CESOP – New reporting obligation on cross-border payments

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.

Payroll Tax Reconciliation vs. Annual Tax Return 2023

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.

Annual Tax Reconciliation Czech Republic

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)
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 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

Tax Return 2023 – Tax 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.

Changes in flat-rate tax for 2024

The principles for inclusion in the individual flat-rate tax bands remain the same (see article from last year Changes in flat-rate tax from 2023). However, due to the increase in the average wage and the increase in the assessment base of social security from 25% to 30% of the average wage, there is an increase in all bands.

What is the new amount of monthly lump-sum advances and lump-sum tax?

The amount of the taxpayer’s lump-sum advances in the 2024 advance period by flat rate band is as follows:

  • Band I of the flat rate scheme: CZK 7 498
  • Band II of the flat rate scheme: CZK 16 745
  • Band III of the flat rate scheme: CZK 27 139
Monthly prepayments Total amount Income tax Pension insurance Health insurance
I. band CZK 7 498 CZK 100 CZK 4 430 CZK 2 968
II. band CZK 16 745 CZK 4 963 CZK 8 191 CZK 3 591
III. band CZK 27 139 CZK 9 320 CZK 12 527 CZK 5 292

We remind you that entry into the flat-rate scheme is voluntary and it is possible to register until 10 January 2024. Those taxpayers who used the flat-rate tax in 2023 and for whom the current increase would mean a disadvantage may consider leaving the flat-rate scheme. This must also be notified to the tax office by 10 January 2024.

Tax Return 2022 – Tax Deductions

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.



Tax inspection of YouTubers

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.

Changes in flat-rate tax from 2023

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.

VAT registration limit increased to CZK 2m

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.

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

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.

Inspection on Taxation of Cryptocurrency Transactions

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.