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).
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.
Have you received a letter following your trade registration that looks very credible and requests you to pay a registration fee?
One of my clients did and even from two companies, Česká komora firem a živnostníků s.r.o. (ČKFaŽ s.r.o.) and VENGERBERG s.r.o.
Both letters came some two weeks after the trade registration. The names of the senders were different, but the content was very similar. The aim was to give the impression that by registering in the trade register you are obliged to pay the associated costs. The letters therefore gave the impression of official writing. Both companies dated these offers on the date of registration in the trade register.
They also use names that are supposed to give the impression that it is a state register. This is also supported by stamps or pre-printed postal orders for the payment of the ‘fee’.
Don’t be fooled. These letters are just offers to advertise services. The best solution is to throw them into waste. Without any doubt, they can be at the very least described as unfair practices.
The recently approved amendment of VAT Act and other acts introduces also some fundamental changes effective from 1 January 2023 to the flat-rate tax institute, which was firstly introduced from 1 January 2021.
The new adjustments concerning the flat-rate tax follow the increase of the limit for value added tax payers to CZK 2 million. In order to enter the flat-rate regime, the threshold for income from self-employment has been increased from CZK 1 million to CZK 2 million.
As the increase in the income limit for entry into the flat-rate regime allows for a flat-rate tax to be imposed on personal income tax payers with a very wide range of incomes, the flat-rate tax and the public insurance premiums are no longer set at the same level for everyone, but three bands of the flat-rate regime are introduced, derived from the amount and nature of the taxpayer’s income. In each of the selected bands, taxpayers will pay a different amount of flat-rate advances and, as a consequence, the flat-rate tax and the flat-rate public insurance premium will be different.
Who are the beneficiaries of the individual bands of the flat-rate regime?
Taxpayers whose income from self-employment in the previous tax year did not exceed CZK 1 million, irrespective of the independent activity from which this income is derived.
Taxpayers whose income from self-employment in the previous tax year was up to CZK 1.5 million, if at least 75% of such income consists of income to which may otherwise be applied percentage expenses at the rate of 80% or 60%.
Taxpayers whose income from self-employment in the previous tax year was up to CZK 2 million, if at least 75% of such income is income to which expenses may be applied as a percentage of income at the rate of 80%.
Taxpayers whose income from self-employment did not exceed CZK 1,5 million in the previous tax year, irrespective of the type of the business activity
Taxpayers with income from self-employment in the previous tax year up to CZK 2 million, if at least 75% of such income is income to which expenses may be applied as a percentage of income at the rate of 80% or 60%.
Taxpayers whose income from self-employment did not exceed CZK 2 million in the previous tax year, irrespective of the self-employment activity.
What is the amount of monthly lump-sum advances and lump-sum tax?
The amount of the taxpayer’s lump-sum advances in the 2023 advance period is the following amount per month by lump-sum band:
Band I of the flat-rate scheme: CZK 6 208
Flat-rate band II: CZK 16 000
Flat-rate band III: CZK 26 000
Please do not hesitate to contact us should you need any further information or assistance with respect to the flat-rate regime.
As we have already informed you, the Ministry of Finance prepared an amendment of tax legislation which among others increases the limit for mandatory VAT registration.
The amendment has been approved and will be published in the Collection of Laws soon. Most of the provisions will become effective from 1 Janaury 2023.
The approved version confirms the increase of a turnover (calculated for 12 consecutive months) for the mandatory VAT registration from CZK 1 million to CZK 2 million. The act includes several transitional provisions which among others stipulate the following:
If the taxable person reaches the turnover of CZK 1 million from November 2022 onwards (but does not exceed the CZK 2 million limit), they should already not be obliged to register for VAT anymore.
If a VAT payer did not exceed the CZK 2 million limit in the past 12 consecutive months and wants to deregister from VAT, they should be allowed to do so within 5 days after the amendment is published. It will also be possible to deregister later, but there will be some further conditions that have to be met such as being a VAT payer for at least a year, etc.
Please do not hesitate to contact us should you need any assistance with the above.
As we have already informed you, there has been a draft of an amendment to act changing the social security contributions which shall have a positive effect on part-time employment of selective group of employees.
The amendment has been approved and will be effective from 1 February 2023.
The main change is the introduction of a 5 % discount on employers’ premiums for selected groups of employees. The amount of the employer’s contributions for these employees will therefore be only 19.8% instead of the standard 24.8%.
The main condition for applying the discount is the amount of the employee’s assessment base for the calendar month, which must not exceed 1.5 times the average wage for the same employer in total.
The employer will be obliged to notify the Czech Social Security Authority in advance of the intention to apply the discount.
The Government approved a draft law of the Ministry of Finance, which would increase the annual limit for mandatory VAT registration from CZK 1 million to CZK 2 million with effect from 1 January 2023. The annual income limit for entry into the flat-rate tax regime should also be doubled from next year to CZK 2 million. The proposal is currently being discussed by the Parliament.
The amendment to the VAT Act proposes to increase the annual turnover limit for compulsory VAT registration to CZK 2 million. The current limit of CZK 1 million corresponded to the amount of EUR 35,000 that the Czech Republic received when it joined the European Union in 2004, which has not changed in 18 years despite a significant increase in the price level. The increase of the limit up to €85,000 is supported by the EU itself, which will allow member states to implement this increase from 2025. However, the Czech Republic was allowed to increase the VAT limit to CZK 2 million at its request already from next year. So the main novelty should be the possibility to deregister from VAT on annual turnover of up to CZK 2 million.
The condition for using the flat-rate tax, i.e. paying taxes, social and health insurance in one regular monthly amount without tax returns and without insurance reports, should also increase to twice the amount, i.e. CZK 2 million from next year. The Ministry of Finance expects that next year up to 30,000 sole traders could newly register for the flat tax. However, due to the very wide range of income of flat-rate taxpayers, the monthly flat-rate advances will not be the same for all, but 3 bands should be introduced, primarily derived from the amount of income and secondarily from the expenditure lump sum.
We will see whether and in what form this proposal will be approved.
Should you have any questions, please do not hesitate to contact me.
Similarly to the centralized audits of airbnb providers, the tax authorities newly concentrate also on taxpayers who had income resulting from transactions with cryptocurrencies.
The tax authority issued several statements how the taxation of cryptocurrencies should be addressed over the past few years so at the moment it is hardly advisable that the related income was not declared within the annual tax returns.
Below I translated the official press release from the tax authority office:
The Tax Control and Analytics Section of the General Financial Directorate has analysed the available data for a group of selected taxpayers conducting transactions with cryptocurrencies for the tax years 2019 and 2020. In processing the data and information obtained in accordance with the applicable legislation, a set of taxpayers was detected that did not properly declare or remit tax on income arising from these transactions.
The difference between the detected income and the data claimed by the taxpayers in the personal or corporate income tax returns of these entities (including cases in which no tax returns were filed at all) amounted to hundreds of millions of CZK in aggregate.
The tax administration proceeded in a way that minimised the burden on tax subjects, allowing them to declare their tax liability additionally. Based on the tax administrator’s requests, some entities also filed tax returns for periods that were not examined at that stage.
In other cases, the findings made by the tax administrator have been the subject of a tax assessment, so far in 80% of the tax entities audited, and have also led to the identification of other entities suspected of not declaring income from cryptocurrency trading. For example, cases of collective investment of individuals in cryptocurrencies were also detected, where the funds were paid to the bank account of the representative of the investing persons, who then transferred them according to the contract to the accounts of individual investors, most of whom did not fulfil their obligation to declare and pay tax.
The area of cryptocurrency transactions will continue to be subject to the tax administrator’s control activities. On the basis of domestic and international cooperation in the field of taxation, information is exchanged, for example, with the authorities supervising the regulation in the field of anti-money laundering or with foreign tax administrations, which in the course of their activities detect entities that receive income in connection with cryptocurrencies and are residents of the Czech Republic. Cryptocurrency exchanges, crypto exchanges, entities operating cryptocurrency mining and providers of selected types of services specifically related to cryptocurrencies are also of interest.
At the same time, the tax administration provides relevant information to the tax public in order to familiarise taxpayers with the issue in the context of related tax obligations. “Our goal is to ensure that taxpayers are able to fulfil their obligations properly and voluntarily without the need for intervention by the control units of the tax authorities,” adds Jan Ronovský, Deputy Director General of the Tax Administration. In the matter of taxation of income from cryptocurrencies, the Financial Administration is also actively creating directly usable materials on its website.
If you are an employee and have a car available from your employer that you can use for both business and private purposes, this “benefit” is considered as taxable income and added to your tax base in your monthly payroll. So far we have had only one rate how this monthly benefit has been calculated – 1% of the acquisition price (incl. VAT).
From 1 July 2022, an amendment to the Income Tax Act came into force. Newly for low-emission vehicles provided to employees by their employer for business and private purposes only 0.5% of the car acquisition price will be subject to tax every month.
A low-emission vehicle means a road vehicle of category M1, M2 or N1 which does not exceed the CO2 emission limit of 50 g/km and 80 % of the emission limits for air pollutants in real operation as laid down in the respective EU regulation.
Other cars that do not meet the above definition of a low-emission vehicle continue to be subject to monthly payroll withholdings from the 1% of the acquisition price.
This change will take place from payroll for July 2022 (calculated in most cases in the beginning of August 2022).
Despite the relatively high overall employment rate in the Czech Republic of the population aged 20-64 (Czech Republic – 80.0%, Poland – 75.4%, Hungary – 78.8%, Slovakia – 74.6 %, EU – 73.1 %), there are still quite large groups of people in the Czech Republic with the opposite very low employment rates. These groups include (i) women caring for young children and relatives (ii) young workers, (iii) senior citizens, (iv) people with disabilities.
Based on the Czech goverment, in order to effectively support part-time work, among other measures, it is necessary to take into account given the dominant share of social security contributions in total labour taxation, to reduce social security contributions on the employer’s side. This measure is expected to naturally encourage employers to create and offer more part-time jobs.
The standard employer rate of social security is 24,8 % of the assessment base. It has been proposed to reduce the social security contributions paid by the employer by 5% under the following conditions:
the employee’s agreed weekly working hours are between 8 and 30 hours (part-time).
the employee’s assessment base does not exceed 1.5 times the average salary
the employee belongs to one of the groups for which employment support is needed: A. persons aged 55 years and over; B. parents of children under 10 years of age or persons replacing parental care on the basis of the decision of the competent authority for children under 10 years of age; C. persons caring for a close person who is dependent on the assistance of another person; D. persons studying at secondary school or university; E. persons with disabilities on the unprotected labour market; F. persons in retraining G. A reduction in premiums is also proposed for the group of persons under 21 years of age, regardless of the extent of the agreed working time.
The proposal has already been approved by the Senate. Now only the President’s signature is missing.