FAQ Czech Income Tax Returns

Alexio.cz offers Accounting & Tax services and files Corporate Income Tax Returns for SRO limited companies in Czech Republic, as well as Personal Income Tax Returns for employees and Trade License holders.

We have ample experience with tax issues of foreigners in Czech Republic.

If you have questions about accounting / taxation in Czech Republic, we recommend booking a consultation.

FAQ - SRO Corporate Income Tax Return

SRO: Do I need to file even if the SRO had no activities?

Even if the sro company did not have any business activities, it still has the obligation to file a Corporate Income Tax Return, not filing may ultimately lead to the Trade License Register / Commercial Court de-registering the company, making it impossible to trade or extend the visa of the director.

SRO: What Tax Returns do I need to extend a Business Visa?

When extending a business visa for an director not only the sro Corporate Income Tax Return is required, but due to the new, much more strict visa regulations a director also must have proof of income, and proof of paid tax / social / health charges (in case he has foreign income (instead of salary), he will need proof of this too)

One of the most important things the Foreign Police (Ministry of Interior) asks for is the Personal Income Tax Return, the payroll administration and the personal bank statements. If one can't show or prove enough income (either czech or foreign, it will be hard / impossible to extend the business visa.

FAQ - Trade License Income Tax Return

TL Important: The big difference between 2017 and 2018 for Trade License Revenue over 1 M CZK

Starting 2018, the 60/40 limit has lowered from 2M CZK to 1 M CZK. THIS IS ONE OF THE BIGGEST CHANGES IN RECENT TIMES, which affects all Revenues over 1M CZK, but Revenues between 1M CZK and 2M CZK the most. The higher Revenues (3M, 4M and up) will only see a change of a few %. Everybody will pay more Income Tax, Social Charges and Health Insurance.
  • We highly recommend to book a Business Consultation if you have a Revenue over 1 M CZK becauseTax / Social / Health contributions may amount to up to 32% of your Revenue and in some cases increase as much as 50% compared to what you were paying in 2017 (!)

TL Important: The good news for Trade License Revenue in 2017

For the Revenue of 2017, it is still possible to use the old rules (that were valid in 2016) - which means: using real expenses OR using the 60/40 rule up to 2 M CZK (but no tax benefits, other than the personal one) OR use the new 2018 taxrules (60/40 up to 1M CZK but WITH tax benefits for spouse and children)

TL: 2017 / 2018 Tax Benefits

Tax benefits / deductions for non-working spouses and children can be deducted again for Trade Licenses using the 60/40 rule in 2018. This was not possible in 2017 and before.

One may not be entitled to (all) tax benefits, but there are also factors that lower the taxable income itself, such as mortgage interests, life insurance and gifts. These can also be used, even with the 60/40 rule.

Read more about claiming tax benefits here:

TL: Does Solidarity Tax apply in my case?

Solidarity Tax adds 7% to the standard 15% Income Tax. However, it is only charged on the part of your taxable income above +/- 1.4 M CZK. Your revenue needs to be several millions before the taxbase is above 1.2 M CZK. Therefore, 70% of the trade license holders is not affected by the solidarity tax at all.

Example: Revenue is 2 M CZK, when applying the 60/40 rule (in 2017), the tax base is: 0.4 * 2 M CZK = 0.8 M CZK. No Solidarity Tax.

Revenue is 3 M CZK, when applying the 60/40 rule (in 2017), the tax base is: 0.4 * 2 M CZK + 1 M = 1.8 M CZK. You will pay 15% on 1.4 M CZK, and 15+7% on 0.4 M CZK.

Note that in 2018 the 40/60 rule can only be used up to 1M CZK, NO LONGER for 2M - so in 2018, with a Revenue of 2M, you will just not pay Solidarity Tax, but with 3M, the Tax Base will be 2.4M - so 1.4M at 15% and 1M at 22%

TL: How come I have such enormous monthly charges for Social / Health in the new year?

Social / Health charges are based on the income of the previous year. More precisely, the new monthly charges are calculated from the average monthly income in the previous year. In case you have a Trade License for 1 or only a few months, but during that time you made 100.000s CZK, the average income for this / these months will be high.

Since the Social / Health charges are a fixed percentage of your revenue / income - naturally that will be significantly higher than the minimum charges of last year. If you continue to have the same average monthly income, those new monthly charges acurately match your income - and you will not pay an enourmous amount at once after filing the Tax Return of the current year.

In case in the current year your average monthly income is much lower than the previous year's average monthly income, it is possible to file a request at the authorities to lower these monthly charges. It will be necessary to provide accounting-up-to-date provinf that in fact you make much less money than in the previous year (and the request does not have to be granted). We do provide this service, contact us to find out if it makes sense to file such a request.

TL: What happens if I do not file an Income Tax Return?

For tradelicenses, normally the Income Tax Return is filed at the Tax Office, and income overviews are filed at to the social office and the public health care. Not filing will mean that the Tax Office and Social- and health office will not get this information and you can expect letters from them, because they have nothing to base the new montlhy fees on.

TL: How does my Tax Return affect my Business Visa Extension?

Due to the new, much more strict visa regulations you must have proof of income (at least +/- 9.500 CZK NET for one person), and proof of that income: bank statements, invoices and expenses.

One of the most important things the Foreign Police (Ministry of Interior) asks for is the Income Tax Return.
If you can't show enough income (czech or foreign), it will be hard / impossible to extend your business visa.

So, it is very important to show enough income on this Income Tax Return, even if this means having to pay more tax and social charges. Fortunately, for revenues up to +/- 400.000 CZK you will only pay the minimum social charges - and 400.000 CZK is just enough to satisfy the income demands of the Ministry of Interior.

If you are going to extend your visa, book a consultation and we'll calculate how much you will need to show. Nobody likes to pay taxes, but your stay in Czech Republic may depend on it!

FAQ: Personal Income Tax Return

Employee: Do I miss out on Tax Benefits?

The majority of the companies do not file a tax return for their employees (they are not obligatory), so you will pay 10.000s of CZK too much tax every year because not filing usually means missing out on tax benefits for yourself, your spouse and children, paid mortgage interests, paid life insurance and gifts.

We can even claim missed tax benefits of up to 3 years back!

Read more about claiming tax benefits here:

Employee: How to I declare the 7% Solidarity Tax?

In case you have a monthly income as employee of over +/- 100.000 CZK / month, most likely solidarity tax is already withheld at source. Still, you have the obligation to file a Personal Income Tax Return, which is a change from previous years.

Note that there are solutions to evade the Solidarity Tax, for example by invoicing through a Trade License or by taking out dividends. Contact us for more details.

Employee: Do I declare other / foreign sources of income?

In case you have other sources of income besides employment in Czech Republic (dividends, capital gains, foreign income, rental income) or you started halfway during the year your employment and worked some months abroad at an other company, you will have to file a Personal Income Tax Return, if you are tax resident in Czech Republic.

Declaring (foreign) income in Czech Republic instead of the country where you made this income will most likely result in far less taxes to be paid.

Employee: Does my Income as Employee help my partner on Business Visa?

Yes! Due to the new, much more strict visa regulations directors and trade license holders must have proof of income (at least +/- 9.500 CZK NET for one person). The employee income of the spouse can be used as additional source of income for the extension of the business visa.

One of the most important things the Foreign Police (Ministry of Interior) asks for is the Income Tax Return.
If one can't show enough income (czech or foreign), it will be hard / impossible to extend a business visa.

Filing before the end of a tax year / leaving Czech Republic in the middle of a year

Filing an Income Tax Return before the (tax) year is finished is not possible.
The earliest occasion to file is in the following January, even if you will leave Czech Republic before the year's end. Also complete de-registration from Tax / Social / Health systems will be possible only after filing the Income Tax Return.

It is possible to already order the Tax Return befroe the year end - we just will not be able to process and file the Return until January of the next year, although we will be able to tell you during the year whether it makes sense to file and if so, whether you would be entitled to receive anything back from the Tax Office.

Important: Even if you have paid years Social-, Pension- and Heath contributions - there is no way to claim any of those back, even not with a filed Income Tax Return.