Claiming Tax Benefits / Tax Deductions for previous years.Any person filing a Personal Income Tax Return (PIT) in Czech Republic is entitled to one or more of the following tax benefits / deductions / reductions, split in 2 groups:
Group 1: Tax deductions / reductions / benefits reducing the Income Tax
- +/-25.000 CZK personal tax deduction *
- +/-25.000 CZK tax deduction for a non-working spouse (earning max. 68.000 CZK per year) *
- +/-15.000 CZK per child (under 18, living in your household) *
- +/- 2.000 CZK student tax deduction *
note: exact sums depend on the tax year
The listed deductions reduce the Income Tax (which is calculated as 15% or 22% of your tax base), but are never paid out except for child benefits. Child benefits are the only benefits that are actually paid out.
2018 update: For the Tax Year 2018, Each next child results in a tax benefit that is a few 1000 CZK more than the previous child (child 1: 15204 CZK, child 2: 19404 CZK, each next child: 24404 CZK)
Suppose your tax liability is 60.000 CZK, you are not married but you have 2 children, then this 60.000 CZK is reduced to 0 CZK because of your personal tax deduction, and because of child tax benefits,
Group 2: Factors lowering the Income Tax Base itselfAnd, then there are factors that lower the tax base itself, such as:
- gifts to charity
- mortgage interests (just the interests, not the entire mortgage)
- life insurance (this is not health insurance)
Factors lowering the tax base are cannot be applied in te same way as tax benefits mentioned above.
They lower the Income Tax indirectly, by reducing the tax base.
(Foreign) Capital Gains, Dividends, Stocks - possible tax-exemptionsAlthough (foreign) Dividens and Stocks are taxed in par. 10 of the PIT, not all Dividends and Stocks are subject to income tax, in fact, they may be tax-exempt (especially if owned for a few years). There is no general rule; it will be necessary to look at the agreements and monthly / annual overviews before coming to any conclusion.
Confusingly enough, an increase in value of Stocks may be listed on your (annual) overview as Capital Gains. However, Capital Gains, taxed in par. 8 in the Czech PIT are usually the interest on your money on a (foreign) account. So before you conclude your Capital Gains belong in par. 8 (and therefore cannot be tax-exempt) better check if they do not belong in par. 10 anyway.
Further, Capital Gains / Dividends / Stocks may be taxed at source (abroad) or at least reported to the Tax Office (abroad). In that case it is necessary to see what the Tax Treaty (if it exists) between that country and Czech Republic says and whether you, as individual, have the obligation to pay Taxes / file a Tax Return abroad as well.
Being tax-exempt in CZ does not automatically mean: tax-exempt abroad (!) At the same time, the general rule of thumb is that you do not pay double taxes (in each country). There may be cases where you'd pay very little abroad, and therefore, on top of that some % is added in Czech Republic (or, taxes paid in CZ may generate a tax credit abroad)
We have come across several cases where people paid taxes in Czech Republic on par. 10 income that in fact was tax exempt, or where taxes were paid abroad although they had no obligation to do so. A third category is where paid taxes abroad could have resulted in a tax credit in Czech Republic (or the other way around).
Foreign Income can be quite tricky - in any case it starts with providing us the agreements and overviews; without them we can't determine tax-exemption, tax-credits or check whether a Tax treaty applies.
We can file corrected Czech Tax Returns for previous years (up to 3 years back) in an attempt to claim back too-much paid taxes. Alexio.cz does not file US taxes - however, we have a good partner in the US (so it might be possible to fix the problem on that end).
2018 update: For the Tax Year 2018, it will no longer be possible to claim tax benefits / tax deductions on income from par 8, 9, and 10.
What is the fee for Claiming Tax Benefits?The Order form will display the fee according to the type of service you select on that form.
There are several options to choose from, select the one that best describes your situation.
What is included in the fee for Claiming Tax Benefits?Included in the fee are the following elements:
- a Questionnaire and a Checklist so you know what documents to prepare
- a Consultation (Phone/Skype/Meeting) based on the Questionnaire and Checklist
- Evaluation whether it makes sense to claim or not,
- 2 hours * of Admin / Accounting service,
- calculation of Tax Benefits,
- we file the Tax Return at the Tax Office for you (so no need to do this yourself),
- we file the overviews for the Social Office and Health Insurance for you (so no need to do this yourself),
- You get a copy / scan of the Tax Return.
Admin / Accounting service in excess of 2 hours will be charged according to our standard pricelist.
It is possible to do everything remotely, without visiting our office. You can send in your documents by mail / email / Dropbox / Google Drive share. In this case we will need a signed paper original Power of Attorney for filing.
Employees beware: the company (usually) does not file your Income Tax ReturnBeing employed at a czech company does not mean that the company will file a taxreturn on your behalf.
In most cases, they won't. You may get the personal tax deduction in 12 parts added to your monthly income, but more often than not, spouses, childeren and other benefits are not accounted for, and so you miss out on these benefits: it can be for a 2-child family up to 85.000 CZK per year (without counting gifts, mortgage etc)!
Trade License: 2018 Change in tax benefitsAbove mentioned tax deductions for non-working spouses and children only apply again in 2018 for trade license holders if half of their taxable income is from employment but the 60/40 rule can only beused to 1M CZK Revenue, (unless, as tax base the real trade license income minus the real expenses is used). In case you have few expenses, it means that your tax base will be much higher compared to 2017 using the 60/40 rule!
Determining if there is anything to ClaimIf you expect that you did not get all benefits, we would need to see your previous Tax Returns or at least the annual salary overview provided by the employer (in case no Tax Return was filed) and we need you to fill in a questionnaire.
Costs of Claiming Tax Benefits of previous yearsWe can determine whether it makes sense to file corrected Tax Returns for previous years.
In case it makes sense to claim, we charge 10% of the Tax Benefits to be claimed, with a minimum of 3500 CZK / year.
If it does not make sense (the amount is too small or there is nothing to claim) we charge a 1500 CZK / year handling fee.
Note that for trade licenses, in case the taxable income changes, it also will have an effect on social- and health charges for the previous and running year. It might be necessary to refile overviews at the Social Office and Public Health Care.