A deadline for income tax return is coming and probably will not be exceeded by Covid measures as last year. At this time, you should make sure that your tax reconciliation is getting done by your employer, or start filing your own income tax return if you’re obliged to (or if it’s advantageous for you due to tax reliefs and allowances). The deadline (extended due to Covid regulations) to file a tax return in a paper form is May 3 with a grace period until May 7. If you file the tax forms electronically (but you need an electronic signature or data mailbox or compatible banking login) via the Financial office portal mojedane.cz (in Czech only), the deadline is June 1. And if you ask a certified tax advisor to do the taxes for you, you have time until August 1, but you have to sign the power of attorney to the tax advisor before May 3.
If you’re not sure what we’re talking about, maybe read our previous article first, where we explain how income tax works.
But in this article, Michael Hájek, an expert consultant, explains the few crucial changes in personal income tax effective from the start of this year.
Employees and their new numbers
In the past, an employee’s income tax was calculated from the so-called super gross salary. This increased tax base was now terminated. Newly, the tax base is equal to the gross salary. The tax rate remained 15%. Or 23 per cent, if your monthly income exceeds 141,764 CZK. This higher tax rate (23%) will newly apply to all kinds of income, not just employees.
A personal tax relief increased to 27,840 CZK annually and from the year 2022, it will be even higher, 30,840 CZK. (For a long time, the relief oscillated around 24,500 CZK)
On the other hand, a tax relief applied for a spouse with a small or no income remains the same, 24,840 CZK.
The self-employed and their new fee to rule them all
For entrepreneurs and freelancers, a new option is available to simplify your admin and paperwork.
You can now registered for the so-called flat tax. As long as your annual income doesn’t exceed 1 mil CZK and you’re not a VAT payer or an employee. If you choose to register, you will no longer be obliged to file an income tax return, nor your social security + health insurance annual statements.
You’ll also pay only one sum to one office every month, 5,469 CZK, which would cover all your fees: tax, social and health insurance. However, the flat tax doesn’t have to be automatically advantageous to everyone – you’d be losing the possibility to apply any tax allowances or tax reliefs. So do calculate if paying this flat fee is a good solution for you: you can compare your current taxes with this calculator, provided at the Ministry of Finance website.
If you decide to register, you can do so at the beginning of the next year, at your Financial office. Or, if you’re only now starting, you can register from the first day of your self-employment (at the Trade Licensing office).
Experts view all the above-mentioned changes as positive, as they will cause more money in your pockets. So, hurray 2021 – at least tax-wise.
The article was written in cooperation with an expert accountant Michael Hájek from Bell Consulting, a member of our family of expat-friendly services in Brno, providing complete financial and tax services.