Parts: When will be tested? No. of lecture class MU week Total split of points: Intro part 1 Personal income tax (PIT) tax payer midterm test 1 Task Points Comments: scope of PIT midterm test 1 presentation of examples (calculus) or paper&presentation of topic related to accounting 10 Topic for presentation can be chosen by student BUT must be relevant to the course. Presentations need to have paper backup (i.e. written version) and will be held at the last seminar. proforma for PIT midterm test 1 midterm tests 30 the dates witll be confirmed later employment and self-employment income midterm test 1 final exam 60 the dates witll be confirmed later other types of personal income midterm test 1 total 100 administration midterm test 1 part 2 Corporate income tax (CIT) scope of CIT midterm test 2 proforma for CIT midterm test 2 extra points 10 for presentation of additional examples additonal notes midterm test 2 administration midterm test 2 part 3 Value added tax (VAT) tax payer final exam scope of VAT final exam additonal notes final exam Note: topics for midterm test will be also included into final exam ##### Sheet/List 2 ##### Tax payer resident nonresident impact on tax liability*: unlimited tax liability in CZ => CZ tax on worldwide income limited tax liability in CZ => CZ tax on CZ-origin income impact on tax return*: to disclose worlwide income to disclose CZ-origin income conditions*: permanent home if none of two conditions for tax residency are not satisfied or presence in CZ for more than 183 days * evidence from CZ Additional conditions: for natural person centre of vital interests habitual abode for legal entity place of effective management ##### Sheet/List 3 ##### Scope of PIT subject to PIT not subject to PIT taxable income exempted income overall tax base witholding tax at source (WHT) employment income "employment income based on: (1) employment contract (at condition of above 3,000 till 7/2024 and above 4,000 CZK/month from 7/2024 ); (2) work performance agreement (CZ 'DPP') (with condition of above 10,000 CZK/month till 7/2024 and 10,500 CZK/month from 7/2024 from another 1 employer i.e. no signed Declaration of taxpayer); (3) working activity agreement (CZ 'DPC')" employment income "employment income up to 3,000 CZK/month till 7/2024 and up to 4,000 CZK/month from 7/2024 CZK/month and income based on work performance agreement up to 10,000 CZK/month till 7/2024 and up to 10,500 CZK/month from 7/2024 10,500 CZK/month from another 1 employer (=no signed Declaration of taxpayer)" income from sale of family house or an apartment restitution income income for work of shareholder and limited partner remuneration of statutory body (director's fee) if it is paid by CZ company to CZ non-resident income from sale of other immovable property credits and loans within certain amounts remuneration of statutory body (director's fee) capital income interest income from private bank account income from sale of tangible movable aaset au pair income remuneration paid by state to state officers capital income received from CZ resident entity income from sale of securities business (=self-employment) income "agricultural production by registered farmer, forestry and water management" benefits from private pensions schemes and life isurance schemes unless tax exempt "prizes awareded in public, promotional or sports competition, prizes in lotteries and awards from gambles" "income from enterpreneurial activity under trade license (craft and non-craft) and under special license (lawyers, auditors, tax advicers, physicians, dentists, architects)" rental income income from rental of movable assets located in XZ received by CZ tax non-resients benefits from state-approved insurance partner's share in profits other income "winnings in lotteries (unless tax exempt) + winnings in promotional competitions, prizes from public and sports competitions (10,000 ck/prize)" inheretance income income from use or provision of rights and copyrights gifts "income independent professions (prof athletes, artists, singers, musicians)" gifts received in connection with business activity income from all forms of handling assets (sale and rent) included into taxpayer's business property subtypes of employment income capital income interest income from business bank account interest on loans provided interest and charges for late payment "capital income received from abroad (dividends, interest)" rental income income from rental of immovable assets (even if occasional lease) income from rental of movable assets with exception of occasional lease (it is taxed in other income) other income income not included into previous partial tax bases "income from occasional acitivites: rental of movable assets, agricultural activity not run by enterpreneur, solar power station" "income from sale of individual's own immovable assets, movable assets and securities if not included into business property and conditions for tax exemptions are not met" regularly paid state pension benefits "winnings in gamles unless tax exempt. Awards from cultural events or sports competitions - exepmt if below the limit (10,000 czk; check if whole amount of prize is taxed or only above the limit)" NOTES exempted income: Type of income Conditions for exemption income from sale of family house or an apartment place of residence for 2 years or ownership for 5 years income from sale of other immovable property ownership for 5 years income from sale of tangible movable asset "tax exempt except inome from sale of motor vehicle, aircraft and ships/boats fo which ownership should be 1 year" income from sale of securities "up to 100,000 czk tax exempt, otherwise 3 years of ownership" "prizes awareded in public, promotional or sports competition, prizes in lotteries and awards from gambles" "up to 50,000 czk tax exempt, otherwise: rewards from cultural activites without limit, income from lotteries and gambles approved by Misitry of Finance without limit" benefits from state-approved insurance "sickness allowance, maternity allowance, parental allowance, birth grant, unemployment allowance are tax exempt; retirrement benefits are tax exempt up to 622,800 czk p.a." inheretance income tax exempt regardles of relationship with deceased person gifts "gifts acquired from direct relatives or from person being from common household for 1 year are tax exemp regardless of value. Gifts acquired occasionally regardless of relationship with donor are tax exempt up to 15,000 czk p.a. for all gifts acquired from one donor" gifts received in connection with business activity received promotion items: must have logo or trademark of provider and have value up to 500 czk excl. VAT employment income: subject to SHI except "employment income based on any contract below 3,000 CZK/month (below 4,000 CZK/month from 7/2024)" "work performance agreement up to 10,000 CZK/month (up to 10,500 CZK/month from 7/2024)" "taxable employment income includes all remuneration, both monetary and nonmonetay and benefits provided to employer" employment income taxed with witholding tax "employment income up to 3,000 CZK/month and income based on work performance agreement up to 10,000 CZK/month from another employer (=no signed Declaration of taxpayer)" remuneration of statutory body (director's fee) if it is paid by CZ company to CZ non-resident "this income is not included into tax return and into annual tax reconciliation prepared by employer (mandatory, but it can be included volanterily)" employment income is subject to monthly payroll witholdings performed by employer (tax advances). Payroll tax advances must be witheld from salary and transferred to Tax office by 20th day of the following month for which salary is paid SHI employment income taxed in tax base is subject to monthly SHI contributions performed by employer. SHI contributions must be witheld from salary and transferred to Tax office by 20th day of the following month for which salary is paid employment income taxed with WHT has tax base which is gros monthly income (i.e. not super gross one) and it is not ro "it is not included into tax return or annual tax reconciliation performed by employer. However a person who is tax resident in another EU member state can volantarily include CZ PIT taxed with WHT into his return. Advantage of doing this is posssibiliy to utilise tax base and tax liability deduction in CZ or in home country, if applicable." income from business activity (self-employement): subtypes of self-employement income income from agricultural activity performed by registered farmer "income from enterpreneurial activity under trade license and under special license (lawyers, auditors, tax advicers, physicians, dentists, architects)" partner's share in profits income from use or provision of rights and copyrights income independent professions Possibilities to decrease business income by documented actual eligible expenses or lump sum expenses (certain % of taxable business income accorording to type oftaxpayer's business activity Types of business activity lump sum % max limit "agricultural production, forestry and water resource management. Craft trade" 80% " 1,600,000 " Non-craft trade 60% " 1,200,000 " "Other enterpreneurial activity, use or provision of rights, independent professions" 40% " 800,000 " income fro rental of assets included into taxpayer's business property 30% " 600,000 " rental income: Possibilities to decrease business income by documented actual eligible expenses or "lump sum expenses: 30% of taxable rental income, max 300,000 czk" occasional income: "Taxable only if the total income from all occasional activities I taxable period exceeds 30,000 czk. If limit is exceeded all income from all occasional activites is taxable." taxable income can be decreased by related expenses. Expenses related to one type of income can be claimed up to amount of total income of same type i.e. no losses are allowed. Possibilities to decrease business income by documented actual eligible expenses or "lump sum expenses: 80% of taxable rental income, max 800,000 czk" ##### Sheet/List 4 ##### SHI - social and health insurance contributions Personal tax return (annual) Annual gross income Expenses Partial tax base Personal income employment income x x business income x (x) x/(x) capital income x x rental income x (x) x/(x) other income x (x) x/(x) Total tax base X Tax base deductions gifts (x) interest paid on mortgage (x) pension insurance contributions (x) life insurance contributions (x) trade union contributions (x) tax loss from previous periods (x) R&D allowances (x) professional education allowance (x) Tax base after deductions X Tax exemption (full) for tax base from income earned abroad (x) Tax base after deductions and tax exemption from income earned abroadrounded down to nearest CZK hundred (gross tax base) X Tax rate 15% 15% Tax liability X 23% solidarity surcharge (tax) Solidarity surcharge in 2023 on income over 3*Average wage in CZ i.e CZK 131 901 p.m. 23%*((employment income + business income) - solidarity cap) X Solidarity surcharge in 2023 on income over 4*Average wage in CZ i.e CZK 1 935 552 p.a. or CZK 161 296 p.m. Od roku 2021 Tax liability after 23% solidarity contribution X Tax credit for tax paid abroad* (X) Tax liability deductions personal (x) dependent spouse (x) pro rated dependent child disability of a taxpayer (x) student (x) pro rated kindergarden fee (x) disabled employees (x) discount for self-employed persons with electronic evidence of sales (x) Tax liability after deductions X Child tax credit (x) pro rated Final tax liabillity or tax bonus X / (X) Advance payments (x) Final tax underpayment / overpayment X / (X) Note: for tax credit method it can be either full credit or ordinary credit depending on terms of each DTT existing between CZ and counterparty. Net wage (monthly) Monthly gross salary (incl. taxable benefits) X Monthly tax advances (15% of gross salary) (X) Solidarity contributions (if any) (X) Employee's part of SHI contributions (X) "Employee's personal tax discount, student discount and child discount if applicable" X Monthly net salary X NOTES tax base deductions: Type of deduction Conditions for deduction gifts* recipient of donation NPO https://www.mfcr.cz/cs/aktualne/tiskove-zpravy/2020/prehled-nejdulezitejsich-zmen-v-gesci-mi-40144 purpose of donation "finance science, education, R&D, culture, school, health care, physcial education, elimination of effects of natural disasters" limit "min: total value from 1,000 czk or 2% from tax base before deductions" max: 15% of tax base before deductions interest paid on mortgage loan actual payment "up to 150,000 czk p.a. as deduction (i.e. 12,500 czk per month if only part of year is considered)" housing need satisfaction of housing need (i.e. have residential address there) + being part of mortgage contract pension insurance contributions amount limit "up to 24,000 czk p.a. paid as such contributions" life insurance contributions amount limit "up to 24,000 czk p.a. paid as such contributions" trade union contributions amountlimit "up to 1.5% of taxpayer's employment income, max 3,000 czk p.a." tax loss time limit only if realized on business or rental activity and can be deducted during following max 5 years R&D allowance time limit available only for taxpayer with business income carrying R&D activities and can be deducted during following max 3 years professional education allowance amount limit "contribution for payment of exam confirming professional qualification can be up to 10,000 czk p.a. In case of handicaped employees, the max limit is 13,000 (for 1st degree of physcial disability) and 15,000 (for 2d degree of physsical disability) czk p.a." "Note: 1 blood donations gives 3,000 czk as tax deduction, donation of blood cells or an organ by living donor give 20,000 czk as dedution" tax liability deductions: Type of deduction Conditions for deduction general personal deduction "amount limit: 30,840 czk p.a. in 2023 and 2024" 2570 dependent spouse deduction "amount limit: 30,840 czk p.a. in 2023 and 2024. It is provided to a spouse or registered partner if spouse/registered partner lives with taxpayer in common household and has annual income of up to 68,000 czk (incl. all taxable and tax exemp incomes like sickness allowance, maternity allowance, sale of movable or immovable property, rental income etc.; but excluding social support like parental allwoance) and such dependent spouse is looking after a child of age below 3 years (additinal condition from 2024)" student deduction* "for full time regular students up to 26 years old and for full time PhD students up to 28 years old; 4,020 czk p.a. in 2023 . FOR 2024 - IT IS CANCELLED" dependent child tax credit/bonus "if child lives with taxpayer in common household and is up to 18 years old (for students up to 26 years old). Can be claimed either by mohter or by father taking care of child in one household in one taxable period. It is not on credit for child placement. If tax is lower than respective child redit, taxpayer will get child bonus (as difference between actual tax credit and max allowed; bonus is granted only if variance exceeds 100 czk and max 60,300 czk p.a.; it can be claimed only if taxpayer has annual employment and/or business income above 73,200 czk)" 15204/12 22320/12 27840/12 credit for child placement (pre-school facility) "actual expenses incurred on child placement, max up to 17,300 czk p.a. in 2023. FOR 2024 - IT IS CANCELLED" ##### Sheet/List 5 ##### Work performance agreement (DPP) Working activity agreement Work performance agreement (DPP) - up to 300 hours per 1 calendar year with the same employer without signed declaration with signed declaration without signed declaration with signed declaration without signed declaration with signed declaration without signed declaration with signed declaration without signed declaration with signed declaration income =< 10k (for 2023; and 16 130 CZK/month from 2024) income =< 10k (for 2023; and 16 130 CZK/month from 2024) income > 10k (for 2023; and 16 130 CZK/month from 2024) income > 10k (for 2023; and 16 130 CZK/month from 2024) income < 3k income < 3k income >= 3k income >= 3k income =< 10k "15% tax rate, WHT, income is not mandatory for reporting in personal tax return. Tax liability cannot be reduced by personal tax discount BUT personal tax discount can be refunded in annual tax return if person was employed by 1 employer during tax period. No SHI contributions are paid." "15% tax rate, partial tax base (i.e. advance tax), income is mandatory for reporting in personal tax return in case if person is employed by more than 1 employer during the reporting period. Tax liability is reduced by personal tax discount. No SHI contributions are paid." Gross wage " 10,000 " " 10,000 " " 10,001 " " 10,001 " Gross wage " 2,999 " " 2,999 " " 4,000 " " 4,000 " income > 10k "15% tax rate, WHT, income is not mandatory for reporting in personal tax return. Tax liability cannot be reduced by personal tax discount. SHI contribution are paid." "15% tax rate, partial tax base (i.e. advance tax), income is mandatory for reporting in personal tax return in case if person is employed by more than 1 employer during the reporting period. Tax liability is reduced by personal tax discount and child discount (if any). SHI contributions are paid." Health contributions at min of 450 czk -450 -450 Health contributions at 4.5% by employee - - -180 -180 Social contribution at rate of 6.5% (pension) + 0.6% (sickness) = 7.1% -710 -710 Health contributions at 9% by employer - - -360 -360 1040 Tax base " 10,000 " " 10,000 " " 10,100 " " 10,100 " Social contributions by employee at 6.5% rate - - -260 -260 Working activity agreement (DPC) - no limit on number of hours deleiverd to 1 employer by employee during 1 calendar year BUT max 20 hours per week (50% of standard duration od working week) PIT at 15% "-1,500 " "-1,500 " "-1,515 " "-1,515 " Social contributions by employer at 25% rate - - "-1,000 " "-1,000 " without signed declaration with signed declaration Tax discount - " 2,570 " - " 2,570 " Tax base " 3,000 " " 3,000 " " 4,000 " " 4,000 " "income =< 2,999k" "15% tax rate, WHT, income is not mandatory for reporting in personal tax return. Tax liability cannot be reduced by personal tax discount. No SHI contributions are paid if income is =< 2,999 czk per month" "15% tax rate, partial tax base (i.e. advance tax), income is mandatory for reporting in personal tax return in case if person is employed by more than 1 employer during the reporting period. Tax liability is reduced by personal tax discount. No SHI contributions are paid." Max amount of tax disount which can be utilized - " 1,500 " - " 1,515 " PIT at 15% -450 -450 -600 -600 "income > 2,999k" "15% tax rate, WHT, income is not mandatory for reporting in personal tax return. Tax liability cannot be reduced by personal tax discount. SHI contribution are paid No SHI contributions are paid if income is =< 2,999 czk per month (3,499 for 2021)" "15% tax rate, partial tax base (i.e. advance tax), income is mandatory for reporting in personal tax return in case if person is employed by more than 1 employer during the reporting period. Tax liability is reduced by personal tax discount and child discount (if any). SHI contributions are paid." Net wage " 8,500 " " 10,000 " " 7,326 " " 8,841 " Tax discount - " 2,570 " - " 2,570 " Max amount of tax disount which can be utilized - 450 - 600 Net wage " 2,549 " " 2,999 " " 2,960 " " 3,560 " ##### Sheet/List 6 ##### Employment income Employment partial tax base: Employment benefits: Tax treatment (from PIT perspective) Amount conditions Type of benefit Additional conditions not subject to tax =< amount limit travel reimbursement tax exempt income regardless of value training employees if relates to employer's scope of business activity or if it is tax non-deductable cost for employer meals provided in company canteen or other facilities employer's payments for services from health care facilities (inc. vaccination) and for medical products based on doctor's receipts "use of recreation and educational facilities, workplace libraries, physical training and sports facilities" use of pre-school facility by children of employees (company's own kindergarden or operated by 3d party one) if tax non-deductable cost for employer "employer's payments for sports and culural events, for books" =< amount limit employer's payments fo holidays or excursions "up to 20,000 czk p.a." life and pension insurance contributions "up to 50,000 czk p.a. (on two together)" temporary accomodation "up to 3,500 czk " interest free loan from employer or gratuitous usage of employer's property "up to 300,000 czk p.a." taxable income regardless of value training employees if relate to employer's scope of business activity or if it is tax deductable cost for employer use of pre-school facility by children of employees (company's own kindergarden or operated by 3d party one) if tax deductable cost for employer other types of insurance (besides life and pension) transport to work business car for both business and private purposes 1% from purchase price per month products and services provided at a price lower than market price > amount limit travel reimbursement everything above stated limits as per Labo code (see separate table) employer's payments fo holidays or excursions "everything above 20,000 czk p.a." life and pension insurance contributions "everything above 50,000 czk p.a. (on two together)" temporary accomodation "everything above 3,500 czk p.m." interest free loan from employer or gratuitous usage of employer's property "everything above 300,000 czk p.a." SHI: Type of contribution Subcomponents Participation of employee Rate Total Employee Employer Health insurance mandatory 4.5% 9% 14% Social insurance pensions insurance mandatory 7.1% 21.5% 29% sickness insurance mandatory 0 2.3% 2% unemployment insurance mandatory 0 1.2% 1% TOTAL 11.6% 34.0% 46% Note: health insurance - payment of medical treatment; sickness insurance - allowances during sickness leave SHI: min and max cap MIN MAX health insurance "min employment wage of 18,900 CZK (for 2024) or its substitution (e.g. maternity and parental allowance, sickness allowance)" no limit social security insurance no limit " 2,110,416 " "Note: once max cap for social security insurance is reached, neither employee nor employer is obligated to pay any contributions for the rest of the year. Max cap for social security insurance is assessed separately for each employer, so if employee is employed with more than one employer during the same year, it may happen that insurance contributions are paid even if max cap is reached taking into account all employee's incomes from all employments. In this case employee can ask for refund for the amount overpaid (i.e. payment over the cap) " " $161,296.00 " Business (self-employment) income Adjustments to partial tax base from business activity (if documantary costs are applied): tax non-deductable expenses (expensed but cannot be claimed as cost) representation costs penalties and fines donations shortages and damages exceeding compensation received acquisition price of LT assets (exception: intangible assets) expenses ofr taxpayer's personal needs accounting depreciation "items decreasing partial tax base from business activity (not expensed, but can be claimed as costs)" "tax depreciation of LT business assets, acquisition of low value business assets" travel expense for car in business property travel expense lump sum can be used instead of actual expenses on fuel and parking it can be appluied to up to 3 motor vehicles owned or rented by taxpayer full travel expenses lump sum (if car is used only for business purposes) "5,000 czk/month" tax depreciation and other expenses can be claimed in full amount car insurance in full amount partial travel expenses lump sum (if car is used only for business and private purposes) "4,000 czk/month" tax depreciation and other expenses can be claimed in 80% of actual costs travel expenses actual car insurance in full amount "documentary evidence of actual costs is kept in book of rides. Each ride should contain information about date of ride, purpose of ride, number of km, type of car, registration number" fuel if car technical documentation does not contain amount of fuel consumption it should be estimated as follows: Type of car Consumption petrol oil personal car "6,9" "5,8" truck "7,6" "6,4" personl car with automatic transmission "7,6" "6,4" truch with automatic transmission "8,4" "7,0" Fuel prices recognized for tax purposes: "38,20 czk for 95 petrol" "42,60 czk for 98 petrol" "38,70 czk for oil" parking tax depreciation and other expenses can be claimed in full amount car insurance in full amount travel expenses related to business trips in amounts stated in Labor Code amount of settled liability which increased partial tax base in previous period if more than 30 months have passed since its due date items increasing partial tax base from business activity (will be taxed) amount of unsettled liability if more than 30 months have passed since its due date lump sum rates: lump sum expenses (certain % of taxable business income accorording to type oftaxpayer's business activity Types of business activity lump sum % max limit "agricultural production, forestry and water resource management. Craft trade" 80% " 1,600,000 " Non-craft trade 60% " 1,200,000 " "Other enterpreneurial activity, use or provision of rights, independent professions" 40% " 800,000 " income fro rental of assets included into taxpayer's business property 30% " 600,000 " SHI: Type of contribution Subcomponents Participation of employee Rate Total Participation conditions Self-employed SE is main activity SE is secondary activity Health insurance* mandatory 13.5% 13.5% always always Social insurance** pensions insurance mandatory 28.0% 28% always if SE partial TB is > limit sickness insurance mandatory 2.7% 2.7% always always employment insurance mandatory 1.2% 1.2% always if SE partial TB is > limit TOTAL 45.4% 45.4% Note: health insurance - payment of medical treatment; sickness insurance - allowances during sickness leave "*13.5% from monthly/annual tax base but not less then 2,968 CZK/month as tax advance" "**31.9% from monthly/annual tax base but not less then:(1) 3,852 CZK/month as tax advance for main activity; and (2) 1,413 CZK/month for secondary activity" SHI: min and max cap MIN* MAX main acitivity secondary activity ** main acitivity secondary activity health insurance "21,983,5 czk/month or 263,802 czk/year" no limit no limit social security insurance "13,191 czk/month or 158,292 czk/year" "4,837 czk/month or 58,044 czk/year" "2,110,416" Notes: * if actual assessment base is < minimim => minimum is applied. ** SE income is recognized as secondary activity if person is concurrently employed or is on maternity/parental leave ##### Sheet/List 7 ##### Tax procedure: taxpayer vs payer of tax local competence is based on residential address location of immovable asset (if real estate is taxed) communication with tax authorities "if individual has data box, then communication is via this data box only; if not, via paper forms" registration duty persons lible to tax are obligated to register for taxes with local Tax office by filling in registration form within 15 days from day of commencement of business activity or from day when first business income was received Self-assessment system and tax return: self-assessment principle states that taxpayer fills his tax return by himself or by his official representative (e.g. registered tax advicer) there 3 types of tax return: "ordinary - is filled after the end of taxable period and within deadlines set by law (3 months after the end of taxable period, which is always for PIT the same as normal calendra year; in case if return is prepared by registered tax advicer then there are 6 months for filling this return after the end of taxable period)" corrective - is filled after ordinary tax return but still within deadline set by law. It is used in tax assessments as final one (i.e. without considering ordinary one) "additional - is filled after ordinary tax return and after deadline set by law. The deadline for filling this return is end of month following the month when such facts (see below) were discovered. Additional tax tax, if any, is payable within this additional time limit. This return cannot be filled during tax audit." obligation: it should be filled in case when person liable to tax finds out that his tax liability should be higher or his tax loss should be lower than his last known tax laibility declared in previous tax return possibility: it can be filled in case when person liable to tax finds out that his tax liability should be lower or his tax loss should be higher than his last known tax laibility declared in previous tax return Payment of tax: tax becomes due on deadline for filling in tax return. it should be paid in CZ currency Payroll tax: each employer is obliged to perfom monthly payroll tax witholdings payroll tax advances must be witheld on the day of salary payment and must be transferred to Tax office by 20th day of the following calendar month for which salary is paid employers are obliged to have payroll sheet for each employee after year end employer should perform annual payroll reconcilliation of payroll taxes witheld during the year. it should be prepared within 2 month after the end of calendar year. Rounding: tax base for PIT should be rounded down to the nearest 100 of CZK tax advance should be rounded up to the nearest 100 of CZK tax base for WHT is reounded down to whole CZK