Trade License.cz / Income Tax, Income Tax Return

Filing an Income Tax Return for a Trade License:

At the end of the (calendar) year, an Income Tax Return must be filed. The Tax Return combines income from employment, trade license, capital gains, rental income, and other sources of local and foreign income. Being Tax Resident in Czech Republic, you have the obligation to file your GLOBAL income - not just what you've made in Czech Republic *.

If you had a high income, you may have to pay Income Tax Deposits for the next year, either 2 or 4, depending on the height of the previous year's Income Tax. The exact amounts and payment dates we provide in an additional overview accompanying the Income Tax Return.

IMPORTANT 2018 INCOME TAX CHANGE: affecting Trade Licenses with a Revenue over 1 M CZK

The Trade License income can be filed in 2 ways: either using the real revenue minus the real expenses, or by using the so-called 60/40 rule. The 60/40 rule is almost always used. It means that you can claim a 60% expense deduction on your revenue (even if the the real percentage is much lower). So, the remaining 40% of your invoiced amount is your tax base. On this tax base only 15% income tax is calculated, and if applicable, tax deductions can be applied.

 

Since this resulted in only 6% Income Tax on your total revenue, starting 2013 the government has taken steps to make you pay more. Already in 2013 and 2014 various tax changes have been implemented, and now, starting 2018, again there are important changes:

  • 2018: The 60/40 rule can only be applied on the first 1M CZK on your Trade License Revenue. Everything over 1M is directly added to the Tax Base. (for 2017, it is still possible to use 2M CZK for the 60/40 rule)
  • 2018: For the part of the Tax Base over +/- 1.4 M CZK an additional 'solidarity tax' of 7% is implemented. In order for your Tax Base to be over 1.4 M, your annual Revenue must be over 1.9M CZK (it used to be with a 2.4M CZK Revenue in 2017).
  • 2018: The tax benefits for non-working spouse (+/- 24 K) and children ( +/- 13 K) can be claimed again (which was not possible in 2017).

IMPORTANT: The big difference between 2017 and 2018 for Revenue over 1 M CZK

Starting 2018, the 60/40 limit has lowered from 2M CZK to 1 M CZK. THIS IS ONE OF THE BIGGEST CHANGES IN RECENT TIMES, which affects all Revenues over 1M CZK, but Revenues between 1M CZK and 2M CZK the most. The higher Revenues (3M, 4M and up) will only see a change of a few %. Everybody will pay more Income Tax, Social Charges and Health Insurance.

  • We highly recommend to book an EXPERT consultation with our senior consultant if you have a Revenue over 1 M CZK, since Tax / Social / Health contributions may amount to up to 30% of your Revenue and in some case increase as much as 50% compared to what you were paying in 2017 (!)