What is a tax return and who is it for? Taxes are not always bad; in some cases, you can even refund your overpaid tax.
Who is required to file a tax return?
The person who:
- earns more than CZK 50,000 in income during the year 2023 this income is not exempt from taxes or subject to withholding tax,
- receives income from multiple employers simultaneously (through concurrent employment or agreements to for work), except in cases where the person:
- has income from employment and other income of more than CZK 20,000
- for individuals who passed away in 2023, their heirs, specifically the administrators of the estate or inheritance, are responsible for filing a tax return on their behalf.
- has a tax loss,
- has received payment of insurance benefits from private life or pension insurance,
- the self-employed (OSVČ) and self-employed in a flat-rate scheme (OSVČ v paušálním režimu) who have violated the terms of the flat-rate scheme.
Submitting a tax return can be beneficial, as it allows a claim on various deductions (which can ultimately reduce your taxable income) such as blood donations, contributions to life or retirement savings, a spouse deduction, a child discount, and more.
(!) Tax returns can also be filed voluntarily, i.e. when the taxpayer is not obliged to file them but can.
Wondering why to file a tax return if it's not mandated by law? Here's why it could be beneficial to those who:
• Worked under a "DPP" contract where taxes were deducted, but could potentially get a refund through a tax return.
• Didn't receive an annual settlement from their employer.
• Had their employer not applied certain deductions or tax credits (like life insurance, pension contributions, donations, etc.).
• Couldn't utilize deductions or tax credits throughout the year due to being a non-resident taxpayer.
• Didn't work for the entire year, leaving some tax benefits unclaimed. For instance, if part of the year was spent employed and another part receiving unemployment benefits, parental allowance, sick pay, or as a student.
Tax deductions. Are they worth it? How are they defined?
Deductions are defined by the Income Tax Act:
• basic discount 30 840 CZK – monthly 2 570 CZK,
• discount on a spouse (husband/wife) 24 840 CZK,
• basic discount for disability 2 520 CZK – monthly 210 CZK,
• extended disability discount 5 040 CZK – monthly 420 CZK,
• discount on ZTP/P cardholders 16 140 CZK – 1 345 CZK per month,
• discount per student 4 020 CZK – per month 335 CZK (this discount can be applied for the last tax period 2023, from 1. 1. 2024 this discount is cancelled),
• discount for placement of a child 16 200 CZK (this discount can be applied for the last time for the tax period 2023, from 1. 1. 2024 this discount is cancelled)
and further § 35 paragraph 4 of the Income Tax Act – tax credit for stopped execution.
The taxpayer's tax is reduced by a credit for stopped execution, which equals the compensation granted by the executor when the execution is halted. This credit applies to claims up to a maximum of 1,500 CZK, with compensation amounting to 30% of the collected sum. The maximum tax credit for one execution is 450 CZK.
According to Section 35, paragraph 4 of the Income Tax Act, both individuals and legal entities (taxpayers) are eligible for this tax credit. Employees should include the granted compensation for stopped execution in their request for annual reconciliation of tax advances and tax benefits. They should also provide the decision (or decisions) on the halt of execution.
Child tax benefits:
• per child 15 204 CZK – monthly 1 267 CZK,
• per second child of CZK 22,320 – per month of CZK 1,860,
• per third and next child of CZK 27,840 – per month of CZK 2,320.
To qualify for this tax benefit, the taxpayer must meet a basic condition: their dependent child must live with them in the same household, managed jointly, within the Czech Republic, European Union, or a country in the European Economic Area.
You can apply the tax advantage in the form of a tax credit, a tax bonus or a combination of a tax credit and a tax bonus.
WHERE TO START? - TAX DOMICILE
If a Ukrainian citizen with temporary protection meets the Czech Republic's tax residency requirements, they can request a tax domicile certificate from the local tax office. This certificate is necessary to file taxes. The fee for the application is CZK 100, and the certificate is not given immediately. The tax office assigned to an individual is based on their residential address or where they mainly live.
What is a tax domicile? Think of tax domicile as your tax home. It's where the government considers you as living for tax reasons. So, getting a tax domicile certificate means you're officially recognized as someone who has to pay taxes in a particular place.
The tax office that handles your taxes depends on where you live. It's based on your permanent address or where you spend most of your time.
SUBMISSION OF THE TAX REPORT
The standard deadline for filing a paper tax return for the year 2023 falls on Tuesday, April 2, 2024. If you are self-employed you are required to file it electronically via the data box by Thursday, May 2, 2024.
You can file the tax return in the following ways:
- By handing in the completed form in person at the local competent tax office under which the address of your residence falls.
- By mail, the tax return can be filed – still (at the latest) on Tuesday, April 2, 2024.
- And also by sending the online form – Portal of MY Taxes (mfcr.cz).
What documents should I prepare?
When filing the tax return, you should provide as attachments:
- a certificate of taxable income from your employer,
- a copy of your passport,
- a copy of the temporary protection visa,
- originals or certified copies of other necessary documents (e.g. children's study certificates, children's birth certificates, etc.).
For more information on your rights and obligations, visit the website of the Financial Administration of the Czech Republic.
Information sources:
Financial report: https://www.financnisprava.cz/en/dane/informace-valka-na-ukrajine/informace-k-danovym-pravum-a
Euraxess:
https://www.euraxess.cz/czech-republic/information-assistance/employment-conditions-and-work-permits