Taxes in the Czech Republic. A basic overview on taxation of business in the Czech Republic

Transcription

1 Taxes in the Czech Republic A basic overview on taxation of business in the Czech Republic highlights 2015

2 Introduction In the below document TPA Horwath Czech Republic provides a brief outline of the current Czech tax system and covers the following issues and taxes which are most relevant for business enterprises in the Czech Republic: Most common types of corporations Corporate income tax Personal income tax (incl. a sample calculation) Social insurance taxes Withholding tax Value Added Tax (VAT) Other taxes For more detailed tax information on the Czech Republic please request the TPA Horwath Investing In the Czech Republic 2015 brochure: Taxes in the Czech Republic highligts

3 Content INTRODUCTION TO THE PUBLICATION 2 TYPES OF BUSINESS ORGANIZATIONS IN THE CZECH REPUBLIC 4 CORPORATE INCOME TAX (CIT) 5 PERSONAL INCOME TAX (PIT) 6 WITHHOLDING TAX 9 VALUE ADDED TAX (VAT) 9 OTHER TAXES 10 RELATED PARTY TRANSACTIONS 10 Taxes in the Czech Republic highligts

4 Types of business organizations in the Czech Republic Czech legal system allows conducting business under two different forms (i) organizations as a legal entity or (ii) an entrepreneurship conducted as a natural person. Various types of legal entities are available including a limited liability company (in Czech language společnost s ručením omezeným s.r.o. ), a joint stock company ( akciová společnost a.s. ), a limited partnership ( komanditní společnost k.s. ) and a general partnership ( veřejná obchodní společnost v.o.s. ). Incorporation minimum share capital and indicative foundation costs of the most common types of business organization in the Czech Republic Limited liability company Minimum share capital CZK 1 Approximate foundation costs From CZK 40,000 Joint stock company Minimum share capital CZK 2,000,000 Approximate foundation costs From CZK 70,000 Major duties of a business organization in the Czech Republic Accounting incl. Annual financial statements Annual publication of the financial statements Registration for CIT, annual CIT return Registration for VAT (in most cases obligatorily) VAT returns (monthly/quarterly) Registration for other taxes (may arise) Registration for social security and health insurance (if employing employees) Taxes in the Czech Republic highligts

5 Corporate Income Tax (CIT) All income including gifts and income derived by way of the inheritance are subjected to CIT. Legal entities with their residence or place of the management in the Czech Republic have unlimited tax liability on their world income in the Czech Republic. Basic information on CIT in the Czech Republic Rate Financial year CIT return deadline / payment Loss carry forwards 19 %; 5 % for basic investment funds Calendar year; different fiscal period possible 3 months after the end of the assessment period; 6 months if represented by a tax adviser / or if statutory audit requirement Carry forward time period of 5 consecutive years, no carry back available, same business activity limitation applicable under the substantial change in the direct ownership Taxes in the Czech Republic highligts

6 Personal Income Tax (PIT) Individuals with their residence or habitual abode in the Czech Republic have an unlimited tax liability on their worldwide income in the Czech Republic. Sample tax calculation (employee s income) 2015 EUR A B C D Fixed salary 52,000 60, , ,000 Bonus 10,200 12,800 18,000 20,000 Total salary 62,200 72, , ,000 Company car Czech Republic , , ,632 Social security (SS) - employer s part 11,518 11,518 11,518 11,518 Social security - employee s part 2,995 2,995 2,995 2,995 Health insurance (HI) - employer s part 5,637 6,591 17,877 19,857 Health insurance - employee s part 2,818 3,295 8,938 9,928 Tax basis* 79,783 91, , ,006 PIT 11,967 13,701 34,204 37,801 Solidary increase 1,159 1,901 10,679 12,219 Tax deductible amount - taxpayer PIT total 12,231 14,706 43,987 49,124 Net salary 44,585 52, , ,584 Employer s costs 79,783 91, , ,006 * If the employee s salary is a subject to foreign SSHI, the total salary is increased fictively by the Czech SSHI (under adjustment of maximum SS contribution base) Taxes in the Czech Republic highligts

7 Basic information on CIT in the Czech Republic Rate 15 %; Total of employment income and self-employment tax base, which is exceeding four times the average annual salary, i.e. CZK 1,277,000 (EUR 46,060), is subject to a 7 % solidarity surcharge Financial year PIT return deadline / payment Income categories Accounting Flat-cost option Calendar year 3 months after the end of the assessment period; 6 months if represented by a tax adviser / an audit requirement 1. Employment 2. Self-employment 3. Rental and leasing 4. Capital assets 5. Other income Receipts and payments accounting (tax documentation); Double-entry bookkeeping, where income in excess of CZK 25,000,000 (EUR 901,713) For operating expenses of self-employment, flat-cost options are available: 80 % for income from agriculture and forestry and skilled trade. Expenses can be claimed at the maximum amount of CZK 1,600,000 (EUR 57,710). 60 % for trade and business income. Expenses can be claimed at maximum amount CZK 1,200,000 (EUR 43,282). 40 % for income governed by special provisions (professions). Expenses can be claimed at the maximum amount of CZK 800,000 (EUR 28,855). 30 % for rental income. Expenses can be claimed at the maximum amount of CZK 600,000 (EUR 21,641). Exchange rate: EUR 1 = CZK (EUR amounts rounded) Taxes in the Czech Republic highligts

8 Social Insurance Social and health Insurance Contribution rates and maximum basis of assessment Statutory health, accident and pension insurance for all gainfully employed persons There is a maximum basis of assessment for both self-employment and employment Self-employed persons Basis of calculation Annual contribution ceiling Health insurance 50 % of income net of expenses health insurance; no pension and sickness insurance: CZK 1,277,328 (EUR 46,071) 13,5 % (medical care in case of illness) Pension insurance 28 % Sickness insurance Contribution to national employment policy 1,4 % (not obligatory) 1,2 % (unemployment insurance) Aggregate contributions amount to 44,1 % (42,7 % without sickness insurance) and care capped in total at CZK 372,980 (EUR 13,453) for pension insurance per year Employed persons Basis of assessment Annual contribution ceiling Gross income health insurance; no pension and sickness insurance: CZK 1,277,328 (EUR 46,071) Health insurance Employee 4,5 %, employer 9 % Pension insurance Employee 6,5 %, employer 21,5 % Sickness insurance 0% Employee, employer 2,3 % Contribution to national employment policy 0% Employee, employer 1,2 % Employee s contributions total 11 % and employer s contributions total 34 % Employer also pays accident insurance (varying depending on employment category): from 0,28 % to 5,04 % Taxes in the Czech Republic highligts

9 Withholding Tax Withholding tax is applied for specific kinds of activities i.e. interest, royalties and dividends. Interest Royalties Dividends Standard rate 15 % (or 35 %) may be reduced under the relevant double tax agreement (the DTA ), or the EU Interest and Royalty Directive as implemented under the Czech tax law Standard rate 15 % (or 35 %) may be reduced under the relevant DTA or the EU Interest and Royalty Directive as implemented under the Czech tax law Standard rate 15 % (or 35 %) may be reduced under the relevant DTA or the EU Parent Subsidiary Directive as implemented under the Czech tax law Value Added Tax (VAT) VAT in European Union is based on the Council Directive 2006/112/EC on the common system of value added tax. This Directive is implemented in the Czech VAT Act. VAT is applied on all supplies of goods and services, intra-community acquisition of goods and import of goods with the place of taxable supply in the Czech Republic. Basic information on VAT in the Czech Republic Standard rate 21 % First reduced rate 15 % Second reduced rate 10 % Taxable period Calendar month In the case requirements are met, calendar quarter possible. Turnover for obligatory registration CZK 1,000,000 Recapitulative statement Evidence of local reverse charge VAT return deadline / payment Recapitulative statement and evidence of local reverse charge deadline Obligatory in the case of supply of goods and services to another EU member state. Obligatory in the case a supply under the regime of local reverse charge is provided or received. 25 days after the end of taxable period (obligatory electronic filling) 25 days after the end of taxable period (obligatory electronic filling) Taxes in the Czech Republic highligts

10 Other taxes Other taxes which may be applicable to the business conducted in the Czech Republic: Tax Subject Tax period / Return deadline Real Estate Tax Land Tax, Buildings Tax Calendar year; 31 st January Real Estate Acquisition Tax Acquisition One-time; 3 months after each entry in the cadastral office / after each acquisition in case of nonregistered real estate Excise Tax Alcohol, tobacco, mineral oils Calendar month; 25 th day of following month Environmental Taxes Natural gas, electricity, solid fuel Calendar month; 25 th day of following month Road Tax Cars for business purposes Calendar year; 31 st January Related Party Transactions The Czech tax law requires that any transactions between related parties are carried out at arm s length, i.e. they should be the same as they would be between unrelated parties unless any difference ascertained is sufficiently justified. Although the Czech tax law currently does not contain any specific transfer pricing documentation requirements, the OECD transfer pricing guidelines are followed and the preparation of the transfer pricing documentation may be highly recommended. More detailed information you can find in brochure Investing in the Czech Republic. Taxes in the Czech Republic highligts

11 For further information please contact Petr Karpeles Petr Karpeles Partner, Tax advisor Tel.: TPA Horwath Antala Staška 2027/79, Prague Taxes in the Czech Republic highligts