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 2019 INCOME TAX: affecting Trade Licenses with a Revenue over 2 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, in 2018 the 60/40 rule was limited to 1M CZK Revenue, and now, the 2019 situation is:

  • 2019: The 60/40 rule can be applied on the first 2M CZK on your Trade License Revenue. Everything over 2M is directly added to the Tax Base.
  • 2019: 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 3.5M CZK (because 40% of 3.5M is 1.4M)
  • 2019: The tax benefits for non-working spouse (+/- 24 K) and children ( +/- 13 K) can be claimed again

IMPORTANT: For TL Revenue over 2M, it may be possible to optimize using various solutions

We highly recommend to book an EXPERT consultation with our senior consultant if you have a Revenue (well) over 2 M CZK, since Tax / Social / Health contributions may amount to up to 31% of your Revenue.