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Czech Taxes 2014
rutland ježek, a Czech law firm in Prague on the changes in taxes as of 2014
Czech Tax Rates
|Value added tax (VAT)
The basic tax rate remains 21 %.
The reduced tax rate (food, books, health care etc.) also remains 15 %.
|Personal income tax|
Czech personal income tax is still calculated from the so-called "super-gross" wage (i.e. gross wage plus social and health insurance paid by the employer on behalf of the employee). The tax rate is 15 % as it has been last years (i.e. approximately 21 % from the gross wage); however, there is a new progressive taxation since 2013 (so-called "social tax") in case of the income which exceeds CZK 100,000 (approximately EUR 4,000); the tax rate is then higher by 7 %. For example the rate of income tax of a person who earns CZK 160,000 will be 15 % from the CZK 100,000 and 22 % from the over CZK 100,000 exceeding income of CZK 60,000 (both calculated from the super-gross wage).
Starting 2015, Czech income tax shall be calculated from the gross wage and the tax rate shall be 19 %.
|Corporate income tax|
The rate of Czech corporate income tax shall not change and the rate remains 19 %.
|Real estate transfer tax|
The rate of Czech real estate transfer tax remains 4 % of the purchase price or the official value, if the later purchase price is lower than the former.
Selected Tax Legislation Changes in Effect since 1 January 2014
1. Gratuitous Income Accepted (Donations)
Gratuitous income has been subject to income tax of corporations and individuals since 1 January 2014 in relation to the abolishment of inheritance and gift taxes. Income acquired through inheritance has been tax-exempt.
For legal entities, gratuitous income is taxable, except for beneficial taxpayers where this income is tax-exempt.
A beneficial taxpayer does not have to claim this tax exemption. If this tax exemption is claimed, the payer must exclude all costs relating to the gratuitous income from the tax base.
Gratuitous income of individuals is also tax-exempt if acquired from the next of kin related in a direct line and in the collateral line pursuant to the New Civil Code, and if acquired from a person with whom the payer has lived at least one year before receiving gratuitous income.
Occasional gratuitous income (received from any one) is tax-exempt up to the amount of CZK 15,000 (for individuals).
2. Tax-base Deductible Donations Provided (Charitable Donations)
If the taxpayer provides gratuitous performances (donations) for specific purposes subject to the conditions defined by law, they will be deductible by 10% of the tax base over the previous 5% (corporate income tax) and by 15% instead of the previous 10% in the case of individuals.
3. Securities - Capital Gains
The duration of the holding period between the purchase and sale of securities has been united to three years for the purpose of tax exemption of individuals (previously 6 months or 5 years). Income from the sale of securities whose annual aggregate does not exceed CZK 100,000 is newly tax-exempt.
4. Withholding Tax on Income from Employment
Effective from 1 January 2014, the withholding tax may only be applied to income earned under an agreement to work ("dohoda o provedení práce") if the aggregate sum of the same taxpayer does not exceed CZK 10,000 in a calendar month unless the employee signs a Tax Statement for the employer.
Under the law, tax residents are for the first time in the 2014 tax year allowed to include income from an agreement to work ("dohoda o provedení práce") subject to the withholding tax in the total tax base in their tax return. For the withheld tax to be credited in the total tax, the employer must issue a certificate of tax withheld.
5. Tax on Author's Royalties
Tax is newly charged on all royalties of one taxpayer not exceeding the aggregate of CZK 10,000 in a calendar month. Tax residents are also allowed to include income from royalties on which withholding tax is charged in the total tax base in their tax return. For the withheld tax to be credited in the total tax, the employer must issue a certificate of tax withheld.
6. Items Increasing Results of Operations (Profit)
The list of these items has been expanded. It now includes amounts incurred during the change of the accounting method, the value of gratuitous income if not charged in income if it is not tax-exempt corporate income, income which is not taxable, etc.
The threshold on tax eligibility of costs in the sale of land by legal entities has been mitigated. Tax corrections of costs of legal entities can now be performed only for land acquired through an entry in the register while adhering to statutory requirements.
8. Costs of Innovation and Education
The existing deductible items (itemised deductions) for research and development have been increased and a deduction was introduced on support of vocational training of pupils and students.
9. Occasional Income
The amount of income from occasional activities which is tax-exempt in respect of individual income tax has been increased from CZK 20,000 to CZK 30,000 for the tax year.
10. Taxation of Beneficial Taxpayers
Starting from 1 January 2014, the institute of the taxpayer which was not founded or formed for business purposes was replaced by the institute of the ‘beneficial taxpayer'. If adhering to the statutory requirements, a beneficial taxpayer may still enjoy tax advantages in the form of tax-exempt income which newly includes income from non-monetary performance and income in the form of deductibles from the income tax base. Income from interest on current accounts is newly taxable and is levied by withholding. This does not apply to beneficial taxpayers who include all income and expenses in the tax base. The Income Tax Act also negatively defines taxpayers who are not beneficial taxpayers, which also applies to associations of dwelling unit owners.
11. Real Property Transfer
The tax on non-gratuitous transfers of real property has been replaced by the tax on acquisition of real property. Some original principles remained unchanged, but this is in general a new tax and should not be confused with the abolished tax on real property transfer. The tax is paid by the seller and the buyer acts as a guarantor. However, it is possible to agree in a purchase agreement that the tax on acquisition of real property be paid by the buyer.
Please note that the list of legal matters stipulated in this section cannot be considered an exhaustive and comprehensive list of all issues arising under Czech law, further is not a legal opinion or advice in any manner, and only expresses view of rutland Ježek, law firm on certain specific issues of Czech law.