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.
2019 update: For the Tax Year 2019, 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).
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)!
Secondly - and this is not uncommon: When you return to your home country, your tax office may ask to prove that you have paid your taxes in Czech Republic. Usually the annual income statement your employer prepares is not considered official proof - an extra reason to file a tax return, even if there would be no tax benefit to claim. Such a tax return IS accepted as official proof.
Trade License: 2019 Change in tax benefitsAgain for 2019, and foreseeable also 2020, ful tax benefits (spouse, children) can be claimed, even 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.
What is the fee for Claiming Tax Benefits?We can determine whether it makes sense to file corrected Tax Returns for previous years.
In case it makes sense to claim, we charge the fee for filing a (late) tax return. This filing can be ordered seperately, after we determine if there is any benefit. If it does not make sense (the amount is too small or there is nothing to claim) we charge a 2500 CZK handling fee.
The Order form (for filing a personal income tax return) 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.
It is possible to do everything remotely, without visiting our office. You can send in your documents by mail / email / Google Drive share. In this case we will need a signed paper original Power of Attorney for filing.