Page 16 - Mazars Central and Eastern European tax guide 2023

Czech Republic accommodation, food-serving services, including the insurance services, the transfer of buildings/apartments/
serving of non-alcoholic beverages or keg beer; e-books
non-residential premises (from 5 years following the
and audiobooks, including lending; tap water, water and building approval), renting of real estate, mail services,
sewer charges; the repair of shoes, leather products, radio and TV services, education services and medical and
clothing and textile products, bicycle repairs; hairdresser social care services.
and barber services; home care for children, the elderly,
Mazars, s.r.o. ill and disabled people; services for cleaning and washing VAT payers are obliged to submit VAT returns, EC Sales Lists
International Business Center, windows in households; entrance to sports and cultural and Control Statements (detailed evidence for selected
Pobřežní 620/3, 186 00 Prague 8, events). VAT-exempt services include financial and transactions) on a monthly or quarterly basis (depending
Czech Republic on the status of the VAT payer).
Phone: (+420) 224 835 730 Other indirect taxes include excise duties (on mineral oils,
Fax: (+420) 224 835 799 VAT options in Applicable / limits spirits, beer, wine and tobacco products) and an energy tax
www.mazars.cz Czech Republic
(on natural gas, electricity and solid fuels).
Distance selling EU threshold – EUR 10,000/year OSS
system applicable Personal income tax / Social security system
Call-off stock ü
Corporate taxes and other direct taxes Investment incentives in a form of tax relief (tax holiday) VAT group registration ü – only for Czech legal entities Personal income tax is applied at progressive rates
up to 10 taxable periods are available. of 15% and 23% on all types of income (employment,
The general corporate income tax rate is 19%. A corporate Cash accounting – yearly No self-employment, rental incomes, capital gains, interest)
income tax rate of 5% applies to basic investment funds A special corporate tax referred to as a windfall tax applies amount in EUR (approx.) with exemption of certain types of dividends and interest
and 0% for pension funds. to selected taxpayers in the fossil fuel sector, energy sector Import VAT deferment ü or director fees paid to non-residents, which are taxed
and banks in the calendar years 2023-2025. The windfall at a flat rate of only 15%.
Tax losses may be carried forward for up to 5 taxable tax rate is 60% and it is applied on a specifically Construction works, waste, gold, selected
periods. From 2020, tax losses may be carried back calculated tax base. cereals and industrial crops, cell phones, Income from employment and self-employment
integrated circuits, notebooks, tablets,
for 2 taxable periods. The maximum amount that may videogame consoles, used real estate, activity is subject to social security and health
be carried back from one taxable period is limited to Generally, a withholding tax of 15% applies to dividends, Local reverse charge supply of natural gas and electricity insurance contributions. In the case of employment, the
CZK 30 million (approx. EUR 1.2 million). royalties, interest and to income originating in the Czech to traders, provision of telecommunication employee’s contribution is equal to 6.5% (social security)
services to traders, outplacement
Republic. Tax rates may be reduced by double tax treaties. of construction workers, and immovable and 4.5% (health insurance). For the employer, these
An R&D tax allowance up to 110% of eligible R&D costs can The Czech Republic has a wide international treaty property in forced insolvency sales. are equal to 24.8% and 9%, respectively. Social security
be claimed as a tax base deduction.
network with over 90 double tax treaties concluded. Option for taxation contributions are not paid on income exceeding the
Thin capitalization rules apply – financial expenses related If there is no double tax treaty or an agreement for the ü – only to Czech VAT payers for the maximum assessment base (CZK 1,935,552). The example
to credits, loans and other instruments from related parties exchange of information concluded, the payments are letting of real estate performance of economic activities below shows the employer’s and employee’s costs in the
that exceed four times the equity (six times for banks and subject to a 35% withholding tax. supply of used real estate ü (5-year time test) case of the minimum wage and average wage in the
insurance companies) are not tax -deductible. private sector.
Participation exemption (tax exemption) applies VAT registration approx. EUR 83,000/ year –
The EU Anti-Tax Avoidance Directive (ATAD) applies - on dividend distribution, provided that certain conditions threshold only for Czech based legal entities
Limitation of tax deductibility of exceeding borrowing are met. Similar rules apply to tax exemption on capital
costs; CFC rules; Exit taxation; Hybrid mismatch rules. gains from the sale of shares in subsidiaries.
In line with the EU Interest and Royalty Directive, the tax
Transfer pricing in Czech Republic exemption on interest and royalty payments also applies Average wage
when approved by the tax authority.
Arm's length principle ü Since 1993 When certain conditions are met, the transactions that are Wage related taxes in Czech Republic Minimum wage in private sector
Since 2006 (scope generally subject to withholding tax but are thus exempt Exchange rate CZK/EUR 23.95 in EUR in CZK in EUR in CZK
Documentation liability ü of documentation is only from tax must still be reported to the tax authority. 1,683
recommended) 722 17,300 40,324
Road tax is imposed only on selected heavy lorries Total wage cost 2,252
APA ü Since 2006 and trailers. 966 133.80% 133.80%
Country-by-Country From FY 2016 Social security contribution - employer 179 24.80% 417 24.80%
liability ü A real estate tax applies to land and buildings, with tax Health insurance - employer 65 9.00% 151 9.00%
rates generally depending on the type of property, while
The recommended scope Gross salary 722 100.00% 1,683 100.00%
Master file-local file of the TP documentation the final amount of tax may also be influenced by local
(OECD BEPS 13) ü corresponds to the OECD ratios (applied by local authorities). Personal income tax before standard tax deduction* 108 15.00% 252 15.00%
applicable
Guidelines. A real estate transfer tax was abolished in 2019. Personal income tax after standard tax deduction** 3 147
Employees' contributions 79 11.00% 185 11.00%
Penalty
VAT and other indirect taxes Net salary
lack of documentation No – 639 89.54% 1,351 80.24%
20% on tax underpayment For 2023, the standard VAT rate is 21%, while the reduced * 15% tax rate is applied on gross salary up to annual income of EUR 80,789 (or EUR 6,732 monthly), income above is taxed at 23%.
tax shortage ü + late payment interest rates are 15% (applicable, for example, on foodstuffs, ** Each individual is entitled to deduct a lump sum of CZK 2,570 (app. EUR 105) per month from his tax liability (so called “standard tax deduction”).
Direct or indirect control non-alcoholic beverages and selected medical / sanitary
Related parties 25% <
or personally related. goods, municipal waste collection & recycling) and Pavel Klein
Low value-added services: 10% (applicable, for example, on baby formula and Partner, Head of Tax Services
Safe harbours ü 3–7% mark-up. children’s food, certain pharmaceuticals, certain printed Mobile: (+420) 721 461 394
Level of attention paid by Tax books, newspapers, magazines, music sheets, food for E-mail: pavel.klein@mazars.cz
Authority 9/10 gluten-intolerant persons, public transport, heat and cold,

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