In the Czech Republic, filing a tax return is an annual task that most residents must complete. Regardless of whether you are an employee or an entrepreneur – self-employed or have your own business. Each group has its own specific requirements and obligations in this area. It is also essential to meet certain deadlines by which tax returns must be filed.
As far as self-employed persons are concerned, they are obliged to include all their income and expenses for the previous year in their tax return, which includes invoices, bills, bank statements and other relevant documentation. If they are self-employed in the flat-rate scheme, they do not have to file a tax return. Only if they have other income, such as rental income, do they need to file a tax return. The new tax return thresholds for 2023 are 50 000 CZK (up from 15 000 CZK) for the obligation to file a tax return and 20 000 CZK (up from 6 000 CZK) for other income. Health insurance and social insurance are to be filed separately in the Income and Expenditure Statement (Self-employed Person’s Statement) with the health insurance company, ideally in your place of residence. The same applies to social security (you file again with the relevant Czech Social Security Administration in the area of your permanent residence), both no later than one month after the deadline for submitting your tax return. Income tax rates are another important aspect for self-employed persons who are obliged to pay income tax at specific rates set by law. Self-employed persons can use a flat-rate expenditure with progressive tax rates that vary according to the amount of income, which tends to be a popular choice. This allows the self-employed to deduct a fixed portion from their real annual income up to 2 million CZK, without having to keep all receipts and vouchers. In the case of non-use of the flat-rate expenditure, entrepreneurs must keep tax records where receipts and vouchers are taken into account. A flat-rate expenditure allowance of 30% can be applied to rental income, 40% to income from other businesses, 60% to income from other trades and 80% to income from agricultural, forestry, water management and craft trades. If you are interested in more information, please do not hesitate to contact us and we will be happy to advise you. Last but not least, if the self-employed are subject to value added tax (VAT), they must also file control statements (divided into monthly and quarterly) for VAT, which is another important task in their tax planning and compliance. An important change for this group is the increase in the tax rate from 19% to 21%.
The second group of taxpayers are employees. Employees are required to report income from their main employment (wages including bonuses) on their tax return. If the employee has a secondary employment relationship (e.g. as a self-employed person), it is also necessary to fill in Annex 1 of the tax return and indicate the overlap of these incomes. Both employees and self-employed persons can claim various tax deductions, such as deductions for children, spouse, mortgage loans (interest up to 150 000 CZK/year can be deducted) and others. If the employee has another source of income, such as rental property, he/she is also obliged to report this income on his/her tax return. In addition to wages, employees or self-employed persons may also have other income, such as income from the sale of securities, which must also be included in the tax return.
Last but not least, there is a third group and that is the employer or company. A company is required to list all of its income and expenses for the past year on its tax return, which includes bills, invoices, bank statements and other relevant documentation. If the company is subject to value added tax (VAT), like the self-employed, it must also file a VAT return and include all relevant information about the tax. If the business employs workers, it is also required to list their income and any tax credits that apply to them on its tax return. Businesses may benefit from various forms of tax advantages and deductions, such as deductions for business development investments, which must be listed on its tax return.
The filing of tax returns is fast approaching. Have you already filed or are you just about to? What to look out for and what are the deadlines? Tax returns can be filed electronically, by post or in person at the relevant tax office. For an individual or self-employed person, it is ideally at the place of residence, for a company at the place of business. The tax calculated is due on the last day set for filing the tax return and can be paid in cash or non-cash (which is the more commonly used method). As for individuals, when filing in the traditional form, the deadline is 2 April 2024 (these deadlines tend to be the same each year). In the case of electronic filing, the deadline is extended until 2 May 2024. This is also mandatory for all self-employed persons who have had a Data Box automatically created in the previous year. If your tax adviser completes the tax return for you, the deadline for filing is extended until 1 July 2024. Legal entities are obliged to file their tax return within 3 months of the end of the tax year, within 4 months if filing electronically and within 6 months if audited accounts are required.
The tax system may seem a bit complicated and deadlines scare many of us. Many times you’d rather hire someone to take care of it for you. However, if you want to be able to prepare your tax return yourself, come to one of our workshops and you will learn a lot more about taxes. If you are interested in learning more, feel free to contact us to arrange a one-on-one consultation or sign up for one of our education courses. We look forward to seeing you!