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 in 2015, you may have to pay Income Tax Deposits for 2016, either 2 or 4, depending on the height of the 2015 Income Tax. The exact amounts and payment dates we provide in an additional overview accompanying the 2015 Income Tax Return.
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 revenue, starting 2013 the government has taken steps to make you pay more. Already in 2013 and 2014 various Tax changes have been implemented:
- The tax benefits for non-working spouse (+/- 24 K) and children ( +/- 13 K) can not be claimed anymore, unless at least half of your Tax Base consist of salary from employment, or you are not using the 60/40 rule on your Trade License income.
- For the part of the Tax Base over 1.2 M CZK / year an additional 'solidarity tax' of 7% is implemented - this mostly affects executive salaries, but only Trade License holders with a revenue over 3 M CZK.
IMPORTANT CHANGE: 2015 Income Tax for a Trade License with a revenue over 2 M CZK
Starting 2015, for revenue over 2 M CZK, Income Tax went up significanty.
Up to 2 M CZK, Income Tax will still be 6%, but over 2 M CZK, they will be 15%, which is 2.5 times more.
This is because the 60/40 rule can not longer be used for revenue over 2 M CZK.
For Revenue over 2.4 M CZK, also the 'solidarity tax' will kick in, raising the Income Tax to 15% to 22%
- We highly recommend to book an EXPERT consultation with our senior consultant if you have a revenue over 2 M CZK, since Tax / Social / Health contributions may amount to up to 30% of your revenue (!)