 BvL 2 / 83, BVerfGE v. 72, p. 200), such a procedure is not considered by the Constitutional Court as genuine retroactivity. While the true retroactivity of the rule of law is allowed only exceptionally, in the case of retroactivity of the wrong, on the contrary, the case-law and the theory of the view that its application (particularly in the field of tax law) is strictly permissible, whereas only in exceptional cases is it not admissible. Incorrect retroactivity is permissible in the field of tax legislation with regard to its mission when it is necessary to achieve the objective pursued by law and can be concluded that, in the overall measure of "disappointed 'trust in the law and the importance and urgency of the reasons for legal change, the limits of loading capacity [cf.

16. However, in the present case, the Constitutional Court finds that such grounds for an exceptional conclusion on the constitutional inadmissibility of false retroactivity are given. In fact, the conclusions on the discriminatory nature of the contested arrangements are sufficient in themselves to conclude on the need to repeal the contested provision. In the present case, the legislator did not demonstrate that there were serious reasons why it provided that, as a tax loss, the sale of shares at a loss could only be applied under specified conditions by entities accounting in the double-entry accounting system. They were only to be covered by the rules of Paragraph 27 (2) of the Accounting Act, which determine what should be understood as the fair value of securities (market value, valuation by a qualified estimate or expert's opinion, if the market value is not available, or this is not a fair value, or the valuation determined under specific legislation, if it is not possible to follow the rules for determining the market value or the expert's opinion). On the contrary, entities accounting in a simple accounting system were to be subject to the amended rules of Paragraph 24 (2) (w) in the future (but already for the tax period 2002), which were to be based on the acquisition (so-called historical) price of the share or the acquisition price of the shareholding in a limited company or limited company or in a limited company or cooperative, only up to the amount of income from the sale of that share or share. In their case, the legislator retroactively excluded such entities from taking into account the loss-making of securities. Until then, tax entities accounting in the system of simple accounting in their legal proceedings (securities trading) could have expected to be able to claim a loss on the sale of securities in the following three years as an expense within the meaning of Section 23 (1) of the Income Tax Act. However, as a result of the contested provision, each individual loss on the sale of shares has become tax-exempt and it was no longer possible to cumulatively compensate losses and profits within the meaning of Section 24 of the Income Tax Act when selling more shares in the tax period. This conclusion is also confirmed by the course of the tax and judicial proceedings in the case which gave rise to the decision of the Constitutional Court and which implies that it is not possible to interpret the provisions in a constitutional manner. Therefore, this procedure by the legislature in the present case must also be regarded as a breach of the legitimate trust of the taxpayer in the law, since other aspects of the unconstitutional nature of the contested provision must be taken into account (paragraphs 14 and 15). If the legislature imposes, for example, an obligation on tax payers and entities to comply with the rules which they have chosen for the specified accounting and taxation period at the beginning of the accounting system (here accounting in a given system, the filing of tax returns on the basis of accounting in a pre-selected system, the impossibility of submitting additional tax returns during the period of tax control, as laid down by the Accounting Act and the Tax Administration Act, as amended for 2002, and the implementing regulations issued by them), the legislature itself must also respect those rules for that period, and not change them without serious reasons for the burden of the payer, which is treated with confidence in law during that accounting and taxation period. The legislature must therefore respect this particular nature of the tax law, taking into account the difficulties the accounting and collection of taxes would give rise to a different assessment of the nature of the tax-relevant facts during the financial year and the tax period. It should also be pointed out that the different assessment of the legal facts applicable to the calculation of tax and tax burden cannot be based solely on the accounting system in which the taxpayer keeps his accounts.

17. The Constitutional Court therefore complied with the Regional Court's proposal and pursuant to Article 70 (1) of the Law on the Constitutional Court, In paragraph 1, the second sentence was deleted. In accordance with the provisions of Paragraph 44 (2) of the Law on the Constitutional Court, the decision was adopted with the consent of the parties without oral hearing.