Social and Health Insurance

Health Insurance Prepayments from January 2023

Šárka

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).

Changes in flat-rate tax from 2023

Šárka

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?

Band I:

  • 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%.

Band II:

  • 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%.

Band III:

  • 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.

Decrease in social insurance premiums

Šárka

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.

Increase of limit for mandatory VAT registration and flat-rate tax regime

Šárka

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.

Support for part-time work

Šárka

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:

  1. the employee’s agreed weekly working hours are between 8 and 30 hours (part-time).
  2. the employee’s assessment base does not exceed 1.5 times the average salary
  3. 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.

Health Insurance Prepayments from January 2022

Šárka

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.

Due to the increase in average salary every year, the minimum contributions increase as well.

Since 1 January 2022, the minimum advance payments of self-employed persons have been increased to CZK 2,627 (instead of the current CZK 2,393). This amount has to be paid as of the advance payment for January (due date till 8 February 2022).

The OBZP insurance premium and the minimum insurance premium for employees also increases – for 2022 to CZK 2,187 (instead of the current CZK 2,052).

Airbnb providers subject to tax audits (again!)

Airbnb providers subject to tax audits (again!)

Šárka

As previously informed, tax authority has been again checking on taxpayers who provide accommodation services through Airbnb.

The tax office obtains information on the income of taxpayers doing business through electronic platforms (such as Airbnb) and thus has the data to verify whether or not the taxpayer has fulfilled the tax obligations compared to the filed tax return. 

If you are providing accommodation services, be aware of your obligations! Please find below a short summary of them.

In case of any questions or need of assistance, do not hesitate to reach out.

Main tax and related obligations:

  • Trade licence – accommodation services are considered a trade
  • Business income – accommodation services are considered business income and shall be taxed as such. Therefore, they are also subject to social security and health insurance payments
  • VAT registration – commissions to Airbnb are considered payment for services to a company registered in another EU member state, as such at least light VAT registration (as an identified person) is necessary and VAT should be calculated and paid from these commissions in the CR

Health insurance advance payments from January 2021

Šárka

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 payments now.

Due to the increase in average salary every year, the minimum contributions increase as well.

Since 1 January 2021, the minimum advance payments of self-employed persons have been increased to CZK 2,393 (instead of the current CZK 2,352). This amount has to be paid as of the advance payment for January (due date till 8 February 2021).

The OBZP insurance premium and the minimum insurance premium for employees also increases – for 2021 to CZK 2,052 (instead of the current CZK 1,971).



COVID-19: Measures in the area of insurance of self-employed individuals – update

COVID-19: Measures in the area of insurance of self-employed individuals – update

Šárka

Social security

The Senate has approved today afternoon a bill saying that no social security advance payments for March until August 2020 will be due.

On the annual basis, the amounts due for the months March till August 2020 will be decreased by CZK 2,544 per month (for those who have self-employment activity as main income) and CZK 1,018 per month (for those who have it as subsidiary activity).

Health insurance

Similarly, the Senate confirmed that also in the area of health insurance no late payment penalties will be assessed on late paid advance payments for the months March till August 2020 (for the period until 21 September 2020).

In addition, the advance payments for March till August 2020 in the minimum amount do not have to be settled at all.

For those who pay higher than the minimum payments, they will be obliged to repay for these months only the amount that exceeds the minimum payments, but can do so also only once filing the annual report for 2020.

Further, the deadline for filing the annual report for 2019 should be extended from 4 May until 3 August 2020.

The bills now only need to be signed by the President.

Update regarding COVID-19 measures

Update regarding COVID-19 measures

Šárka

Following the steps taken by the respective ministries, I have summarized below the main meassures that have been already approved or are under discussion in the area of taxation and social security and health insurance with respect to the current state of emergency.

Tax measures

The Ministry of Finance and the Financial Administration are gradually responding to the current situation.

On 16 March 2020, the Government approved the so-called Liberation Package, which includes in particular the following measures:

• Flat waiver of late filing penalty of personal and corporate income tax return and late payment interest until 1 July 2020, i.e. taxpayers are effectively allowed to file their income tax returns at the latest 3 months after the statutory deadline without the need to prove coronavirus-related reasons.

• Waiver of tax return late filing penalty in all cases where interest for late payment, tax repayment or penalty for failure to file a VAT control report is individually waived by the tax office.

• General waiver of fines for the late submission of a VAT control report of CZK 1,000 incurred between 1 March and 31 July 2020.

• Possibility of individual waiver of a fine for failure to submit a VAT control report for the period from 1 March to 31 July 2020 if coronavirus-related reasons are proved.

• General waiver of the administrative fee for filing an application for delaying or repayment of tax, the application for remission of a fine for failure to submit a VAT control report (for applications submitted by 31 July 2020).

On 22 March 2020, the Ministry of Finance, within the framework of the Liberation Package II, proposed further measures:

• General waiver of the June advance tax payments for personal and corporate income tax. This means that the June advance payment (otherwise due by 15 June 2020) would not be paid at all.

• General waiver of a fine for late filing of a real estate property acquisition tax return or for a late payment of a real estate property acquisition tax or an advance payment. The waiver would apply to all late tax returns with a deadline from 31 March to 31 July 2020. It should be possible to file a real estate acquisition tax return by 31 August 2020 at the latest without the risk of a penalty, interest on late payment would also be remitted. Effectively, all taxpayers would automatically be allowed to file the real estate property tax return up to five months later.

• Introduction of Loss carryback for both personal and corporate income tax for 2020. It should be possible to apply it in the 2019 and 2018 tax returns.

• Suspension of the obligation for electronical record of sales („EET“) for entities in all phases of the EET for the period of state emergency and the following three months.

Social security and health insurance measures

The Ministry of Labor and Social Affairs responds similarly to the situation. On 19 March 2020, the so-called Antivirus program, which aims to protect employment, was approved by the Government. The state will compensate firms for the costs of incapacity for work under the quarantine order and, in part, for compensation for wages if there are obstacles on the side of the employer if it is shown that the obstacle to work is due to COVID-19.

The compensation will be provided by the Labor Office of the Czech Republic, the amount and duration of the support will depend on the reason of the obstacle at work.

• Mode A – Quarantine employees

Scheme A is intended to contribute to employers’ paid wage compensation in the event of incapacity for work for employees who are subject to quarantine. The employer pays compensation for incapacity for work for the first 14 calendar days, the amount of compensation is 60% of the average assessment base. The employer will be provided with the full compensation of wage compensation paid.

• Mode B – Inability to assign work to employees due to the government emergency measures

Scheme B concerns situations where an employer cannot allocate work to employees because of government emergency measures, i.e. the employer is ordered to close down operations following a government resolution. In such a situation, employees are entitled to wage compensation equal to their average earnings. The compensation to the employer should be 80% of the compensation paid.

On 23 March 2020, the government approved further measures proposed by the Ministry of Labor and Social Affairs, which should support other companies and extend the Antivirus program by three additional regimes:

• Mode C – Inability to assign work to employees due to quarantine or childcare for a significant proportion of employees.

It should be considered a significant part if it is 30% of employees of companies, establishments or other organizational part according to the operating situation of the employer. Compensation of wages or salaries should be paid to the employee at 100% and the employer should be provided a compensation of 80% of the compensation paid.

• Mode D – Restricting the availability of inputs (raw materials, products, services) necessary for the employer’s activity as a result of quarantine measures (or generally production failures) at the supplier, including abroad.

For example, there is an agreement proving the origin of inputs, bans on actions or other measures demonstrably affecting supplies to the employer. Compensation of wages or salaries should be paid to the employee of 80% and the employer should be provided a compensation of 50% of the compensation paid.

• Scheme E – Reduced demand for employer’s services and products as a result of quarantine measures at the employer’s point of sale (CR and abroad).

Compensation of wages or salaries should be paid to the employee in the amount of at least 60% and the employer should be provided a compensation equal to 50% of the compensation paid.

On 20 March 2020, the Ministry of Labor and Social Affairs sent a draft law to the interdepartmental comment procedure for the waiver of compulsory pension insurance payments for self-employed individuals for a period of 6 months. If approved, the measure should be effective as of March. The proposal has so far been approved by the government on 23 March 2020, including a waiver also of the compulsory health insurance payments.

The area of ​​paid nursing is also discussed. It is still true that if an employee has to take care of a child under 10 years after the end of 9 days of nursing (16 for single parents), he / she can stay at home, but only on an unpaid leave. The employee will receive wage compensation only on the basis of an agreement with the employer, but there is no obligation.

Today, the Parliament shall approve an amendment to the law that will ensure that nursing allowance could be drawn for the entire period of school closures (also retroactively). Thus, if the law is passed, employees will be reimbursed for the entire period they were at home taking care of their small children.