Details about the Employee Income Tax in Czech Republic
Czech Personal Income Tax is 15%
In Czech Republic, an employee pays 15% income tax.This is a flat rate,
There is discussion that in 2013 or 2014 there will be again a new system. Whatever the pending changes, we can expect that an employee pays relatively low taxes compared to other EU countries.
People that work on a trade license also pay 15% income taxes, but on only 40% of their revenue (60% is the standard expense deduction). This means that even if the revenue would be the same as the gross salary of their colleague, the freelancer will pay lower taxes / social / health charges then his employed colleague.
Determining Tax Residency
As a basic rule you are tax-resident (i.e. you fall under Czech Income Tax legislation) if you have spent 183 or more consecutive days in Czech Republic. If this is difficult to determine, then needs to be determined where 'the center of your economic and social activity is' (i.e. where you work most of the time and where your family / partner lives)If this period is shorter, or it is obvious you actually are not living here, then most likely you will have to pay taxes in your home country, on your global income (so including income from Czech Republic).
For 3rd Country Nationals but even some EU Citizens there may be bi-lateral tax treaties with different conditions influencing the rules outlined above, depending on their nationality.
Retroactively valid since 01.01.2009 there is the long-awaited renewed treaty on double taxation for U.S. citizens, which has also an effect on social charges and Medicare. More info on US social security here.
Therefore we recommend to apply for tax-residence here as soon as possible, because most likely you'll pay less taxes than in your home country, because currently (2011) the income taxes are only a flat-rate of 15% and there are considerable tax deductions / tax benefits for families with children, but even for single people.
Tax Benefits on Personal Income Tax
If your employer has registered you properly as employee, the taxoffice already is aware of your income and family situation, and you are not obligated to file a tax declaration, provided that you have had no other source of income. However, time and again we see that employers do not provide the accountant proper information about their employees, and no taxbenefits for wife, children, mortgage are applied, so they miss out on benefits / deductions.It is possible to file corrected taxreturns for 2009 and 2010, it can be done up to 3 years back.
It is easy to avoid this whole situation: let Alexio fill in your personal income tax return.
The costs are far smaller than the gains and you have the peace of mind your tax return has been filed correctly!
Filing a Personal Income Tax Return
In the following cases it is wise or obligated to fill in an Income Tax Return:- Your employer does not explicitely ask about your family situation (so no tax benefits),
- You work on a trade license as freelancer,
- You have been only part of the year in Czech Republic,
- You have worked abroad, but for a CZ-based company,
- You pay mortgage (the interest part can be deducted from your income),
- You received rental income or other sources of income inside Czech Republic,
- You have had other sources of income outside Czech Republic,
- There are bi-lateral tax agreements with your homecountry.
Unlike many people think, you are supposed to file for your global income, not only for the czech part!
It is very important to get income statements from every employer of the past year, because they are vital for filing or checking your tax return form.