CESOP – New reporting obligation on cross-border payments

Do you receive more than 25 payments in a quarter from EU to your bank account? Maybe you should have registered for VAT. To reduce possible unpaid VAT within EU, banks now report automatically certain bank account owners to the tax office.

Payment service providers in the EU have to record and report data on cross-border payment transactions since 1 January 2024 under an amendment to the law. The purpose of the law is to enable tax authorities to detect uncollected VAT within the EU and thus reduce the gap between the amount reported and the amount not collected. A payment service provider, which means a person authorised under the law governing payment transactions to provide a registered payment service, i.e. mainly banks (except for the Czech National Bank), is required to keep records of cross-border payments and their recipients if it provides more than 25 cross-border payments to a single recipient in a calendar quarter. A cross-border payment is a payment transaction that goes from a payer in one EU Member State to a payee in another EU Member State or from a payer in one EU Member State to a payee in a third country. The obligation will therefore affect all cross-border payments where the payer is located in the EU.

The notification to CESOP (EU Central Electronic System of Payment Information) is made quarterly, at the latest on the last day of the month following the end of the relevant calendar quarter. It will be possible to submit it via the Moje Daně portal in XML format. The tax administrator is the Specialised Tax Office in the case of records of cross-border payments and their recipients.

The key data to be recorded and subsequently reported are as follows:

  • BIC/ID of the reporting payment service provider,
  • the name of the payee,
  • VAT/ID number of the payee,
  • IBAN/other beneficiary account identification number,
  • BIC/ID of the payee,
  • address of the payee,
  • information on the returned payment – refund yes/no, reference,
  • date/time,
  • amount,
  • currency,
  • Member State of origin of the payment,
  • Member State of destination of the reimbursed payment,
  • information on the place of the payer (origin of the payment),
  • transaction identification code,
  • presence of the payer at the physical premises of the business when the payment is initiated.

Payroll Tax Reconciliation vs. Annual Tax Return 2023

The Annual Tax Reconciliation (“ATR” or “Roční zúčtování daně” in Czech) is a simplified reconciliation of payroll taxes withheld by the employer from the employee’s salary throughout the year. It happens only internally at the employer’s and no documents on behalf of the employee are filed with the tax office.

Annual Tax Reconciliation Czech Republic

Who Is Eligible to the ATR?

The ATR for 2023 shall be made by the employer for an employee who:

  • Signed a Declaration of the personal income taxpayer with the employer, “Prohlášení poplatníka daně z příjmů fyzických osob ze závislé činnosti” in Czech
  • Is not obliged to file a personal income tax return
  • Applies until 15 February 2024 for the ATR, signs “Žádost o roční zúčtování záloh a daňového zvýhodnění” in Czech (see picture above)
Tax Return Czech Republic

Who Is Obliged to File a Tax Return?

Employees are obliged to file their own personal income tax return especially when:

  • They had employment income from multiple employers at the same time (and it was subject to advance tax, not final withholding tax), or
  • They had other income higher than CZK 20,000 that is not exempt from tax or subject to the final withholding tax, e.g. self-employment, rental, some capital income or other income

Following the abolition of the solidarity tax and introduction of the progressive taxation, there is now no limit of employment income that would require the employee to file a tax return as there was in the past. For 2020 this was the amount of CZK 1,672,080.

In general everyone whose annual income exceeded CZK 50,000 should file a personal income tax return, but employees having only one employment income can generally apply for the ATR instead of filing a tax return on their own.

What Has To Be Enclosed to the ATR Application?

The employee should submit the following attachments to the application for the ATR:

  • Confirmation of taxable income from all previous employers where he/she was employed in 2023, or information on his/her activities until joining his last employer, e.g. proof of registration at the labor office
  • Documents proving entitlement to the relevant tax deductions or tax base deductions

Tax Return 2023 – Tax Deductions

Do you need some information about Tax Return Czech Republic? Such as what tax deductions you may be eligible to in 2023? Then the below article may provide you with some guidance.

Tax base deductions

Providing all legislative conditions are met, it is possible to lower the tax base by so-called tax base deductions. The main tax base deductions are:

  • The total interest on a mortgage or construction saving loan if used to finance personal housing needs
  • Contributions of up to CZK 24,000 made to supplementary pension insurance or life insurance schemes that comply with specific conditions.
  • Gifts made to certain entities for specific purposes (e.g. humanitarian, charity, ecological purposes) if they amount to at least 2% of the tax base or CZK 1,000. The maximum amount that may be deducted is 30% of the tax base.
  • Unpaid blood donation – CZK 3,000 per donation.

Tax discounts

It is possible to lower the tax liability by applying additional tax discounts. The highest and most common applicable discounts are as follows:

  • Taxpayer’s personal tax discount of CZK 30,840.
  • Spousal tax discount of CZK 24,840 if the spouse lives in the same household as the taxpayer and the spouse’s annual income does not exceed CZK 68,000.
  • Tax discount for dependent children; CZK 15,204 for one child, tax discount of CZK 22,320 for the second child, and tax discount of CZK 27,840 for the third and any additional dependent child.
  • Tax discount for kindergarten fees paid, maximum in the amount of CZK 17,300.

We are here to help you with your Tax Return filing, should you wish. Please do not hesitate to contact us.

Social security contributions of OSVČ from 2024

The government’s consolidation package also brings changes to the minimum advances for social security (pension insurance) of self-employed individuals. From 2024, there will be a significant increase for self-employed persons, especially those who pay the minimum contributions. This is not only due to the increase in the average wage, but also due to the change in the minimum assessment base for calculating advances. Instead of the current 25%, advances are calculated on 30% of the average wage in 2024 (and there will be a further increase to 35% in 2025 and 40% in 2026). However, the 25 % monthly assessment base will be valid for new self-employed persons for the first three calendar years from the start of their business.

Moreover, for everyone the assessment base for pension insurance increases from 50 % to 55 % of the tax base.

We would like to point out that payments need to be increased already for the month of January (i.e. due by 31 January 2024). This will align the rules for payments of increased pension insurance advances with payments of increased health insurance advances. However, the consolidation package does not change the calculation of health insurance advances, so the calculation of social and health insurance will diverge from 2024 (see article Health insurance prepayments from 2024).

Minimum monthly advance payment for pension insurance premiums for self-employed persons in 2024:

  • For main activity – CZK 3 852 (pension premium 28% + state employment policy premium 1.2%, i.e. 29.2% of CZK 13 191)
  • For secondary activities – CZK 1 413 (pension premium 28% + state employment policy premium 1.2%, i.e. 29.2% of CZK 4 837)

Changes in flat-rate tax for 2024

The principles for inclusion in the individual flat-rate tax bands remain the same (see article from last year Changes in flat-rate tax from 2023). However, due to the increase in the average wage and the increase in the assessment base of social security from 25% to 30% of the average wage, there is an increase in all bands.

What is the new amount of monthly lump-sum advances and lump-sum tax?

The amount of the taxpayer’s lump-sum advances in the 2024 advance period by flat rate band is as follows:

  • Band I of the flat rate scheme: CZK 7 498
  • Band II of the flat rate scheme: CZK 16 745
  • Band III of the flat rate scheme: CZK 27 139
Monthly prepayments Total amount Income tax Pension insurance Health insurance
I. band CZK 7 498 CZK 100 CZK 4 430 CZK 2 968
II. band CZK 16 745 CZK 4 963 CZK 8 191 CZK 3 591
III. band CZK 27 139 CZK 9 320 CZK 12 527 CZK 5 292

We remind you that entry into the flat-rate scheme is voluntary and it is possible to register until 10 January 2024. Those taxpayers who used the flat-rate tax in 2023 and for whom the current increase would mean a disadvantage may consider leaving the flat-rate scheme. This must also be notified to the tax office by 10 January 2024.

Health Insurance Prepayments from January 2024

Like every year, also for 2024 the minimum health insurance payments will be increased. Due to the increase in average salary every year and new government regulation, the minimum contributions increase as well.

Monthly health insurance contributions are due until the 8th of the following month, i.e. for January until the 8th February.

Do you pay the minimum health insurance contributions in the CR as self-employed (in Czech “OSVČ”) or individual with no taxable income (in Czech “OBZP”)? Then you should make sure that you adjust your prepayments now.

From 1 January 2024, the minimum advance payments of self-employed persons have been increased to CZK 2,968 (instead of the current CZK 2,722). This amount has to be paid as of the advance payment for January (due date till 8 February 2024).

The OBZP insurance premium and the minimum insurance premium for employees also increases – for 2024 to CZK 2,552 (instead of the current CZK 2,336).

The Recovery Package – Tax Changes from 2024

The Chamber of Deputies has approved in the third reading the draft of the recovery package, which aims to reduce budget deficits by CZK 150 billion over the next two years. The proposal will now head to the Senate for consideration so that measures from a total of 63 amendments to the law can come into force as early as 1 January 2024.

Here is an overview of the most important changes affecting personal income taxation:

Changes in progressive taxation

Shift of the 23% personal income tax threshold from four times to three times the average wage.

The government wants to expand the set of high earners who pay the 23% income tax rate. This should be a solidarity move to ensure that high-income workers also contribute more to the consolidation of public finances.

Model example: currently, an employee pays 23% tax on income exceeding CZK 161 300. Up to this amount, they pay 15% tax. The new amount will be roughly CZK 121 000 (the amounts are current for 2023 and are regularly indexed to average wage growth).

Changes in tax credits and tax base deductions

  • Parametric reduction of the tax credit for the spouse, which will now be limited exclusively to the spouse caring for a child up to 3 years of age only.
  • Abolition of the so-called kindergarten fees or tax rebate for placing a child in pre-school.
  • Elimination of the student tax credit.
  • Elimination of deduction for union dues and abolition of the deduction of reimbursement for examinations verifying the results of further education.

Changes in tax exempt income of employees

  • Limitation of exemption of non-cash benefits to employees. All previously tax-exempt non-monetary benefits provided by the employer to the employee will be exempt from personal income tax for the given tax period on the part of the employee only up to half of the average wage (currently CZK 20,162 per year).
  • Repeal of the exemption for over-the-limit meal vouchers.

Changes for OSVČ (self-employed individuals)

  • Increase in the levy burden on self-employed persons. Specifically, in 2024-2026, the minimum assessment base for social insurance premiums for self-employed persons will increase from 25% to 40% of the average wage, i.e. by 5 percentage points per year, bringing the minimum assessment base closer to the minimum wage. At the same time, self-employed persons will pay insurance premiums on at least 55% of the tax base instead of the current 50%.
  • Limiting tax deductibility for the purchase of passenger cars for business purposes to the first CZK 2 million of the car price.

Limitations to tax relief for work performance agreements (Dohoda o provedení práce – DPP)

  • There are two new thresholds for participation in the insurance of an employee working on the basis of DPP (and thus the thresholds for payment of social security contributions): the first limit will be set at 25% of the average wage for single-employer DPP; and a second limit (higher) will be set for the accrual of insurance coverage when multiple DPPs with multiple employers are combined, at 40% of the average wage.
  • If the employee exceeds one or the other limit, the insurance premium will also be paid. To ensure that the measure can be monitored, a register will be established of all the DPPs and the income from these agreements.

Changes in VAT

  • Reduction in the number of VAT rates to the standard 21% and reduced 12% (instead of the current 15% and 10%). Shifting selected goods and services from the reduced to the standard VAT rate.

Changes in property tax

  • Real estate tax rates will increase to approximately 1.8 times, which will increase the collection of this tax by CZK 10 billion. All tax revenue will be retained by the municipalities. In exchange for the increase in the real estate tax, there will be an adequate reduction of CZK 10 billion in the municipalities’ revenue from shared taxes within the framework of tax budgeting, so that the positive impact of the increase in the real estate tax will be reflected exclusively in the state budget. The current share of municipalities in shared taxes is 25.84%.

Tax Return 2022 – Tax Deductions

Do you need some information about Tax Return Czech Republic? Such as what tax deductions you may be eligible to in 2022? Then the below article may provide you with some guidance.

Tax base deductions

Providing all legislative conditions are met, it is possible to lower the tax base by so-called tax base deductions. The main tax base deductions are:

  • The total interest on a mortgage or construction saving loan if used to finance personal housing needs
  • Contributions of up to CZK 24,000 made to supplementary pension insurance or life insurance schemes that comply with specific conditions.
  • Gifts made to certain entities for specific purposes (e.g. humanitarian, charity, ecological purposes) if they amount to at least 2% of the tax base or CZK 1,000. The maximum amount that may be deducted is 30% of the tax base.
  • Unpaid blood donation – CZK 3,000 per donation.

Tax discounts

It is possible to lower the tax liability by applying additional tax discounts. The highest and most common applicable discounts are as follows:

  • Taxpayer’s personal tax discount of CZK 30,840.
  • Spousal tax discount of CZK 24,840 if the spouse lives in the same household as the taxpayer and the spouse’s annual income does not exceed CZK 68,000.
  • Tax discount for dependent children; CZK 15,204 for one child, tax discount of CZK 22,320 for the second child, and tax discount of CZK 27,840 for the third and any additional dependent child.
  • Tax discount for kindergarten fees paid, maximum in the amount of CZK 16,200.

We are here to help you with your Tax Return filing, should you wish. Please do not hesitate to contact us.



Health Insurance Prepayments from January 2023

Like every year, also for 2023 the minimum health insurance payments will be increased. Due to the increase in average salary every year, the minimum contributions increase as well.

Monthly health insurance contributions are due until the 8th of the following month, i.e. for January until the 8th February.

Do you pay the minimum health insurance contributions in the CR as self-employed (in Czech “OSVČ”) or individual with no taxable income (in Czech “OBZP”)? Then you should make sure that you adjust your prepayments now.

From 1 January 2023, the minimum advance payments of self-employed persons have been increased to CZK 2,722 (instead of the current CZK 2,627). This amount has to be paid as of the advance payment for January (due date till 8 February 2023).

The OBZP insurance premium and the minimum insurance premium for employees also increases – for 2023 to CZK 2,336 (instead of the current CZK 2,187).

Tax inspection of YouTubers

YouTubers and other influencers were subject to a first area inspection from the tax authorities. The inspection showed that many of them did not properly state their total income or fulfilled their VAT obligations. You may find below a translation of the financial office press release.

The Tax Control and Analytics Section of the General Financial Directorate carried out an analysis of selected tax entities using internet platforms that allow them to earn taxable income based on the content they publish (e.g. YouTube and Twitch).

The processing of data and information obtained in accordance with the applicable legislation detected tax entities that did not properly declare and therefore did not pay tax on income derived from the operation of live broadcasting (streaming) or publishing videos via Twitch or YouTube platforms, or from other income (e.g. from the sale of logoed products, contract products, donations from sponsors, etc.). In some cases, these entities did not even pay value added tax.

“The difference between the income found and the data claimed by the tax subjects in their personal or corporate income tax returns or value added tax returns (including cases in which tax returns were not filed at all) amounted, for example, to tens of millions of crowns that were not paid to the public budgets in the cases dealt with by the Financial Office for the Moravian-Silesian Region,” says Jan Ronovský, Deputy Director General of the Financial Administration. In these cases, the Financial Administration also followed the path of minimal burden on tax subjects, allowing them to declare the established tax liability additionally and subsequently use the option of a payment plan if the conditions are met.

The tax administration therefore recommends that tax entities engaged in the above-mentioned activities pay due attention to the correct reporting of their tax obligations and, where appropriate, file additional tax returns.

In view of the knowledge gained about the level of misconduct found in specific cases, the area of income from similar activities carried out via the internet and social platforms will continue to be the subject of the tax administration’s search and control activities. The next action in this area is planned for the first half of 2023 and will cover a wider range of platforms.