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Tax Minimization in Czech Republic

Updated on Tuesday 07th September 2021

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Czech Republic is a state in which the level of taxation is generally lower, compared to other countries from its vicinity. Both natural persons and legal entities can benefit from tax minimization in Czech Republic; if you want to find out to which tax minimizations you are entitled to, our Czech company formation specialists can provide you with further information. 
 

Czech taxation for residents and non-residents

 
In the Czech Republic, the tax rates for the residents and the non-residents of the state are the same. A flat rate of 15 per cent is applicable on a super gross salary. The Czech nationals must declare and pay on their worldwide income, such as capital gains, investment income, self-employment income, employment income and other taxable incomes. The citizens transfer the tax payment under a unique tax identification number to the appropriate account of the tax authority while foreigners get their identification number from tax authority upon registration.
 
You can trust our consultants for understanding tax minimization in Czech Republic.
 
 
The following video offers a short presentation on the manner in which investors can benefit from tax minimization procedures in Czech Republic:
 
 

Corporate deductions

 
Czech legislation allows a series of corporate tax deductions for operating expenses. Also, charity donations can be deducted by the company only if the total value of the donation is above CZK 2,000; the tax can be reduced up to 10% of its standard rate. 
 
Other tax minimization in Czech Republic, that companies can use is the deduction of the costs of fix assets and lease payments.  Expenses incurred by the research and development department can also be deducted under several conditions, which can be explained by our company formation specialists. 
 

Czech tax exemptions

 
Businessmen interested in the tax legislation applicable to companies in Czech Republic should know that the local authorities offer a set of rules and regulations advantageous to foreign businesses, which can be employed as tax optimization solutions. One major tax deduction applicable to foreign companies is related to the standard corporate rate. Although local and foreign companies are imposed with the same taxation system, In the case of corporate tax, the local authorities impose a corporate tax of 15% on foreign sourced income, compared to the standard corporate tax of 19%. 
 
 
Another tax minimization solution can be used by companies with operations in several sectors which are 100% exempt of Value Added Tax (VAT), which is currently applicable at the rate of 21%. As such, business activity in the field of exports or international transportation is not required to pay any VAT. 
 
Companies and other legal entities which provide services in several domains are also full exempt from paying the VAT; services in the broadcasting industry, postal industry, insurance, education and gambling do not have to pay this tax; our company formation agents can provide you with further information on this matter. 
 

Who can apply for a VAT refund in the Czech Republic?

 
Foreign visitors, except those from the European Union, can apply for a refund of value-added tax (VAT) since April 1, 2000. This VAT refund is either 10% or 20% of the total amount of the goods. The following conditions must need to be fulfilled by a non-EU foreigner to get the VAT refund:
 
  • -  An individual must have purchased the goods in one day from a retailer marked by tax refund sign;
  • -  Must ask the retailer for the receipt and tax refund form;
  • -  Purchased goods along with the VAT must exceed an amount of 2,000 CZK;
  • -  Right after the day of purchase, the goods must leave the country within 30 days.
 
You can claim a VAT refund with the same retailer in person, or you can get the assistance of our company formation experts in Czech in this regard, they will help you out in the refund of value-added tax.
 

How to get a VAT refund?

 
If you want to get a VAT refund in Czech Republic, please do not forget to request the receipt and VAT refund form from your retailer. Fill the form and get it stamped by the retailer. Get your VAT refund form validated at the airport or border by the Czech Customs Office. You must ask for a customs officer if you travel by train. You can mail all the forms to our experts in the Czech Republic for VAT-refund, or you must keep all the receipts and forms and claim the refund when you visit the Czech Republic again within 90 days from the day of purchase. Please bear in mind, VAT refund is not available on goods like petrol, cigarettes, food and alcohol, etc.
 

Significant changes in Czech taxation

 
Some significant changes came into effect as of January 1st, 2021 in Czech taxation. These changes are made to reduce taxation for employees and other individuals with income up to a certain limit. On the other hand, the tax rates were said to increase for individuals with income above that certain threshold. After the abolishment of super-gross salary as a tax base, the income tax calculation is simpler now. The lower tax rate is going to remain 15% on gross income below the certain threshold (CZK 1,701,168).
 
However, due to the introduction of progressive income tax, the taxation is going to increase for people with income above a certain limit (CZK 1,701,168). Which means a 15% tax rate is applicable on income up to the limit and 23% on the income that surpass the established limit. This policy also brings an increase in taxation of duty base above the limit by:
 
  • -  1% for income from self-employment activity and employment, etc;
  • -  Higher tax rates do not apply to the foreign capital income (interests from abroad dividends).
 
You can rely on the services of our experts in Czech Republic if you want to know about a solidarity tax surcharge and basic tax relief. Our experts will help you understand the tax minimization in Czech Republic. 
 

Tax revenue of Czech Republic 

 
Please find below the Czech Republic’s tax revenue:
 
  • -  In March 2021 the tax revenue was reported at 11.244 US billion dollars;
  • -  2021’s figure shows a decrease from the previous one of 13.449 US billion dollars for December 2020;
  • -  The revenue data is updated quarterly in the Czech Republic, averaging 8.866 US billion dollars from March 1995 to March 2021, with 105 observations. 
 
If you need further information on the tax minimization in the Czech Republic, please contact our company formation consultants for assistance. 

 

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Call us at +420 721 565 868 to set up an appointment with our specialists in company formation in Brno. Alternatively you can incorporate your company without traveling to Czech Republic.

As an CorpexLab client, you will benefit from the joint expertize of local experts and international consultants. Together we will be able to offer you the specialized help you require for your business start-up in Czech Republic.

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