On May 31, 2018, the Supreme Administrative Court (NSS) issued the judgement No. 7 Afs 145/2018 - 22, where the subject of the dispute was the taxation of indemnification from the insured event (hail).

The plaintiff owned the property for which he claimed the income and expenses as tax deductible under Section 9 of the Income Tax Act (ZDP) because he demonstrated to the tax administrator that the property was acquired in accordance with the business plan, i.e. for the property rental purpose. On the day of the hail there was no rental agreement of the property concluded and therefore the income from the insured event was assessed by the plaintiff (taxpayer) as income exempted from tax payment under Section 4 (1) (d) of ZDP (in its previous wording).

The NSS confirmed the opinion of the Regional Court that during the entire tax period, i.e. including the time of the damage, the property was intended to be rented although the property was not rented on the day of the insured event. Factually this property is a real estate intended for a long-term rent. If the rental relationship was terminated because the property owner intended to use the rent premises for purposes other than the rent, then the income in the form of the indemnification would be assessed as the exempt income.

The NSS concluded this case by stating that it is not possible to exempt from the personal income tax the indemnification as a compensation for damage caused to real estate which was intended for rental in the taxable period, even if it was not actually rented on the particular day of the claim.

Marie Rudolfová