Once a year, most internationals are obliged to fill in and file a tax return. The deadline for filing the last year income tax return (but also for paying the tax) is on the 3rd of April 2023. In the case of processing and filing the tax return online, the deadline is the 2nd of May.
Every month your employer deducts health insurance (4.5%) and social security contribution (6.5%) from your gross salary (100%). Your employer also pays health insurance (9%) and social security contribution (25%) as an extra payment to the Government. Income tax of 15% is calculated from the gross salary.
Your employer also reduces your monthly tax by CZK 2570 (2023) – this is possible only in one employment contract at the time (if you have few jobs), after signing the “Pink Paper” (=Prohlášení poplatníka, declaration of the taxpayer). After signing the “Pink paper”, the tax relief is automatic and your employer should offer you this option. See more about tax reductions below.
- Mostly people without taxable incomes (housewives/husbands, pensioners, students with “DPP”);
- People who have only one employment at the time, or more jobs that were consequently one after each other;
- People with monthly income from “DPP” under CZK 10,000;
- Self-employed under flat-rate tax regime.
However, those groups may submit the tax return on their own or via the employer and claim various tax reductions (tax reliefs and allowance from the tax base).
1. Your employer can do that for you
- But only if you do not have any other jobs, or any other income (i.e. renting a flat, shares, other business activity, etc). DPP under CZK 10,000 doesn’t count.
- If your employer will offer you help – let them know in mid-January that you would like them to file your taxes. Ask for yearly reconciliation (“roční zúčtování”).
- It pays to ask your company accountant what allowances and reliefs you can ask for. Mostly, employers will require a Czech tax domicile from you. You will need to obtain it yourself from Financial Authority (see below).
2. Filing tax return on your own
When do you have to file your Tax return on your own?
- If you had other incomes (renting a flat, from abroad, from stocks, from bitcoins, etc.);
- If you have more than one employment at the same time, “DPP” over CZK 10,000/monthly, “DPC“ over CZK 3,500/monthly;
- You are a freelancer unless you pay flat tax;
- If your employer refuses to do it for you (which happens often to foreign employees).
How to fill Tax return?
- You will need a Confirmation of taxable incomes (“Potvrzení o zdanitelných příjmech”) form from your employer(s), it has to be requested from the employer(s) in January/February.
- You can submit it in person. Find a specimen online (in English), but you have to submit the filled in form solely in the Czech language. Thus, we strongly recommend to find an English-speaking accountant or even a tax consultant to help you with this task. The latest submission date is at the 3rd of April.
- You can submit your tax return in any office of the Financial Authority (there are 3 offices in Ostrava), but if you already have temporary/permanent residence, it should be in the area of your residence. Find out with this website which office you belong to. On this website fill „PSČ PLÁTCE DANĚ“ which refers to the postal code of your accommodation. Also, if you submit your tax return once you also have to do it in the same office next year, unless you will ask the Tax Authority for the relocation of your “profile” to another tax office (in case you will move to another place).
- You can submit it online via gov website mojedane.cz (you can access it through your Data mailbox), unfortunately only in the Czech language.
- Our partners such as NeoTax or Na stejné lodi can help you, see contacts down below.
There are a number of various allowances and tax reliefs that can be used. The differences are following: tax allowances are adjusting (decreasing) the tax base from which income tax (15%) is calculated. Then the tax reliefs are decreasing the tax itself.
Allowance from the tax base
By various allowances, you can adjust (reduce) the tax base, not the tax itself. The general rule is that every allowance of CZK 1,000 will reduce the tax by CZK 150. Those are allowances from the tax base in 2022:
- Private pension savings up to CZK 24,000
- Life insurance up to CZK 24,000
- Charity gifts (min. CZK 1,000 up to 15% of tax base)
- Blood donation up to CZK 3,000, bone marrow donation up to CZK 20,000
- Mortgage interests (up to CZK 300,000 /150,000)
- Increasing of professional qualifications up to CZK 10,000
- Union fees up to CZK 3,000
After calculating the final 15% from the tax base (above), then tax reliefs can be used as discounts on the final tax. Maximum tax reliefs for 2022 are:
- For taxpayer (“personal tax credit”) CZK 30,840
- For students CZK 4,020
- For a maintained spouse CZK 24,840
- For maintained children(s) CZK 15,204 to 27,840
- For kindergarten tuition CZK 16,200
All allowances and/or reliefs (except taxpayer and student discounts) can only be applied to Czech tax residents (or to EU/EEA citizens having 90 % of your world income from the CZ), please see below how to obtain Czech tax domicile.
How to apply for tax reductions?
- Through your employer after signing the “Pink Paper” (=Prohlášení poplatníka, declaration of the taxpayer). This is possible only in one employment contract at the time (if you have few jobs).
- Through filing Tax return (see above) on your own.
If your yearly tax base is CZK 400,000 and you won’t use any tax allowances/reliefs, then your tax will be CZK 60,000. But it might be way less. You will first use tax allowances, eg. the amount of paid mortgage interest and gifs in the value of CZK 20,000, to decrease the tax base, so your new tax base is now CZK 380,000 of which tax (15%) is CZK 57,000. Now you will use tax reliefs, eg. a taxpayer bonus of CZK 30,840 and a child bonus of CZK 15,204, and your final tax will be only CZK 10,956.
The income tax of 15% is calculated from the tax base. The tax base can be calculated as incomes deducted by the business expenses. In some cases, the expenses are quite constant and can be estimated. In such cases, the self-employed may register for the so-called expenditure flat rate (“výdajový paušál”) up to 60% of their total incomes (this can vary due to the type of trade licence). So, if this method were to be used, then the tax base will be the remaining 40% of the income from the trade licence activities (activities falling under paragraph 7 of the tax law). Further on, the tax base may be lowered by tax allowances and from this new “reduced tax base”, the final 15% income tax is calculated. So the final tax can be discounted by various tax reliefs, such as tax credits for children, kindergarten tuition, etc. Please see more bove.
The deadline for filing last year’s income tax return (but also for paying the tax), is usually April 3st. In case of processing and filing the tax return by the advisor, the deadline is postponed to July 1st, but in this case, on March 1st, the entrepreneur should submit a power of attorney granted to the tax advisor to the Tax Authority.
!! IMPORTANT !!
Once a year, apart from the Tax Return you have to submit also the Summary of Income and Expenses to both the social security office and your health insurance office. The deadline is 2nd May. All self-employed persons (except those with flat-rate tax) are obliged to fill in and submit the summary, even those for which there is no minimum assessment base. Please ask your tax advisor for these statements along with Tax Return.