Tax Return 2021 – Deadlines

Šárka

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

Tax Return 2021 – Deductions

Šárka

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.

Annual Tax Reconciliation (Roční zúčtování daně)

Šárka

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.

Annual Tax Reconciliation Czech Republic

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
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 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

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
Deadline for filing income tax return 2020

Deadline for filing income tax return 2020

Šárka

The amended Tax Code that applies to the 2020 tax period and onwards has introduced changes to filing deadlines. Yes, the statutory deadline for filing the tax return for the previous calendar year remains 1 April of the following year, BUT only in case of a paper version.

Newly, if the tax return is filed electronically, the deadline is extended to four months after the end of the tax period (i.e. 3 May 2021 for the tax period 2020 since 1 and 2 May are public holiday and a weekend), instead of the standard three-month deadline.

The deadline for filing a tax return based on a power of attorney given to a tax advisor remains six months after the end of the tax period. This applies if the tax return was not filed within the three-month or four-month period and is subsequently filed by a tax advisor. However, what is new based on the amendment is the fact that the power of attorney no longer has to be delivered to the tax office before the statutory deadline (usually 1 April) to ensure the automatic deadline extension. This means that the power of attorney may be filed anytime before 1 July, for instance together with the tax return.

Should you wish to take advantage of the filing deadline extension, feel free to contact me.

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).



Important changes from 2021 – tax package approved

Important changes from 2021 – tax package approved

Šárka

The tax package 2021 which significantly alters the area of personal income taxation has been approved (again) by the Chamber of Deputies. The bill now goes to the President who has previously announced that he will neither veto nor sign the amendments. As such it is still unclear whether the amendments will have general effect already from 1 January 2021.

These are the most important personal income tax changes and their possible effectiveness:

  • Abolition of the super-gross wage and establishment of new income tax rates of 15% and 23% – effective for the entire period 2021 (technically, due to later effectiveness, the taxpayer can choose for 2021 between the current and the new state)
  • Increase of the basic taxpayer tax deduction (currently CZK 24,840 p.a.). The amount of the discount is set at CZK 27,840 for 2021 (effective for the whole period 2021) and at CZK 30,840 for 2022.
  • Monetary meal allowance provided by employers with a beneficial tax regime – an alternative to meal vouchers – effective from 1 February 2021, if the law is promulgated in January
  • Depreciation (abolition of depreciation of intangible assets, increase of the limit for mandatory depreciation from CZK 40 to 80 thousand and introduction of extraordinary accelerated depreciation of tangible assets acquired in 2020 and 2021) – effective for the periods 2020 and 2021

For most taxpayers these are for sure profitable changes. In case of individuals who have high income for instance from rent or sale of shares, it may be advisable to review which regime for 2021 they should choose.

Abolition of real estate acquisition tax approved

Abolition of real estate acquisition tax approved

Šárka

The proposal to abolish the real estate acquisition tax has been approved and now also officially signed by the President.

The abolition of the real estate acquisition tax applies retroactively to acquisitions where the entry into the land register took place in December 2019 or later.

Together with this change, period for tax exemption of individuals’ income from the sale of real estate (that is not used to satisfy housing needs) was increased from the current 5 years to 10 years. However, the new period shall apply only to the sale of real estate acquired after 1 January 2021.

Moreover, the annual limit for the tax base deduction of interest on loans used to finance housing needs is reduced from CZK 300,000 to CZK 150,000, but again only for real estate acquired after 1 January 2021. (Originally, the proposal wanted to abolish this deduction completely.)

If you have already paid the tax, the abolition triggered a tax overpayment. In such a case, you have to request its refund from the tax office.

Those who have not filed their tax returns and paid the tax yet, do not have any further obligations towards the tax authorities.

Abolition of real estate transfer tax?

Abolition of real estate transfer tax?

Šárka

The Ministry of Finance will likely submit a proposal to abolish the real estate acquisition tax to the government next week. The tax is currently 4% of the total purchase price. However, the proposal should include also an adjustment in the possibility of tax base deductions from newly concluded mortgage loans.

Anyone who paid the tax in the past or has acquired a property exempt from this tax (e.g. first purchase of a new apartment), should be able to continue to apply the tax base deductions in their income tax return. Mortgage refinancing should also be considered in the amendment so that it is not treated as a new loan.

The amendment should be retroactive, i.e. it should have retroactive effect as of the date of its approval by the government. In the meantime, whoever pays the acquisition tax should be further eligible for the mortgage interest tax base deduction.

Those whose transfers are currently taxable would most likely profit from this amendment, especially companies (if the amendment will apply to legal entities as well).

On the other hand, those individuals who bought a new property (for instance from a developer company) had the purchase tax free anyway and newly would not be allowed to apply the mortgage interest paid for financing such property.

But let’s wait for the final wording of the proposal as well as the fact whether it will be approved.