A year has gone by and the date for submitting personal income tax return statements for 2016 is near. When a natural person submits their tax return statement themselves, the due date is 3^rd April 2017. This date is also the latest date for the payment of the tax. This date given by the law may be exceeded by five more days without resulting in a penalty from the tax administration. If a natural person exceeds the date by more than five days and submits the tax return statement even later, there is probably no way to avoid the fees.

In cases where the tax return statement is compiled and submitted by a tax advisor based on an authorization the natural person is required to show this authorization to a competent local authority (competent local tax office) until 3^rd April 2017. The authorization must make it clear that the natural person has authorized their tax advisor with compiling and submitting their personal income tax return statement. In this case, the latest date for submission is moved to 3^rd July 2017. But even here there is the possibility of late submission within the next five days without the risk of any fees from the tax administration.

The tax rate has not risen since last year and for the year 2016 stays at 15 % of the tax base (in some cases it may be higher due to the solidarity tax). Neither the basic tax credit has been changed; it stays 24 840 CZK per year (2 070 CZK per month).

The increase in tax advantage for the second and third child (or rather any further children) can be considered a pleasant surprise. This change will probably be welcomed by most taxpayers. Tax advantage for the first child stays the same as in 2015, that is 13 404 CZK per year (1 117 CZK per month). For the second child the advantage has changed from 15 804 CZK per year (2015) to 17 004 CZK per year (1 417 CZK per month). This means the tax advantage for the second child has been increased 1 200 CZK per year. Tax advantage for the third and any other child is now 20 604 CZK per year (1 717 CZK per month), compared to 2015 when the figure was 17 004 CZK per year. The year 2016 has thus seen an increase of 3 600 CZK per year in the tax advantage for the third and any other child.

Thanks to the rise of the minimal wage the income limit for tax bonus has risen also. The tax bonus is payed to taxpayers who apply tax advantage for children and their tax ends up being negative. Instead of paying income tax, this taxpayer gets extra money from the state. This tax bonus can be applied only by those taxpayers who have reached the income limit in 2016 of minimum of 59 400 CZK (in 2015 the minimum income was 55 200 CZK). The minimum income limit is calculated as the minimum wage for the given calendar year times six.

Higher minimum wage has also increased the limit for tax reduction for placing a child in a kindergarten or a similar establishment. After proving the expenses, the taxpayer can make use of a reduction of up to 9 900 CZK yearly for each dependent child who attends an establishment for pre-school aged children. These establishments are newly defined by the law since 2016. Until the end of 2015 there wasn’t any legal definition and the taxpayer could make use of a tax reduction for any establishment taking care of preschool-age children. Since 2016 a preschool establishment according to § 35bb section 6 of Act No. 586/1992 Coll. on Income Tax means:

1. A kindergarten, as according to the education law, or a similar establishment abroad,
2. An establishment of care for groups of children,
3. An establishment of care for preschool-aged children operating under a license, if the character of this care is comparable to the one of:
   • An establishment of care for groups of children or
   • A kindergarten, as according to the education law.

The increase of minimal wage in 2016 has also influenced the increase in figure of pensions exempted from tax and retirement pensions, the current figure for 2016 is 356 400 CZK. The law newly includes exemption from complementary retirement savings and supplementary pension, this exemption is valid for pensions having been paid out for at least 10 years.

Solidarity tax of 7%, where income surpasses the figure of the average wage times 48, on the summation of incomes of the basis of assessment as according to § 6 of Act on income from employment tax and partial basis of assessment as according to § 7 of Act on professional income tax stays the same in 2016. The decisive sum is the only thing changed as it has risen from 1 277 328 CZK in 2015 to 1 296 288 CZK in 2016.

At the same time, the advance income tax from income from employment when monthly income surpasses the figure of four times the average wage as according to § 6 of Act on income tax. The decisive sum for 2016 is 108 024 CZK monthly (it was 106 444 CZK monthly in 2015).

Good news is that for the 2016 tax period Judgement No. 271/2016 Coll. of the Constitutional Court revokes provision § 4 section 3 of Act on income tax for reasons of discrimination. This way taxation of pensions of persons with income from employment or basis of assessment from entrepreneurial actions or rental, alternatively a summation of those bigger than 840 000 CZK, was revoked. Working pensioners no longer need to keep an eye on the 840 000 CZK limit to keep their pensions exempt from taxation.

Attention should be payed also by taxpayers who have a data box or are obliged to have an audit of their financial statement. Until the end of 2015, financial authorities allowed these taxpayers to submit their tax return statements via the tax portal without an electronic signature. A tax return statement submitted like this had to have been confirmed via paper form (e-form) within the 5 following days. The transitional period during which this submission was possible ended on 31^st December 2015. Since 1^st January 2016 these taxpayers must submit their tax return statements, reports, and applications for registration via the tax portal already authorized (signed). Thus, a tax return statement submitted via the tax portal must have a certified electronic signature or be authenticated by details used to access a data box account belonging to the taxpayer. The last option how to submit an authorized tax return statement is to submit it via data message sent from a data box belonging to the taxpayer.

Author: Lucie Berglová