The 2023 Tax Package (Act No. 366/2022 Coll.), which was published in the Collection of Laws on 2 December 2022, also brought changes to the Income Tax Act (the "ITA") with effect from 1 January 2023. Below is a basic overview of these changes.
1. Limit on the obligation to file a personal income tax return for the 2023 tax year
As part of the changes, the limit for filing personal income tax returns has been changed. The following will not be required to file a tax return:
a) taxpayers with income from dependent activities (employment), if their other income does not exceed the decisive amount of CZK 20,000 (originally CZK 6,000);
b) taxpayers with income not exceeding CZK 50,000 (originally CZK 15,000).
2. Flat-rate tax regime for individuals
The amendment to the ITA increases the threshold for income from a trade with which it is possible for persons doing business (non-payers of VAT) to enter the so-called flat-rate regime to CZK 2 million. At the same time, three bands of the flat-rate regime are introduced, depending on the amount and nature of the taxpayer's income from self-employment:
|
Band |
Annual earnings |
Condition |
Lump sum deposit / month |
|
1st band |
< CZK 1 million |
Regardless of the source of the income from self-employment |
CZK 6,208 (CZK 100 income tax, CZK 3,386 social security and CZK 2,722 health insurance) |
|
< CZK 1.5 million |
At least 75% of the income is income from self-employment on which expenses can be claimed at a rate of 80% or 60% of the income |
||
|
< CZK 2 million |
At least 75% of the income is income from self-employment on which expenses can be claimed at a rate of 80% of the income |
||
|
Zone 2 |
< CZK 1.5 million |
Regardless of the source of the income from self-employment |
CZK 16,000 (CZK 4,963 income tax, CZK 7,446 social security and CZK 3,591 health insurance) |
|
< CZK 2 million |
At least 75% of the income is income from self-employment on which expenses can be claimed at a rate of 80% or 60% of the income |
||
|
Zone 3 |
< CZK 2 million |
Regardless of the source of the income from the self-employment |
CZK 26,000 (CZK 9,320 income tax, CZK 11,388 social security and CZK 5,292 health insurance) |
For a self-employed person to enter the flat-rate scheme for 2023, it was necessary to submit a notification of entry into the scheme to the local tax office by 10 January 2023.
3. Exemption of gratuitous income in the form of acquisition of a co-ownership interest in immovable property from a municipality or from a taxpayer of which the municipality is a member or founder
Exemption from personal income tax in the case of gratuitous acquisition of a co-ownership interest in immovable property from a municipality or from a taxpayer of which the municipality is a member or founder, under the conditions when:
- a subsidy from the state budget was obtained for the construction of the property in question between 1995 and 2007;
- the transfer of immovable property has been prohibited by the terms of the grant (point 1) for a specified period and this is the first transfer after the expiry of that period, the purpose of the transfer being the ownership of the property by a natural person.
4. Exemption from remuneration for the performance of the duties of a member of the Electoral Commission
A new provision in the ITA exempts special remuneration for the performance of the duties of a member of a precinct election commission and a member of a special precinct election commission.
5. Extraordinary depreciation
Extraordinary depreciation was originally introduced to the ITA in response to the unfavourable economic situation in connection with the coronavirus situation in order to enable taxpayers to depreciate assets classified in depreciation groups 1 and 2 and acquired in 2020 and 2021 more quickly (and therefore at a higher cost). The amendment to the Act extends the possibility of extraordinary depreciation for these assets also acquired in 2022 and 2023.
6. Immovable cultural monument
The amendment to the ITA clarifies the definition of immovable cultural monuments for tax purposes. Taxpayers are given the choice of whether they will continue to treat an immovable object that does not meet the definition of a cultural monument resulting from the 1987 regulations (a cultural monument is an immovable object that has been entered in the state list of cultural monuments and has been declared a cultural monument) as an immovable cultural monument for tax depreciation purposes, or whether they will depreciate it in accordance with the tax procedures applicable to the depreciation of immovable property. In this case, it is necessary to recalculate the depreciation and the tax depreciated cost at the same time as the adjustment to the economic result.
7. Windfall tax
The global situation (especially the economic impact of the ongoing war in Ukraine) has helped the implementation of the windfall profits tax in the ITA, which will affect only a select group of entities - large companies in the banking, energy and mining industries. This is a temporary taxation applicable from 2023 to 2025. A simplified description of the calculation mechanism consists of a 60% tax surcharge applied to excess profits. Excess profits are determined by comparing the tax base for the current year with the average of the historical tax bases for the 2018-2021 period, plus 20%.