Taxes can be divided into direct taxes, related to the subject’s level of income, and indirect taxes, related to consumption or the purchase of goods and services. The administration and collection of individual taxes is controlled by the Czech Ministry of Finance and its subordinated tax offices.
Registration for tax purposes
VAT registration in the Czech Republic is defined in Act No. 235/2004 Coll., on Value Added Tax.
A VAT payer is a taxable person with a registered office in the Czech Republic whose turnover exceeds CZK 1,000,000 in 12 consecutive calendar months, except for a taxable person that performs supply services exempted from VAT without the right of deduction of VAT. The government plans to increase the limit for compulsory VAT registration to two million crowns from 1 January 2023.
The taxable person is considered a VAT payer from the first day of the second month following the month in which the person exceeded the determined turnover unless it becomes a VAT payer under this Act at an earlier time.
The taxpayer’s registration obligation for personal income tax is regulated in Section 39 of the Income Tax Act No. 586/1992 Coll., according to which:
A taxpayer of personal income tax referred to in Section 2(2) of the Income Tax Act (tax resident) is obliged to submit an application for registration for personal income tax to the relevant tax administrator within 15 days from the date on which
- (a) he has started to carry out an activity which is a source of income from self-employment, or
- (b) received income from self-employment.
However, people do not have to file annual tax returns or reports for health insurance companies and the Social Security Agency if they sign up for the flat-rate tax (this applies from 2021). You pay only the minimum monthly advance payments for health insurance (the lowest possible payments for social insurance plus 15 per cent, and finally income tax of CZK 100). The flat tax is available to those with annual net incomes of up to CZK 1 million (planned to be increased to CZK 2 million).