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.

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 two different rates: basic rate of 20 % and a discounted rate of 14 %.

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.

Real estate tax

Real estate tax generally applies to land and buildings; however, there are many exemptions. In terms of land, the tax base is either the plot area or the price of the land. The tax rate depends on the form of usage of the land and its location. In terms of buildings, the tax base is the built up area and the tax rate again depends on the type of usage of the building and its location. Generally, the larger the municipality, the higher the rate.

Real estate transfer tax

The real estate transfer tax applies to a transfer of real estate for a fee. The unified tax rate is defined as 3 % of the price of the transferred real estate.

Inheritance tax

The inheritance tax applies to assets acquired through inheritance. Certain groups are not subject to inheritance tax

Gift tax

The gift tax is a one-off tax which applies to the payment-free acquisition of assets. Certain groups are not subject to gift tax.

Environmental tax

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, persons must pay the tax if their turnover exceeds CZK 1,000,000. 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 in the Czech Tax Authority`s e-submission (ESU) application.

Electronic tax management for registered entities. Current tax forms for all.

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.