How about bringing some light on Czech taxes for foreigners? Filing your income tax papers in Czech Republic doesn’t have to be a miserable experience. It’s not just something all responsible adults do every year. It is also an excellent opportunity to make the government return you some money from the taxes you had paid already. Many foreigners feel frustrated over the fact they cannot handle their Czech income tax paperwork in English. They don’t understand the Czech tax code and they are afraid to do something wrong. Well, fear no more! In this article I will break down the main points of the Czech tax law for you. Everything in a simple and understandable language: Czech taxes for dummies, so to say. 🙂 So, let’s look into this!
Please note, I do not have professional qualification to provide legal or tax advice. Information gathered in this article simply reflects my own experience and research on the topic. Use it as general guidance only.
Is filing Czech tax papers required from foreigners?
The simple answer is that if you have multiple streams of taxable income in one fiscal year, you need to submit your tax return yourself, or hire a professional. Otherwise, for example if you are simply an employee of a Czech company, let your employer’s accountant deal with your taxes on your behalf. This general recommendation would be applicable for most foreigners in Czech Republic. But even in this case it is highly beneficial to know what kind of tax deductions you can apply when working in Czechia. Or sometimes, you make money but it ends up being exempt from income tax, so you don’t need to pay income tax on those earnings at all. But who knows that?! Being ignorant on this topic simply means you’re going to lose money.
There is a great deal of nuance when it comes to Czech taxes for foreigners, and some of it might be relevant for you. For example your tax residence status in Czech Republic is one of the key factors that determine whether you should file your tax return or not. To understand more about this, check out my other article about differences between Czech tax residents and non residents, and who should file a tax return here. For others, let’s continue by looking at what a Czech income tax return is all about when it comes to foreigners living in Czechia.
Which tax is the Czech tax return about?
Everyone doing their taxes in Czech Republic has to deal with three main types of taxes here:
- Income tax (or Daň z příjmů in Czech)
- Social security contributions (so called Sociální pojištění or “social insurance”)
- Mandatory health insurance contributions (so called Zdravotní pojištění or “health insurance”)
The list is not exhaustive, of course, as there is a variety of other taxes people pay – VAT, property tax etc. However, for the purposes of your Czech tax return the above mentioned three taxes are all you need to think about.
When you are filing your tax return as a foreigner, you’re dealing with your Income tax. It’s calculated as 15% of your income after all the deductions and “discounts”. There is also an additional 7% solidarity tax for really high-earning individuals which some of you might want to read about. Note, though 2020 is be the last fiscal year for which this 7% is applicable.
What is considered taxable income in Czech Republic for a foreigner?
Although there are some cases when you make money and you don’t have to pay any income tax on your earnings at all, most income is actually taxable in Czech Republic. According to § 3 of the Czech Income Tax law (586/1992) for a human (and not a company) the following types of income are considered taxable, and therefore should be included in your Czech tax return paperwork:
- income sourcing from employment
- income sourcing from entrepreneurship (e.g. your typical freelancer work or živnost)
- capital income (investments, stocks etc.)
- lease income (when you rent out your real estate or other assets, e.g. your car)
- other sources of income (e.g. you sell your business or win a lottery, see § 10 of the same law for more details)
Are there any deductions for you to apply before taxing your income?
Before you apply 15% tax in your calculations, note that for each type of income there is a different rule for how much you can claim as expenses. This is relevant because the tax is not applicable on your total income in each category, but only on the tax base. For example, if you have a trade licence (živnost) then you can simply deduct 60% from your income sourcing from such entrepreneurship. Only after that you calculate the 15% tax from the remaining amount (tax base). And you don’t have to prove you really spent 60% of your income to generate it in the first place (e.g. on advertising). If you want to learn more about how to optimize your Czech taxes and save on deductions, check out that other article I wrote.
Don’t forget statements of income for social and health insurance
After you file your Czech tax return, you’ll also need to submit two separate statements of income. One goes to the Social Security Office, and the other to your provider of mandatory health insurance (typically VZP, OZP or VoZP, but can be another one – whichever you chose to register with).
The first one goes to the respective Social Security office based on where you live, or where your business is registered. Here is the list of CSSZ offices in Prague for your convenience. If you live in Prague in particular, you can go to any of the offices located in the capital. You will need to go there physically, unless you handle it online using a data male box. The second statement would be addressed to the nearest office of your (mandatory) health insurance provider.
The purpose of these statements is to assess if you had already paid your fair share of contributions. Here you’re basically comparing the sum of all advanced payments you made during the year with the total amount you were supposed to pay based on your actual income. If the numbers turn out to be different, you will need to balance your account with each of these two offices.
Czech income tax deadline:
|Filing your tax return in Czech Republic…||Deadline|
|… yourself||March 31st|
|… through an auditor or tax adviser||July 1st (but read below)|
The official deadline for submitting your tax return in Czech Republic is March 31st of the year following the fiscal year. In case March 31st is a weekend day, then the deadline is moved to the next week day. Typically there is also a grace period of 4 days put in place. If you submit your tax return during these four days, you are not likely to face any penalty. But after that a penalty may be applied.
In case you hire a certified tax adviser (or auditor) who is going to submit your Czech Tax Return on your behalf, then the deadline is July 1st. However, note that in this case you need to write a power of attorney in their name, and make sure they deliver it to the Tax Office by March 31st.
Submitting Czech income tax return: where and how?
There are three main ways how foreigners can handle their Czech taxes, and submit the paperwork. And each of these ways will require a certain degree of Czech language knowledge. Yes, unfortunately the Czech Tax Office is not very English-friendly. But, to be fair, whenever I had a chance to deal with them, they are very friendly and understanding. But I speak Czech, so I’m not sure you’ll have the same experience if you contact them in English. So, here are the main ways of submitting Czech taxes for a foreigner:
File your income tax paperwork online
There are two ways how you can file your Czech taxes online, even if you’re not physically in Czech Republic:
- Through the Tax Portal of the Czech Tax Office. In this case you will be filling in their online form, which diligently takes you through the whole process step by step (in Czech though). Alternatively, you can upload your tax return as an externally generated XML file, for example if you used a third party software to prepare it. As you can see in my list of Czech tax advisers who speak English, some of them offer this service.
- Using your Data Mailbox. In this case it is extra important to make sure that the XML file you are going to send them is done in the right format. For that, the best way is to use the same Tax Portal as above, going through all the steps and then simply downloading the form in XML format and sending it to the Tax Office via Data Mailbox.
Offline option is also available for tech dummies
Another way to file your Czech tax return is by physically going to your local Tax Office, based on your city (or district, if you live in Prague). You can look it up by playing with this drop-down on their website. You will need to download the most up to date Czech tax return form here, print it and fill it, and then bring it with you. The Tax Office provides a version of this Czech tax return form in English, but only for your reference – don’t fill it in, they won’t accept it. The Czech tax system is foreigner-friendly, but not too friendly (as everything here 🙂 ).
Once you come to your local Tax Office, find your tax collector. They are assigned to you based on the first letter of your surname in the Czech alphabet. Once you find your tax collector, smile and ask them if they speak English, or bring a Czech-speaking friend with you. 🙂
So, should foreigners do their Czech taxes by themselves?
For many years, as an employee of a Czech company, I had only one source of income – my salary. So, up until certain point I had no idea how to handle my Czech income tax papers. The idea of doing it seemed depressing. But eventually I ended up diversifying my income streams. For example, I started occasionally renting out a room in my apartment on AirBnB. This put me in a position when my employer couldn’t do my tax return on my behalf anymore. So, as a result, I’ve been filing my own tax return for the last couple of years now, and it’s fine! Yes, I do speak Czech and I managed to handle this without a tax adviser. But, the bottom line is – it’s doable! For foreigners, for dummies, for people who have never done it before – for everyone.
Besides, I honestly had only positive experience when dealing with tax authorities in Czech Republic. My tax collector has always been willing to patiently answer my questions. He even helped me fill in the tax return form when I was struggling with it! So, my message to you is – fear is your enemy. Filing your Czech taxes as a foreigner is not that scary. I hope this article helps you!
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Learn more about Czech taxes in English
- Czech taxes for foreigners explained (not only for dummies)
- Czech tax advisers who speak English. Recommended by expats.
- Czech solidarity tax: who pays it and how to get this money back?
- When you don’t need to pay income tax in Czech Republic?
- Czech tax return: tax deductions and discounts you should know about