Taxes, VAT and other fees
Taxes can be divided into direct taxes, related to the level of income of the subject, andindirect taxes, related to consumption, or the purchase of goods and services. The administration and collection of the individual taxes falls under the Ministry of Finance of the Czech Republic and its subordinated tax authorities.
Types of Taxes
- Income taxes (inheritance and gift tax is a part of the income tax)
a) income tax of natural persons, flat rate of 15% (the same for wage earners and self-employed people.
b) income tax of legal entities, flat rate of 19%
c) pension and investment funds pay 5% corporate tax
- Value added tax
a) The Czech VAT law is based on the principles of the common system of VAT as an indirect tax.
b) There are three different rates: basic rate of 21 % and two discounted rates of 15 % and 10 %.
- Road tax
a) 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.
b) Tax rates are defined as fixed annual amounts.
- Immovable Properties
Tax generally applies to land and buildings situated in the territory of the Czech Republic registered in the Land Registry. Each of these tax rates is set out individually. 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 the acquisition of immovable property
Subject to tax is the acquisition of immovable property (land, building, part of the utilities) situated in the territory of the Czech Republic or the right to property or ownership share of the immovable property.
- Excise Duty Tax
Subject to excise duty are selected types of goods (mineral oils, spirit, beer, wine, tobacco products).
- Environmental taxes
Subject to environmental tax are natural gas, certain other gases, solid fuels and electricity.
Registration for tax purposes
VAT registration in the Czech Republic arises from the Czech VAT Act No. 235/2004 Coll., Value Added Tax.
- A VAT payer is a taxable person with registered office in the Czech Republic whose turnover for up to 12 immediately preceding consecutive calendar months exceeds CZK 1,000,000, except for a taxable person that carries out only supplies exempted from VAT without the right of deduction of VAT.
- The taxable person stated in the paragraph 1 shall be considered as a VAT payer from the first day of the second month following the month in which the person exceeded the determined turnover, unless he becomes a VAT payer pursuant to this Act any earlier.
Obligatory registration of VAT payer
- Taxable person shall apply for registration within 15 days after the end of the calendar month in which they exceeded the determined turnover.
- In other cases, the VAT payer shall apply for registration within 15 days from the date on which he became VAT payer.
Voluntary registration of VAT payer
- Taxable persons having their registered office or fixed establishment in the Czech Republic who carry out taxable supplies or transactions with deductibility of VAT can apply for registration.
- Taxable persons who does not have their registered office or fixed establishment in the Czech Republic and who will carry out supplies or transactions with deductibility of VAT with the place of supply in the Czech Republic can apply for registration.
- Taxable persons stated in paragraph 1 or 2 can apply for registration not before lapse of 1 year from the date on which the registration of VAT payer was cancelled due to a serious breach of obligations related to administration of VAT.
The specific form of application for registration to VAT (Steps: Elektronická podání pro finanční správu → Elektronické formuláře → Registrace → Přihláška k registraci k dani z přidané hodnoty platná od 1. 1. 2015)
If the application for registration for VAT is submitted by a taxable person who does not have a seat or a VAT establishment in the Czech Republic, it is obligatory to submit following attachments to the registration:
- Certificate of a registration for VAT or similar tax in other country
- License to business activities, abstract of companies register
- Abstract of the companies register
- Eventually other attachments
All these attachments must be officially authenticated copies of original documents and officially authenticated translation to the Czech language.
Our VAT Act defines an obligation to submit the application for VAT registration only electronically in the following ways:
- Submission via Tax Portal with electronic signature
- Submission via Tax Portal without electronic signature if this submission is within
5 days confirmed or repeated in written form or orally (via protocol)
- Data message via so called Data Box
- Data message with verified identity of sender in a way, in which it is possible to use Data Box
In case of a taxable person who does not have a seat or a VAT establishment in the Czech Republic, the locally competent tax administrator shall be the Tax Office for Prague 1. Any other information you can find at website of Financial Office or you can contact the locally competent tax administrator at the address:
Finanční úřad pro hlavní město Prahu
Územní pracoviště pro Prahu 1
112 33, Praha 1
Tel: +420 224 041 111
Fax: +420 224 043 198
You can also contact Czech SOLVIT center that provides entrepreneurs with quick and practical help where they face problems doing business as a result of incorrect application of EU market rules by public authorities.
Czech accounting system
The Act on Accounting is the primary legislation regulating accounting and financial reporting. The implementing decrees of the Ministry of Finance of the Czech Republic and the Czech Accounting Standards are also important, as they specify the obligations of the individual accounting units.
Primary legislation regulating accounting and financial reporting:
- Act on Accounting No. 563/1991 Coll.
- Implementing provisions to the Act on Accounting
- Other accounting legislation on the web of the Ministry of Finance of the Czech Republic
Listed companies have to apply IAS/IFRS, for their annual (consolidated) financial statements. Companies that are part of the group that uses IAS/IFRS for preparing its consolidated financial statements are allowed but not required to use IAS/IFRS for their financial statements.
The financial statements consist of the balance sheet, profit, loss statement and notes. Financial statements can also include cash-flow statement and statement of changes in equity. The accounting units obliged to carry out audit also have to prepare an annual report. The financial statements and the annual report are filed in the Commercial Register. Accounting units are obliged to archive statements and annual reports for at least 10 years. The duties regarding accounting are specified in the Czech Accounting Standards.
Financial Reporting for Various Forms of Business
The implementing decrees and Czech Accounting Standards define for different types of businesses the way how to keep accounts and report preparation. There exist separate decrees and standards, for example for entrepreneurs, banks and financial institutions, insurance companies and other.
The following institutions and web portals may offer more information and useful services:
- Ministry of Finance of the Czech Republic
- Union of Accountants
- Official portal for business and export
- Portal of the public administration of the Czech Republic
- Chamber of auditors