Greetings appreciated reader, in the following blog I’m gonna Outline Taxation System in the Czech Republic. As may you know, here we have three kinds of taxes; Direct taxes , Indirect taxes and Other taxes, hereby I will connect each of the existing taxes to this 3 groups. Besides, you will come across the information about Taxes and Tax rates in the Czech Republic and finally, you will be get introduced to Tax Administration. For those individuals, whose want to start a business in CR or already have a company in Czech Republic, this information will especially be useful. Do not forget that we also offer our company registration and after company formation service investors to make their business journey easier!
Outline of Taxation System in the Czech Republic
The current functioning tax system in the Czech Republic was established in 1993. According to the given model, taxes are divided into 3 main groups, including – direct taxes, indirect taxes and other taxes. As you know, on May 1, 2004, when the country joined the European Union, this system went through a continuous process of harmonization of European legislation. The Czech Republic also has an extensive network of double taxation agreements with both the EU and non-EU countries. These double taxation agreements are based primarily on the OECD Model Tax Convention.
1) Direct taxes consist of:
- Personal income and corporate income taxes, which are regulated by the Czech income tax
- Property taxes regulated by the Czech Real Estate Tax Law and applicable to road tax
- Transfer taxes regulated by Czech law on real estate purchase tax.
2) Indirect taxes include:
- The additional tax is imposed by Czech law on VAT
- Excise tax is regulated by the Czech excise tax
- Commission taxes regulated by the Czech Customs Tax Act
- Environmental taxes, which are regulated by a special law on taxes on energy sources.
3) Other taxes include mandatory contributions to the Czech social security and public health insurance systems, which are governed by a variety of Czech legislation and municipal fees, which are normally governed by local law.
Taxes and Tax rates in the Czech Republic
Entities in the Czech republic are subject to the listed taxes below:
- According to January 1, 2010 act, the standard corporate tax rate is 19%.
- The special tax rate of 5% applies to certain collective investment funds, pension funds C.
- Accounting for taxes on non-residents’ income 35/15/0%, by type. Withholding tax can be reduced by double taxation agreements.
- As you Know Personal income is subject to an apartment tax rate of 15%.
- Employee tax base is calculated as the total salary is increased by the employer’s health insurance and social security contributions.
- Employment and / or business income 48 times the average wage is subject to a 7 percent solidarity tax.
- The tax on contributions is determined on the occupied land area. Rates range from CZK 2 to 10 for buildings. Increased rates apply
Under certain circumstances.
- The real estate tax on agricultural land is 0.75 percent of the estimated value. Special rates apply to forests, lakes and ponds.
- For other types of land, the tax is determined on the area; The rate is CZK 2 per square meter for construction land, 5 CZK per square meter for improved land used for business and 0.20 CZK per square meter in other cases.
- Real estate tax is deductible for corporate income tax purposes.
There are two taxes, standard and reduced. The standard tax covers most goods and services, while the reduced rate applies predominantly to food and pharmacists.
- The VAT standard rate is 21 percent – most products and services.
- The rate of reduced VAT is 15 percent – basic food products, certain pharmaceutical products, newspapers, certain medical equipment,
Heating, social housing.
- Reduction of VAT rate by 10 percent – The need for baby food, certain medicines, books, mill and other suitable products without gluten diet.
- This tax is paid by the real estate seller if the parties agree that it will be paid by the buyer.
- The tax rate is a higher percentage of the sale price and a reference to the property.
- Taxes are levied on persons who manufacture or import certain goods, including hydrocarbon fuels and lubricants, alcohol and spirits,
Beer, wine and tobacco products.
- The tax is based on the quantity of goods expressed in specific units and the tax can be imposed only once on specific goods.
- Energy taxes apply to natural gas and other gases, electricity and solid fuels.
- Only the supply of these products in the Czech Republic is subject to energy tax.
- There are a wide range of exceptions (for example, for energy used in metallurgical or mineralogical processes). In order to request exemption, approval from the customs authority is required.
- The tax is generally paid on a vehicle registered in the Czech Republic.
- The tax rate varies from CZK 1,200 to CZK 4,200 in the case of passenger vehicles and from CZK 1,800 to CZK 50,400 in the case of other vehicles.
Gift and inheritance taxes are non-existent as of January 1, 2014. Gifts are subject to income tax, except among close relatives.
Tax administration is regulated by law and carried out by the tax authorities – in some cases, the customs authority under the Ministry of Finance of the Czech Republic (www.mfcr.cz). The tax return can also be entered electronically through data boxes.
Under Czech law, a data box is defined as a special type of electronic repository designed for the delivery of electronic documents. The law provides for the installation of data boxes for all public authorities, all natural or legal persons engaged in business, as well as other types of persons; Other individuals and legal entities have the right to create data boxes free of charge. Communication through data boxes is a complete substitute for the delivery of documents using traditional mail services and fully protects the Czech legal system.