In 2017, there were significant changes in the regulations regarding settlements and taxes on natural persons. The biggest change is in 2018. For people using the flat-rate cost option, the maximum lump sum is significantly reduced. At the same time, tax breaks that were previously unavailable to lump sums have been reintroduced.
In the tax return for 2017, the taxpayer will be able to use the current lump sum. However, if he decides to use the rate applicable in 2018, he will be able to take advantage of all discounts now.
We suggest to clients who use the flat-rate form of settlement, and whose annual income clearly exceeds 1,000,000, - crowns (~ 150,000 PLN), the possibility of splitting the income into a spouse (s) or partner (s) and setting up a second activity.
From 2018, the following limits for unrecorded costs (flat rate) will apply:
This unpleasant change was compensated by the possibility of deducting all tax credits that were previously only available to people who settled on general terms. There was also a marked increase in the amount of tax credits.
Credits that reduce the tax base
Credits that reduce the tax base are also known as tax-exempt amounts. The Income Tax Act lists several of them.
1. Donations and blood donation
Donations in the form of money transfer or material donation made to foundations or associations, churches and religious associations, but also to the Police, Fire Brigade and political parties reduce the tax base.
As a donation, you can also deduct the purchase of health funds for people with disabilities over the funding they receive from insurance funds. It is a condition for the deduction that the total amount of the donation for one person is equal to or greater than 1000 crowns.
A donation of CZK 3,000 is considered to be a blood donation. In the case of donating organs for transplant from a living person, the tax value of the donation is 20,000 kronor. Bone marrow donors can also deduct 20,000 kroner.
Commercial companies are also entitled to deduct a donation.
2. Interest relief on a flat or house
The taxpayer can deduct the value of interest on a home or mortgage loan from the tax base. The only condition is that the house or flat is in the territory of the European Union.
3. Relief for old-age or life insurance
It allows you to deduct up to 24,000 kronor of pension insurance contributions in a private fund pension or life policy up to CZK 24,000 (previously both amounts were CZK 12,000). Contributions paid in foreign funds are also deductible, as long as the conditions for payment of funds are similar to the Czech regulations.
4. Contributions to employee organizations and trade unions
5. Vocational and professional examinations qualification
The costs of exams confirming obtaining additional education or certificates of professional competence can be deducted from the tax base.
6. Discounts for research
7. Discounts for support for students
In addition to tax deductions deducted from the tax base (known as tax-exempt amounts), you can deduct different amounts depending on your personal situation.
1. Basic relief
Basic relief of CZK 24840 can be deducted by any taxpayer who has a source of income from business activity in the territory of the Czech Republic, death redundancies, civil law contracts and rental.
2. Relief for a non-working spouse
If in a given tax year the spouse did not have taxable income, i.e. from which he could deduct the basic relief himself, his relief in the same amount may be deducted by the other from the spouses who bear the entire financial burden of maintaining the household. The amount of the relief is CZK 24840.
3. Relief for a disabled person
This relief applies to both the taxpayer and the spouse and ranges from CZK 2,520 to CZK 16140 depending on the degree of disability.
4. Student allowance
Persons running a business who study at the same time and are under 26 years of age may additionally deduct 4020 crowns from the tax. The age limit is increased to 28 in the case of doctoral studies
5. Pre-school allowance.
A taxpayer who sends a child to a nursery or school may deduct the related costs (tuition) from the tax, but not more than CZK 9,200 per year.
6. Child allowance
You can also deduct child allowance from the tax due. Its amount depends on the number of children and amounts to:
- CZK 13404 for the first child,
- CZK 19404 for the second child, (increase by CZK 3600)
- CZK 24204 for each subsequent child ( an increase by 7,200 kroner),
- twice the amount for each child with a severe disability
Severe disabilities include:
- loss of limbs (including partial ) or their serious dysfunctions,
- serious diseases of the spine and skeletal system,
- other chronic problems limiting mobility, including cardiovascular diseases,
- complete or almost complete loss of hearing or vision ,
- diseases of a neurological or psychiatric background that limit IQ below 50 or significantly prevent communication or orientation (e.g. autism, Alzheimer's)
Relief for employers
Employers who decide to pay the employee a bonus in the form of a surcharge to his investment in pension funds, they may include a premium in operating expenses. The bonus paid in this way is not included in the basis of tax and employee insurance premiums, as long as it does not exceed the amount of PLN 48 thousand. crowns. If the employer dismisses the employee or resigns from this form of paying the bonus, he does not lose the current deductions.
Food vouchers are also partially free of contributions and tax.
Employers are also entitled to additional allowances for employing people with severe disabilities.
Magazines and newspapers versus VAT
In 2017, there is also a change in the tax rate for newspapers and magazines from 15% to 10%.
Reliefs in social and health insurance contributions.
The amount of social and health insurance contributions depends on the amount of income obtained, but in most cases it cannot be lower than the minimum contribution threshold set in the act. However, in the situations specified in the act, the entrepreneur may be exempt from the minimum rate and will pay contributions according to the income earned, even if they are only small amounts.
The following are exempt from the minimum social security rate:
The following are exempt from the minimum rate of health insurance: