Trade / 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 2020 INCOME TAX CHANGE: Three ways calculating

Up to 2020, the Trade License income could 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 for business with little expenses. 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.

In 2020, it looks that there will be third method, called 'pausalni dan' for Revenue up to 1 M CZK. The ideea is to pay fixed sum per month (cca 5400 CZK) and no Income Tax Return needs to be filed. But you can not make use of it if: you are making more than 1 M CZK / year, are registered for VAT, are employee, are shareholder in a CZ company, are EET registered and most of all: if you are currently nor in the Public Health Care. In addition: for visa extension, foreign tax offices, banks / lease companies it is really necessary to be able to show a tax return. So it is probably not a good idea to use this pausalni dan method.

Note that if you have to extend a Business Visa you need a certain amount of minimum income. Using the 60/40 method, it would mean a Revenue of at least 450.000 CZK. If you do not have that kind of Revenue then you have to use the Real Expense method (Revenue at least 180.000 CZK). In case you have a higher rent than the nominal rent of 8.577 CZK / month and/or there are more people in your household, your Revenue needs to be significantly higher to get your visa(s) extended. We have a precise calculation sheet that will calculate exactly how much Revenue you will need.

For more information on Income Tax, Tax Returns and special income situations
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