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TAXATION OF TAXATION OF INDIVIDUALS IN INDIVIDUALS IN THE CZECH THE CZECH REPUBLICREPUBLIC

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Individuals are subject to income Individuals are subject to income tax.tax.

Taxable income and tax liability Taxable income and tax liability of individuals are determined of individuals are determined under the Income Tax Law.under the Income Tax Law.

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Taxable personsTaxable persons

1.1. ResidentsResidents

2.2. Non-residentsNon-residents

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1. Residents1. Residents

An individual is considered to be a An individual is considered to be a resident of the Czech Republic:resident of the Czech Republic:

permanent home (residential permanent home (residential address) address)

> 183 days in the Czech Republic > 183 days in the Czech Republic in relevant calendar year, except in relevant calendar year, except stay for studies or medical stay for studies or medical treatmenttreatment

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Taxable incomeTaxable income

Resident individuals are subject Resident individuals are subject to tax on their to tax on their worldwideworldwide income income received in monetary or non-received in monetary or non-monetary income.monetary income.

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Following income and capital gains are Following income and capital gains are subject to income tax:subject to income tax:

employment income (salary/ benefits in employment income (salary/ benefits in kind, pension, director’s remuneration)kind, pension, director’s remuneration)

business and professional income business and professional income (royalties and licence fees)(royalties and licence fees)

income from capital (investment income from capital (investment income, capital gains)income, capital gains)

rental income andrental income and other incomeother income

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Other income:Other income:– income from occasional activities income from occasional activities

> CZK 20,000 (2015: 30,000)> CZK 20,000 (2015: 30,000)– capital gains on the sale of non-capital gains on the sale of non-

business assets, unless exemptbusiness assets, unless exempt– sale of property rightssale of property rights– alimony payments and pensions if not alimony payments and pensions if not

exemptexempt– settlement payments and liquidation settlement payments and liquidation

proceeds of companies and proceeds of companies and partnershipspartnerships

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Every individual is taxed separately.Every individual is taxed separately.

The net result (income minus The net result (income minus deductible expenses) is subject to a deductible expenses) is subject to a flat tax rate + solidarity flat tax rate + solidarity surcharcharge.surcharcharge.Certain items of income are taxed Certain items of income are taxed separately by way of a final separately by way of a final withholding tax rate. withholding tax rate.

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Personal deductions, allowancesPersonal deductions, allowances

A.A. DeductionsDeductions

B.B. Tax creditsTax credits

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A.A. DeductionsDeductions

Following items are deductible:Following items are deductible: donations for charitable purposes, donations for charitable purposes,

described by law and deductible after described by law and deductible after a threshold. Including established in a threshold. Including established in EU, Norway and Iceland. EU, Norway and Iceland.

mortgage interest for the main mortgage interest for the main residence up to CZK 300,000 per yearresidence up to CZK 300,000 per year

premiums paid for private life/state premiums paid for private life/state insurance up to CZK 12,000 per year.insurance up to CZK 12,000 per year.

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B.B. Tax creditsTax credits

Resident and non-resident individuals Resident and non-resident individuals may deduct from their aggregate may deduct from their aggregate income a at least a basic personal income a at least a basic personal allowance for spouse and children.allowance for spouse and children.

The credits may only be used The credits may only be used (deducted) up to taxpayer’s tax (deducted) up to taxpayer’s tax liability. As of 2015 a tax credit of CZK liability. As of 2015 a tax credit of CZK 3,000.3,000.

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LossesLossesAny negative result of the category of Any negative result of the category of employment, capital and other income employment, capital and other income cannot be negative. Any negative cannot be negative. Any negative result of the category of business and result of the category of business and professional income can be set off professional income can be set off against a positive result of rental against a positive result of rental income. If the aggregate income income. If the aggregate income (excluding employment income, (excluding employment income, capital income and other income) is capital income and other income) is negative, losses may be carried negative, losses may be carried forward for five taxable periods. forward for five taxable periods.

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Tax ratesTax rates

The tax rates consist of a flat rate The tax rates consist of a flat rate of 15%.of 15%.

(As of 2015 19%.)(As of 2015 19%.)

For the tax years 2013-2015 an For the tax years 2013-2015 an additional 7% solidarity surcharge additional 7% solidarity surcharge applies, which exceeds four times applies, which exceeds four times the annual average salary (CZK the annual average salary (CZK 1,242,432)1,242,432)

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Withholding taxWithholding tax

Following items of income derived Following items of income derived by by residentsresidents from domestic from domestic sources and are subject to a final sources and are subject to a final withholding tax at a rate of 15%:withholding tax at a rate of 15%:

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dividends and other distributionsdividends and other distributions interest on bondsinterest on bonds Interest and other yields on money Interest and other yields on money

held in savings accounts, deposit held in savings accounts, deposit accounts or non-business current accounts or non-business current accounts accounts

Benefits from a state-contributory Benefits from a state-contributory supplementary pension insurance supplementary pension insurance or from a private life insurance, or from a private life insurance, reduced by the premiums paid.reduced by the premiums paid.

From 2015 dividends and other From 2015 dividends and other profit distributions derived by profit distributions derived by resident individuals from resident resident individuals from resident companies will be exempt.companies will be exempt.

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Taxable periodTaxable period

Income tax is assessed annually. Income tax is assessed annually. The taxable period is generally The taxable period is generally the calendar year. Individuals with the calendar year. Individuals with an aggregate income exceeding an aggregate income exceeding CZK 15,000 must file a tax return. CZK 15,000 must file a tax return. Entrepreneurs deriving income Entrepreneurs deriving income from agriculture or trade may from agriculture or trade may choose a different financial year choose a different financial year upon approval of the authorities.upon approval of the authorities.

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2. Non-residents2. Non-residents

Individuals who do not have their Individuals who do not have their permanent residence in the Czech permanent residence in the Czech Republic are treated as non-Republic are treated as non-residents.residents.

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The income of non-residents is The income of non-residents is generally taxed (15% or 35%) generally taxed (15% or 35%) according to the rules applicable to according to the rules applicable to residents, unless a law or tax residents, unless a law or tax treaty provides otherwise. treaty provides otherwise.

If 90% is derived from Czech If 90% is derived from Czech sources the non-resident is entitled sources the non-resident is entitled to deductions which residents are to deductions which residents are entitled to. As of 2015 only for EU entitled to. As of 2015 only for EU member states incl. Norway and member states incl. Norway and Iceland.Iceland.

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Non-residents are entitled to the Non-residents are entitled to the basic personal tax credit.basic personal tax credit.

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Non-residents are subject to the Non-residents are subject to the general withholding tax unless general withholding tax unless special rules apply:special rules apply:

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Remuneration paid to non-Remuneration paid to non-resident members of statutory resident members of statutory executive and supervisory bodies executive and supervisory bodies of resident legal entities is subject of resident legal entities is subject to a final withholding tax at a rate to a final withholding tax at a rate of 15 or 35%.of 15 or 35%.

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Income from independent Income from independent activities and from services activities and from services provided in the Czech Republic is provided in the Czech Republic is subject to a final withholding tax subject to a final withholding tax at a rate of 15% or 35%.at a rate of 15% or 35%.

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A rate of 15% or 35% applies to A rate of 15% or 35% applies to royalties and to income from the royalties and to income from the leasing of movable assets.leasing of movable assets.

Scheme income taxScheme income tax

Income minus deductionsIncome minus deductions Income tax (flat & withholding Income tax (flat & withholding

tax)tax) Less: tax creditsLess: tax credits Payable/refundable income tax.Payable/refundable income tax.

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Social SecuritySocial Security

Employees and self-employed Employees and self-employed persons are liable to social persons are liable to social security contributions.security contributions.

Contribution for employed: 11%Contribution for employed: 11% Contribution for self-employed: Contribution for self-employed:

45%45%

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