"Disclaimer: While every effort has been made to ensure the accuracy and completeness of the information provided in this article, it is for general informational purposes only and should not be considered professional advice. Tax regulations and policies may vary by jurisdiction, and readers are advised to consult with a qualified tax professional or legal advisor regarding their specific circumstances. The author and publisher of this article disclaim any liability for reliance on the information herein."
Living and working in the Czech Republic comes with the responsibility of paying income tax, a process that involves submitting a tax return to Czech institutions. Navigating the Czech tax system can be complex, especially for expatriates and first-time filers, and understanding which documents to submit and how to properly file taxes (daňové přiznání) is crucial for compliance.
Whether you're a freelancer or entrepreneur (OSVČ - osoba samostatně výdělečně činná, often referred to as podnikatel), this guide aims to simplify the process by highlighting essential tax documents.
Do You Have to Pay Taxes This Year?
In the Czech Republic, several categories of individuals are required to file taxes. If you’re reading this article, you likely fall into this one:
- Holders of an active trade license (self-employed individuals who have been issued živnostenský list in Czech).
It's important to note that the Czech Tax Office (Finanční správa České republiky) considers individuals with a permanent dwelling in the Czech Republic, residing in the country for more than half a year, as Czech tax residents. As a tax resident, you're required to report worldwide income in your Czech tax return.
However, the Czech Republic offers deductions for various expenses, such as a non-working spouse, children, mortgages, etc. Additionally, if your income was taxed abroad, the Czech Republic allows for reductions based on double taxation treaties.
It's also essential to note that tax return filing is mandatory for individuals whose annual income exceeds CZK 50,000.
What to Include with Your Tax Declaration
When preparing your tax declaration (daňové přiznání) in the Czech Republic, it's essential to gather the following documents:
- Confirmation of Income: Compile a summary of all income or payments received into your bank account or in cash during last year.
- Expenses Documentation: Depending on your business type, you'll need to provide either actual expenses (skutečné výdaje) or expenses calculated as a percentage of your income related to your business. Consider whether flat-rate expenses or real expenses are more advantageous for your situation. Remember, it's possible to switch between different tax regimes, including opting for a flat-rate tax regime, but it's crucial to follow the specified procedures outlined in tax laws.
- Employment Confirmation: If you also were employed on top of your self-employed activity last year, obtain a confirmation of your taxable income (potvrzení o zdanitelných příjmech) from your employer.
- Rental Income and Capital Gains: If applicable, gather documentation related to rental income and any income from capital gains (příjmy z kapitálového majetku).
- Deductible Items: Gather proof of deductible items, such as contributions to pension and life insurance, mortgage or loan interest payments, charitable donations, union membership fees, examination fees for further education, etc.
- Tax Credits (sleva na dani): If eligible for tax credits, ensure you have the necessary documentation, including declarations or certificates for spousal, student, disability, childcare-related credits, and any proof of prepayments on income tax.
- Health and Pension Insurance Prepayments (zálohy na důchodové a zdravotní pojištění): Obtain confirmation of prepayments on health and pension insurance from relevant institutions. Remember to submit these within one month of filing your tax declaration.
How to download a summary of paid social insurance installments?
Submitting the required documents to relevant institutions can be done electronically through various portals, such as the ePortal of the Czech Social Security Administration (ČSSZ). If you have an electronic signature or a data box, you can submit forms in XML format directly. Otherwise, you can deliver printed forms to the respective institutions or submit them via electronic submission channels.
How to submit a summary to the health insurance company?
Each health insurance provider has its own form for submitting income and expense overviews. Visit the website of your health insurance provider to download the necessary form (Přehled OSVČ) and submit it through their designated channels.
> Example: VZP
You can submit the summary through the Moje VZP app or via VZP Point if you have access. Alternatively, use the interactive form or visit a VZP branch. You can even mail the completed form to the new central address or submit it via data box (i48ae3q).
Gathering and submitting these documents accurately and timely will ensure compliance with Czech tax regulations and streamline the tax filing process for freelancers and entrepreneurs.
How and Where to Declare Your Taxes
Self-employed individuals with mandatory databoxes are required to submit tax returns electronically since the previous year. Entrepreneurs with active databoxes aren't necessarily bound to submit returns exclusively through their databoxes; they can utilize any electronic submission method available.
The process of declaring taxes in the Czech Republic has been streamlined with the introduction of the Finance Ministry's online tax platform, MojeDaně. While the platform is primarily in Czech, recent improvements have enhanced its user-friendliness. Utilizing this online portal not only facilitates tax submission but also offers the advantage of an extended deadline.
Electronic submission options include:
- Using a databox
- Sending an electronically signed email
- Utilizing the Mojedane platform
Taxpayers without active databoxes can still submit paper returns. Late submissions beyond five working days are typically subject to sanctions.
Understanding the process of filing tax reports and submitting documents can be daunting for expat entrepreneurs in the Czech Republic. However, platforms like živno offer English-friendly tools and invoicing apps tailored to simplify tax compliance for freelancers and small businesses. By utilizing such resources, entrepreneurs can ensure adherence to tax regulations and concentrate on managing their finances effectively, thus fostering business growth with confidence.
