Tax

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.

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.

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.

What are the deadlines for filing a Personal Income Tax Return Czech Republic for the 2021 tax period?

The 2021 tax return should be filed no later than three months after the end of the tax period. The last day of the deadline for filing a tax return is 1 April 2022.

If the taxpayer submits the tax return electronically they may do so no later than four months after the end of the tax period, i.e. Monday, 2 May 2022. This deadline does not apply to tax advisers representing the taxpayer.

In case of a taxpayer whose tax return is processed and filed by a tax advisor (based on a Power of Attorney), the tax return is filed no later than six months after the end of the tax period, i.e. 1 July 2022

Do you need some information about Tax Return Czech Republic? Such as what deductions you may be eligible to? 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 27,840.
• 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 19,404 for the second child, and tax discount of CZK 24,204 for the third and any additional dependent child.
• Tax discount for kindergarten fees paid, maximum in the amount of CZK 15,200.

I am here to help you with your Tax Return filing, should you wish. Please do not hesitate to contact me.

The Annual Tax Reconciliation (“ATR”) 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.

Who Is Eligible to the ATR?

The ATR for 2021 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 2022 for the ATR, signs “Žádost o roční zúčtování záloh a daňového zvýhodnění” in Czech

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 6,000 that is not exempt from tax, e.g. self-employment, rental, 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 15,000 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 2021, 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