Glossary of terms

The taxpayer is entitled to reduce his tax base by the amount of his/her contribution to private life insurance. The maximum reduction can be in the total amount of 24 000 CZK annually, also in the case when the taxpayer has multiple life insurance contracts. The taxpayer has to meet the requirements to be entitled…

The taxpayer can reduce his/her tax base up to 24 000 CZK annually for his/her contribution to: If the supplementary pension insurance with a state contribution, pension insurance or additional pension savings expired without the entitlement to pension, a one-time settlement or a one-time insurance payout of pension insurance and the taxpayer was paid surrender value or other…

Contributions paid for life insurance – a deductible item from the income tax base of FOA taxpayer can deduct premiums paid for private life insurance from the income tax base. The deduction can be made up to a total of CZK 24,000 per year, even if the taxpayer has concluded several private life insurance contracts….

VAT control reports are generally filed by all persons who are registered for VAT in the Czech Republic as a VAT payer. It is not decisive whether they are a domestic VAT payer or a foreign entity. An entity that is not a VAT payer, is an identified person, has not made any taxable supply…

Corporate income taxEvery corporate entity must register for corporate income tax on the date of incorporation and file a corporate income tax return. This category of legal entities includes limited liability companies, joint stock companies, public partnerships, limited partnerships and non-profit organizations.The tax base is calculated on the profit or loss of the legal entity…

The taxpayer is entitled to a tax credit for a dependent child living in a jointly managed household in the amount of: If the child is entitled to a Disabled Persons’ Identity Card, the tax benefit is doubled. A taxpayer’s dependent child is his/her own child, an adopted child, a child in care replacing the…

Act No. 216/2022 Coll., which brings an amendment to the original amendment to Act No. 589/1992 Coll. on social security contributions and contributions to state employment policy, will enter into force on 1 February 2023. Employers may reduce social security contributions by 5 p.p. if they meet the conditions set out below, and only for…

DONATIONS MADE – A DEDUCTIBLE ITEM FROM THE INCOME TAX BASE FOThe taxpayer may reduce the tax base by the value of gratuitous supplies if their value exceeds 2% of the tax base or amounts to at least CZK 1,000 for the tax period. A maximum of 15% of the tax base can be deducted….

The taxpayer is entitled to reduce his tax base by the amount of gratuitous performance, if the value of these exceeds 2 % of the tax base or if it is in the minimal amount of 1 000 CZK in a tax period. It is possible to deduct a maximum of 15 % from the tax base….

Excise duties are paid to the state by the taxpayers, i.e. authorised natural or legal persons, but are collected from the consumer. It is therefore a so-called indirect tax. It applies to alcoholic and tobacco products, fuel and mineral oils. This tax is a frequent item on the list of tax evasion attempts, because the…

If a person is registered as a permanent resident in the Czech Republic and works or is self-employed, he or she is obliged to pay health insurance. This requirement also applies to foreign nationals. However, dependent children (children up to the end of compulsory schooling and subsequently students up to the age of 26 or…

Income tax is a direct tax and is always paid by a specific person. According to the Income Tax Act, both natural persons and legal entities are subject to this tax.

Interest paid on a loan – a deductible item from the income tax base of the FOThe taxpayer has the option to reduce his/her tax base by the amount of interest paid during the taxable year on a loan from a building savings or mortgage loan that was arranged for the purpose of financing the…

The taxpayer has the option to reduce his/her tax base by the interest paid on a building savings loan or mortgage in a tax period. The loan has to be se up in order to finance the housing needs of the taxpayer, his/her spouse, his/her offsprings, parents or grandparents of the maried couple. If the housing is…

The taxpayer may reduce his tax base by the membership fees paid to a trade union in the tax year. According to its statutes, this organisation defends the economic and social interests of employees. The taxpayer may deduct an amount of up to 1,5 % of his taxable income from employment. This income does not…

The taxpayer can reduce his tax base by up to CZK 24,000 for contributions paid to his: pension insurance with a state contribution according to the contract between the taxpayer and the pension company; the tax base can be reduced by an amount equal to the sum of the parts of the monthly contributions which…

Personal income taxThe personal income tax applies to those who are permanent residents or habitual residents of the Czech Republic, i.e. tax residents of the Czech Republic. A tax resident is a person whose temporary stay in the Czech Republic exceeds 183 days per calendar year. Personal income tax is levied on income from employment,…

Personal income tax credit for a dependent spouseA personal income tax payer may also apply a discount for a spouse, up to a maximum of CZK 24,840 per tax year, if the spouses live together in a jointly managed household and the spouse’s income for the tax year does not exceed CZK 68,000. If the…

Personal income tax payers who have been awarded a disability are entitled to a basic and an extended tax credit. The basic disability allowance of CZK 2,520 is available to taxpayers who have been Admitted to first or second degree disability and receives a disability pension. If entitlement to a disability pension ceases because of…

The amount of this tax credit is based on the expenses paid by the taxpayer for the placement of a dependent child in a preschool. The dependent child must live in the same household as the taxpayer. If more than one taxpayer is supporting a child in the same household, only one of them can…

A taxpayer can claim tax credits for the period during which he or she is continuously preparing for a future profession by study or prescribed training, up to the age of 26. Up to the age of 28, a taxpayer who is studying full-time in a doctoral programme provided by a university may claim the…

The real estate tax is a property tax and is paid by the owners of the real estate in question – land, taxable buildings and residential and non-residential units. The tax return is based on the status as of 1 January and the return is filed by 31 January with the local tax administrator, depending…

The subject of the road tax are goods vehicles of categories N2 and N3 with a weight of more than 3.5 tonnes and their trailers of categories O3 and O4. The amount of the tax will be set only for vehicles with a maximum permissible weight of 12 tonnes or more. So what does this…

Self-employed is the abbreviation used for a self-employed person. Self-employment can be either main (main source of income) or secondary (e.g. a business in addition to employment). The tax system defines this abbreviation as an individual who has his or her own income, i.e. an entrepreneur or sole trader who is in business for profit….

Social insurance is a regular monthly contribution to pension insurance, sickness insurance and state employment policy contributions. Employers, employees who are covered by sickness insurance, self-employed persons and people who have taken out voluntary pension insurance are obliged to pay contributions. The employer pays the insurance premiums on behalf of the employees.The premium is calculated…

Everyone who had taxable supplies with entities outside the Czech Republic in a given period (for monthly payers it is the past month, for quarterly payers it is 3 months) must submit a summary report. This means primarily the supply of goods to a person or entity registered for VAT in one of the other…

The taxpayer has the right to apply for a tax credit for a dependant child living in the same household as the taxpayer A dependant child of the taxpayer covers his/her own child, an adopted child, a child in foster care, a child that does not live with the taxpayer anymore because of gaining legal capacity or reaching legal…

The taxpayers of personal income tax who have been granted the invalidity status are entitled to the basic and enhanced tax credit. The taxpayer, who has been granted the invalidity status of the first and second grade and who is a receiver of the invalidity pension, is entitled to the basic tax credit in the amount…

The amount of the tax credit is based on the taxpayer´s provably paid expenses for placing a dependant child in a preschool facility. The dependant child has to live in the same household as the taxpayer. If there are more taxpayers living in the same household with the dependant child, the tax credit can only be applied…

Taxpayers in the Czech Republic who have income from outside the country must also pay the appropriate tax on this income. There is an international double taxation treaty on this income, which helps you avoid paying double tax on the same income. However, declaring this income is more complicated and requires careful scrutiny and more…

The taxpayer is entitled to reduce his tax base by the amount of membership fees paid to trade unions in the tax period. According to its statute, this organization defends the economic and social interests of the employees. The taxpayer is entitled to deduct the amount up to 1,5 % from his employment income. The…

The taxpayer of personal income tax can apply for a tax credit for a dependant spouse in the maximum amount of 24 840 CZK for a tax period, if the spouses share one household and the income of the spouse is lower than 68 000 CZK in a tax period. If the spouse is a holder of the ZTP/P card,…

If an employer sends an employee on a business trip, the employer is obliged under the Labour Code to reimburse the employee for expenses related to the business trip, unless the employer pays them himself. Under the Labour Code, the employee is entitled to reimbursement of travel, accommodation, meal and necessary incidental expenses.

VAT debt of at least half a million CZK, failure to comply with mandatory filing deadlines or involvement in suspicious business transactions. It is not only in these cases that an entrepreneur or a company can become an unreliable VAT payer. The VAT Act defines an unreliable taxpayer as a taxpayer who seriously fails to…

VAT or value added tax, where value added is the difference between the input and the output. VAT is an indirect tax, i.e. it is not paid as a separate amount but is included directly in the price of the product or service. Almost all products and services are subject to value added tax and…

If the VAT payer has declared an excessive deduction in the tax return, the tax administrator is obliged to refund it within 30 days of the assessment or within 30 days of the last day of the deadline for filing the return. The tax administrator shall refund overpayments exceeding CZK 100. Before the tax administrator…

VAT registrationIf a trader wishes to register for VAT on a voluntary basis, the law does not set a time limit. However, if he/she becomes a VAT payer by law, i.e. by exceeding the two million turnover threshold for compulsory VAT registration in the previous 12 months, he/she must register within 15 days of the…

The entrepreneur can verify the business partner as a VAT payer in the VAT register published on the website of the Ministry of Finance. The search is done simply before the tax identification number.In addition to basic information, the VAT register also contains the legal form, business name and registered office of the taxpayer. They…

A voluntary VAT payer is an entrepreneur who does not have to pay VAT according to the law, but voluntarily registers for it. The main reason for this decision is that most of the business partners with whom the non-VAT payer has traded so far are VAT payers. The change from a non-VAT payer to…