Czech Republic: Changes in income taxes effective 2017 and other news
CHANGES IN INCOME TAXES EFFECTIVE 2017
In connection with the termination of the pension saving funds (the so-called second pillar), effective 1 January 2017 (i.e. from the 2017 tax period) the Czech government raised the ceiling for non-taxable pension and life insurance payments made by employers, and increased the tax deductible payments made by employees (Act No. 377/2015 Sb.):
- Employees will be exempted from paying income taxes on payments made by their employers of CZK 50 000 per year (previously the ceiling was CZK 30 000) as contributions to the employees private retirement pension schemes, supplementary pension scheme with state contributions (the so-called third pillar), pension insurance and private life insurance.
- Taxpayers will be allowed to deduct from their tax bases the amount of CZK 24 000 (previously CZK 12 000) paid by themselves as contributions to their own private retirement pension scheme, pension insurance and supplementary pension scheme (the so-called third pillar).
- Taxpayers will be allowed to deduct from their tax bases private life insurance premiums paid by themselves. The maximum amount per tax period will be CZK 24 000 (previously CZK 12 000).
INCREASE IN THE MINIMUM SOCIAL SECURITY AND HEALTH INSURANCE PAYMENTS OF SELF-EMPLOYED PERSONS
- Social security of self-employed persons in 2017
Maximum and minimum assessment bases of self-employed persons are linked to the amount of average wage (which was raised in the Czech Republic in 2017). The maximum assessment base of social security payments will increase to CZK 1 359 552 in 2017. The minimum advance payment for social security will increase by almost CZK 100: from CZK 1972 to CZK 2061. If self-employed persons perform an additional activity only, then their minimum advance payment will increase from CZK 789 to CZK 825.
- Health insurance of self-employed persons in 2017
The new assessment base has led to changes in advance payments for
health insurance. The minimum advance payment for health insurance has increased from CZK 1823 to CZK 1906. Self-employed persons must pay the higher advance payment for January 2017 already.
- Higher threshold of solidarity tax
If the sum of revenues included in the partial tax base under sec. 6 (revenues from employment) and the partial tax base under sec. 7 (independent gainful activity) for the entire year exceeds the threshold, the excess will be subject to the solidarity tax.
The threshold is calculated at the average wage multiplied by 48 (average wage is to be calculated in compliance with the act regulating social security premiums), which is illustrated as follows:
Thresholds of solidarity tax 2016 2017
Monthly amount 108 024 CZK 112 928 CZK
Yearly amount 1 296 288 CZK 1 355 136 CZK
Electronic records of sales (EET): 2nd stage from 1 March 2017
In March 2017, a new obligation for wholesalers and retailers will come into effect: to report their cash revenues via electronic records of sales (EET). The 2nd stage of EET applies to wholesale and retail businesses shown in NACE classification under codes 45.1, 45.3, 45.4, 46 and 47. Namely, they are the following business activities:
- 45.1 Motor vehicle trading, excluding motorcycles
- 45.3 Motor vehicle parts and accessories trading, excluding motorcycles
- 45.4 Motorcycle trading, including motorcycle parts and accessories (the 2nd stage of EET does not apply to the repair and maintenance of motorcycles)
- 46 Wholesale, excluding motor vehicles
- 47 Retail, excluding motor vehicles
All entrepreneurs dealing in the trades listed above will have a duty to report their sales via EET, regardless of whether it is their main or additional activity. From 1 March 2017, the entrepreneurs who perform the listed trades as additional activities only will also have to report via EET (however, if the sales of an entrepreneur in the specific place of business meet the criteria of a minor activity, then the tax administration will not exact the electronic reporting of sales, until the entrepreneur is obliged to report sales on his major business activity, or until he exceeds the limits of a minor activity).
The General Financial Directorate issued its explanation of the definition of a minor activity in its instruction version 1.0 of 31 August 2016.
In February 2017, the General Financial Directorate issued additional information on minor activities. Sale of goods manufactured by entrepreneurs is deemed to be neither wholesale nor retail and it will be subject to the next stage of EET starting 1 March 2018.
OPINION OF THE GENERAL FINANCIAL DIRECTORATE CONCERNING ONLINE PAYMENTS
On its website, the General Financial Directorate issued its opinion on the moment when internet payments are deemed to be realized and must be reported electronically via EET. The tax administration and the customs office will accept later reports of sales in the cases where a taxpayer was not able to perform his duty to report via EET at the moment stipulated in sec. 18 (2) (b) of the Act on the Electronic Records of Sales.
Magda Vecerova
pan-china_vgd_newsletter201708.pdf (893.91Kb)
