Czech Republic Summary Guide

Taxation of Business People in Czech Republic

Taxation of Individuals in Czech Republic

The combination of income tax and social security contributions means that total personal tax liability in the Czech Republic is quite high. Personal Income Tax is levied at a flat rate of 15% (this was formerly based on income bands). This applies to employed individuals and those who are self-employed, or sole traders.

Self-employed persons must inform the appropriate financial office and register for tax. This must be done within 30 days of receiving a Trade Licence. Income tax payments will be required in advance based on the previous year’s tax liability or, in the case of a new business, on the basis of projected income.

Sole proprietors have traditionally had the option of participating in a lump sum regime rather than paying a tax on profits, provided the person is not registered for VAT and has annual income of less than CZK1m. The income tax return must be submitted by 31st March in relation to the previous year, together with any payment due. Employers must deduct income tax at source from their employees’ wages.

Every individual is entitled to a basic personal tax allowance of CZK24,840. Additionally, allowances are available for a dependent spouse (CZK24,840) and dependent children (CZK10,680 per child).

All employees and employers must pay social security contributions towards health care, pensions, sickness and unemployment. The total contribution is 45% of gross salary, split 34% by the employer and 11% by the employee.

Self-employed individuals (with or without employees) pay a contribution as a percentage of declared income (currently 28%). Declared income is defined as 50% of the difference between income and expenses (ie taxable profit).

Corporation Tax is levied at 19% from January 2010 (down from 20% prior to that). Dividends are taxed at 15% withholding tax, unless the dividend is paid between two Czech companies, or between connected EU corporate recipients (subject to a 10% shareholding threshold). Income from interest is taxed at 15%. A company may deduct an amount for genuine operating expenses before establishing the taxable base. Losses may be carried forward for up to five years.

The standard rate of VAT is 20% in 2010 (up from 19% prior to that). A lower rate of 10% applies mainly to food supplies, up from 9% prior to that. A business with a turnover of more than CZK1m per year must register for VAT. In certain other instances, VAT registration may also be compulsory.

Tax is charged on the value of land and of the buildings. Real Estate Tax is charged at CZK2 per square metre on land, and for buildings is imposed on a sliding scale per square metre, depending on the use to which the building is put, and its location.

Czech Republic Summary Guide Contents

Czech Republic Summary

Czech Republic Summary Chart

Czech Republic Residence

Taxation of Business People in Czech Republic

Living and Doing Business in Czech Republic

Business Forms in Czech Republic

Latest Comments

Expat Brit

Hi,

I am facing a dilemma and would like to invite any reader to advise me.

I am a Brit who has lived outside UK since 1993- initially in Belgium (5 years) & subsequently in 4 African countries. After a year outside UK, the UK Inland Revenue confirmed my status as ‘non-resident’ for tax purposes and as I have had no income in UK, I have not completed a UK tax return for many years. I visit UK very rarely, normally for one or two weeks per year.

In May 2011, I was made redundent by my employers, who were downsizing. This coincided with a move to retire in the Netherlands, where I now have official residency (my wife is Dutch). I thought that, at 63 years of age, I would be unlikely to find suitable employment; in fact, I have not tried hard and had resigned myself to permanent (but slightly premature) retirement.

However, to my surprise, I have recently been approached (through a mutual acquaintance) by a company that wishes to use my skills on a project in the Isle of Man. The role, if & when confirmed, would see me working for about 10 days a month in Isle of Man, with about 5-7 additional days per month, working from home. Contract will be for about two years. The firm has asked me to confirm if I would prefer to be paid (and therefore be taxed) in Netherlands or Isle of Man, the idea being that I create a self-employment entity for this employment. I have no data on which to base a response. Given Isle of Man's traditional ‘low tax ‘environment, are there any benefits to declaring an income in IOM? Are there any Isle of Man residency implications? Netherlands takes a tax cut on total world wide income, and, as I have never had any contact with the Dutch authorities, I am reluctant to start such a relationship now. Do I have to declare income in both countries, with a breakdown prorata to the time spent in each jurisdiction? Should I declare income to UK Inland revenue?

If anyone has pertinent advice on these points, I’d be grateful to hear them.

TJM @ Eindhoven, NL

T. Dog

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Jersey vs. Malta??

Hi, I live in South Africa, and along with 2 business partners (one in South Africa and one in Ireland - all South African citizens though) are setting up a company that designs Smart phone applications. As they will be sold on the various platforms (none of which operate out of South Africa)we have to list our company as operating out of Ireland anyway. As such, we have decided to set up our company in the best tax country and are wanting info on whether Jersey or Malta is best? If anyone has some inside info we would really appreciate it!! Thanks!Mary

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Purchasing investment-link insurance for my staff

Would that count as income tax to my staff? And would that count as expense to my company?Michael

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Irish crisis - effects on small business?

Hi all,

Just wondering if anyone 'on the ground', as it were, might be reading and able to help me...I was considering relocating my hairdressing business from the UK to Ireland before the economy started to go properly belly-up...now, not so much.

Are things as bad as they seem over there, or is it being over-hyped by the media? And is the government still keen to support small business people? Cos if not, I'll look elsewhere...

Thanks,Kate

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Living in France contracting to Australian company

I am moving full time to France in Jan 2012 where I will be working as a freelance contract engineer to a number of Australian based companies. It is my choice to move to France not a work requirement. I will be renting my house out in Austrlalia and renting a house while I am in France. I hold both EU & Austrlain citizenshiip. I am married with 2 young children. Approx total family income $100k AUD.
Do I pay tax in France or Australia or both ?
Any help or guidance would be much appreciated.France move

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