Paying Taxes

The text sums up the system of taxation in the Czech Republic, that means division of taxes, specific legislation and tax registration.

Legal requirements

The system of taxation of the Czech Republic resembles the systems of taxation of other European countries. Generally, taxes can be divided into direct taxes, related to the level of income of the subject, and indirect taxes, related to consumption, or the purchase of goods and services. The system of taxation of the Czech Republic consists of the following tax categories: value added tax (VAT), income tax, real estate tax, road tax, estate tax, gift and inheritance tax, excise duty, areal estate transfer tax and environmental tax. Each type of tax is defined in a specific piece of legislation. The administration and collection of the individual taxes falls under the Ministry of Finance of the Czech Republic and its subordinated administrative bodies, above all the local tax authorities.

Income tax

Represents the main tax duty. It is divided into the income tax of natural persons and the income tax of legal entities, with different tax rates. The income tax of natural persons has a flat 15% rate. The rate is the same for wage earners and self-employed people. The current income tax of legal entities is 19 %. Pension and investment funds pay 5% corporate tax. Since January 2014 an inheritance tax and gift tax is a part of the income tax which were originally separate taxes.

Value added tax (VAT)

The Czech VAT law is based on the principles of the common system of VAT given by the VAT Directive. VAT is an indirect tax. The subjects of the tax are most of the taxable supplies in the Czech Republic. There are three different rates from 2015: basic rate of 21 % and two discounted rates of 15 % and 10 %.

Excise duty

Subject to excise duty are selected types of goods (mineral oils, spirit, beer, wine, and tobacco products).

Road tax

Road tax applies only to those vehicles that are used or intended for business. Vehicles used exclusively for personal needs are exempt from the tax. Tax rates are defined as fixed annual amounts.

Tax from immovable properties

Tax from immovable properties (until 2013 real estate tax) generally applies to land and buildings. Each of these tax rates is set out individually. Subject of the tax are immovable properties (land, buildings, units) situated in the territory of the Czech Republic registered in the Land Registry. The tax period is a calendar year and a taxpayer is required to file a tax return for the tax period to the corresponding tax authority by 31 January.

Tax on acquisition of immovable property

Subject to tax on the acquisition of immovable property (until 2013 real estate transfer tax) is the acquisition of title to the immovable property which may be land, building, part of the utilities, a unit situated in the territory of the Czech Republic or the right to property or ownership share of the immovable property.

Environmental taxes

Environmantal taxes are applied on electricity, natural gas and solid fuels.

The Czech taxation system is rather complex and not very user–friendly for a non–professional. Specifically entrepreneurs have many opportunities for optimising their tax duty. Therefore, many entrepreneurs use the services of tax advisors in order to decrease their tax burden.

Administrative procedures

Tax registration

Self-employed business owners must register with the local tax administration body within 30 days of obtaining their business licence. The obligation to register is set out in the Act on Administration of Taxes and Fees.

Value added tax is governed by in the Act on Value Added Tax. Under this Act, legal or natural persons doing business activities must pay the tax if their turnover exceeds CZK 1,000,000 in 12 consecutive calendar months. Such persons (tax payers) must submit an application for registration within 15 days of the end of the calendar month in which this amount was exceeded.

Submitting the tax return

Tax returns may be submitted on a traditional printed form either at the relevant local financial office, or on an electronic form by means of application called Electronic submission to Tax Administration, abbreviated as EPO.

Resources

The following governmental and non–governmental institutions and web portals offer further information and useful services in the area of accounting and tax agenda.

Personalised help and advice

The link below offers information on tax consulting.

The Enterprise Europe Network is an extensive network (with 600 host organisations and 4,000 full–time staff) providing information and advice to entrepreneurs through its local partners.

SOLVIT provides entrepreneurs with quick and practical help where they face problems doing business abroad as a result of incorrect application of EU market rules by public authorities.

Legal texts

Document created in co-operation between Your Europe - Business (EU portal for companies) and BusinessInfo.cz.