Once a year you are obliged to fill in and file your 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 through an advisor, the deadline is postponed to July 1st, but in this case, please do not forget to submit the power of attorney granted to the advisor to the Tax Authority by March 1st.
Every month your employer deducts health insurance (4.5%) and social security contribution (6.5%) from your gross salary. Your employer also pays health insurance (9%) and social security contribution (25%) as an extra payment to the Government. As from January 1st 2021, so-called super-gross salary was abolished (134% of gross salary), from which income tax was calculated. Income tax 15% is now calculated from the gross salary.
Your employer also reduces your monthly tax by 2570 CZK (2023) – this is possible only in one employment contract at the time (if you have few jobs), after signing the “Pink Paper” (=Prohlášení k dani, tax return statement). After signing the “Pink paper”, the tax relief is automatic and your employer should offer you this option.
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 1,000 CZK will reduce the tax by 150 CZK. Those are allowances from the tax base in 2022:
- Private pension savings up to 24,000 CZK
- Life insurance up to 24,000 CZK
- Charity gifts (min. 1,000 CZK up to 15% of tax base)
- Blood donation up to 3,000 CZK, bone marrow donation up to 20,000 CZK
- Mortgage interests (up to 300,000 /150,000 CZK)
- Increasing of professional qualifications up to 10,000 CZK
- Union fees up to 3,000 CZK
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:
- Taxpayer 30,840 CZK
- For students 4,020 CZK
- For a maintained spouse 24,840 CZK
- For maintained children(s) 15,204 to 27,840 CZK
- For kindergarten tuition 16,200 CZK
All allowances and/or reliefs (except taxpayer and student discounts) can only be applied to Czech tax residents, please see below how to obtain Czech tax domicile.
If your yearly tax base is 400,000 CZK and you won’t use any tax allowances/reliefs, then your tax will be 60,000 CZK. 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 20,000 CZK, to decrease the tax base, so your new tax base is now 380,000 CZK of which tax (15%) is 57,000 CZK. Now you will use tax reliefs, eg. a taxpayer bonus of 30,840 CZK and a child bonus of 15,204 CZK, and your final tax will be only 10,956 CZK.
- Your employer can do that for you, but only if you do not have any other job, or any other income (i.e. renting a flat, shares, other business activity, etc).
- If your employer will offer you help – let them know in early February that you would like them to file your taxes. It pays to ask what allowances and reliefs you can ask for. Mostly, employers will require a Czech tax domicile from you.
- You can submit it yourself online. Find a specimen online, 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).
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 deducting the interest paid for a mortgage, having children, giving gifts to particular recipients, certain kinds of life insurance, etc.
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 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.