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On 4 November 2022, the Chamber of Deputies approved an amendment to the Income Tax Act (ITA) and the Value Added Tax Act (VAT) – Parliamentary Print No. 254. The proposal was forwarded to the Senate for consideration.
In this article, we will present some changes to the personal income tax that are expected to come into force from 1 January 2023.
From 2021, self-employed persons can pay personal income tax and social security and health insurance premiums through the so-called flat-rate tax.
The main objective of the amendment is to expand the circle of persons, who will be allowed to enter the flat-rate tax regime, especially in connection with the amendment to the VAT Act, which Proposes to increase the limit for VAT registration from the current CZK 1,000,000 to CZK 2,000,000 for twelve consecutive months.
To enter the flat-rate tax, the taxpayer must meet the following criteria:
Another novelty is the proposal to introduce three categories of flat-rate tax, depending on the amount and nature of the self-employed person’s income.
|
Eligible income for participation in the given band |
Total monthly advance payment |
Band 1 |
|
CZK 6,208
out of which: tax CZK 100 SI CZK 3,386 HI CZK 2,722 |
Band 2 |
|
CZK 16,000
out of which: tax CZK 4,963 SI CZK 7,446 HI CZK 3,591 |
Band 3 |
|
CZK 26,000
out of which: tax CZK 9,320 SI CZK 11,388 HI CZK 5,292 |
Explanatory notes to the table: SI = social insurance, HI = health insurance
If during the tax period there is an increase/decrease in income, so that the self-employed person falls into a different band than the one he/she originally chose, he/she would be allowed to transfer to a different category:
2. Limits for submitting tax return
As part of the amendment, it was originally proposed to increase the limit of income establishing the obligation to file tax return from the current CZK 15,000 to CZK 25,000. During the discussions, MPs eventually agreed on a more significant increase, to CZK 50,000. An individual with annual income of up to CZK 50,000 (gross income before deduction of expenses, excluding exempt, non-taxable or withholding taxable income) would not be obliged to file personal income tax return.
The obligation to submit tax return should also not apply to employees, who do not have other taxable income outside of employment exceeding CZK 20,000 per year (previously the limit was CZK 6,000, the original proposal was to increase it to CZK 10,000). These employees will be able to ask their employer for an annual settlement of advance tax payments.
3. Exemption of gratuitous acquisition of a co-ownership interest in immovable property from a municipality or from a taxpayer, of which the municipality is a member or founder
The above-mentioned amendment to the ITA should also allow individuals to exempt from income tax a gratuitous acquisition (donation) of a co-ownership interest in immovable property from a municipality or from another taxpayer, of which the municipality is a member or founder (i.e., for example, from a voluntary association of municipalities, a housing cooperative or a contributory organisation).
The exemption may be applied, provided that the following conditions are met:
In order to qualify for the exemption, the transfer must be a gratuitous transfer intended to transfer a co-ownership interest to an individual. The property can either be transferred from the municipality directly to an individual, or it can be transferred to a housing cooperative, which will subsequently be transformed into an association of unit (flat) owners (SVJ).
If you are interested in additional information, please do not hesitate to contact us.
Author: Roman Burnus, Vendula Florešová