In judgment no. 29 Af 83/2018-102 of January 2022, the Regional Court in Brno dealt with a dispute regarding additional assessment of personal income tax on a tax entity that paid a bonus for the sale of its products to an employee of another tax entity. The tax entity that provided the bonus did not withhold an advance on personal income tax from the remuneration paid. The tax office assessed the tax, plus an obligation to pay a penalty of 20 % of the assessed tax.

The tax entity supposed that this was not income from dependent activity under article 6 of the Income Tax Act (ITA), but income from self-employment under article 7 of the ITA, or other income under article 10 of the ITA of the person, who received the bonus. This argument was based on the information that the competition in the sale of products was intended for an indefinite number of persons and was therefore a public promise to various persons.

The court decided that this information was incorrect and that this was support intended for products made by the taxpayer sold by vendors, who were employees of another entity, so the argument that the products were sold to an unspecified group of people could not be considered relevant. The bonuses were paid on the basis of submitted coupons and cheque books, the Regional Court stated that the salesmen, as employees of the customers, were selling products in connection with their primary dependent activity, therefore the remuneration for submitting the cheque book became income arising in connection with their dependent activity under article 6 paragraph 1 letter d) of the ITA.

For the assessment of income as income from dependent activities under article 6 paragraph 1 letter d) of the Income Tax Act, it is relevant if the taxpayer is performing any (primary) dependent activity, and if he receives any income in connection with this dependent activity, it is irrelevant whether he receives this income e.g. as an employee from his (primary) employer or from someone else.

Third party liability to pay personal income tax

The Regional Court therefore decided to treat the bonus as income from employment. It further stated that every payer of income is referred to as an “employer” under the first sentence of article 6 paragraph 2 of the ITA, even if there is no employment relationship between the payer and the taxpayer.  Thus, all tax entities, from which a taxpayer receives income related to the performance of his/her dependent activity, are obliged to pay employment income tax on behalf of the taxpayer, as they are considered taxpayers and the Income Tax Act refers to them as employers.

A bonus received by an employee in connection with the sale of the products of another tax entity is therefore employment income from an employer other than the primary employer, and therefore advance employment tax must be paid on this income.

It is necessary to be wary when organising a competition of this type, so that we correctly identify if this is a competition aimed at the general public or not, so that we do not become a taxpayer for employees we have never effectively hired.