Is the Accrual Principle Fully Applied in Corporate Income Taxation in the Czech Republic?

Abstract

Abstract This paper analyses the relation between accounting and taxes in the Czech Republic using a specific example of the accrual principle. It asks the question whether the accrual principle applied in accounting is also fully applied in the area of direct taxation. The paper first discusses general considerations on tax collection in the Czech Republic and its constitutional and legal aspects, followed by reflections on how a tax base is constructed when the accounting profit according to Czech accounting regulations is used in the case of accounting units. The core of all considerations is the discussion about whether all revenues reported in accounting (unless specified otherwise in particular cases) are income that is subject to tax. The considerations are made in the context of decision making practice of the Supreme Administrative Court, while attention is also paid to the questions of legal regulation of financial accounting in the Czech Republic.