Tax

The tax increase now also applies to rooms in residential houses and units used for any kind of business, including accommodation.

Until the end of 2023, the obligation to increase the property tax rate on residential properties applied only to properties where the predominant part of the property (or the whole property) was used for business, including accommodation services, such as Airbnb.

The amendment to the Real Estate Tax Act brings a number of changes, of which we would like to point out in particular the increase in the real estate tax and the resulting obligation to declare this increased tax in certain cases.

Since 1 January 2024, the tax rate increased from CZK 2 to CZK 3.50 per 1 m² of non-residential space used for business purposes. This new increase is also applied to all rooms in residential houses and housing units used for business, including accommodation services. The tax increase is calculated as the product of the floor area of the non-residential space or room in question in m² multiplied by CZK 3.50. It follows that taxpayers who do not allocate the entire building of a residential building with a tax rate for business, because more than half of the floor area of the building is used for housing, have a new obligation to file a real estate tax return in which they indicate the tax increase for rooms used for business accommodation.

Situations where a certain room of a residential house or unit is used for living as well as business purposes at the same time remain outside the tax increase. For example, a seamstress or a tailor uses the living room not only for living but also for business during the day, as they sew and test in it, or an IT developer programs on a computer in his bedroom.

The amount of the tax is determined by the usage of the property for housing vs business valid as of 1 January 2024.

Example:

Mr. Smith owns a family house in which he has two apartments (but which are not defined as separate units according to the Land Registry) in which he provides accommodation and related services to tourists. Since the majority of the floor area of the family home is used for his permanent residence, he has claimed the family home at the residential tax rate for the 2023 tax year. Is Mr. Smith required to file a tax return for the 2024 tax year?

Yes, Mr. Smith is obliged to file a real estate tax return for the 2024 tax year, in which he lists the family home including the tax increase for the relevant m2 of rooms comprising the two apartments used for his accommodation business.

If you are affected by this change and have any questions or uncertainties on how to proceed, please do not hesitate to contact us.

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.

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.

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)

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

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.

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.

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.