Contents

PREFACE ........................................................................................................................... 4
Abbreviations ................................................................................................................... 5
1. TRADE LICENSE ......................................................................................................... 6
1.1. Freelancer without a trade license................................................................... 6
1.2. Types of trade licenses ..................................................................................... 6
2. TRADE LICENSING OFFICE......................................................................................... 8
2.1. Registration form ............................................................................................. 8
3. VALUE ADDED TAX VAT (DPH) ......................................................................... 10
3.1. What is VAT? .................................................................................................. 10
3.2. Who has to register as a VAT payer? ............................................................. 10
3.3. Person identified for VAT ............................................................................... 11
3.4. VAT Return ..................................................................................................... 11
3.4.1. Example of VAT Return........................................................................... 11
3.4.2. Instructions for filling in the VAT return................................................. 12
3.4.3. Corrective and Additional tax return...................................................... 13
3.4.4. Sending of the VAT return and payment of VAT .................................... 14
3.5. EU Sales list {Souhrnn hlen VIES} ............................................................. 14
3.5.1. Instructions for filling in the EU sales list ............................................... 15
3.5.2. Sending of EU sales list ........................................................................... 15
3.6. Simple examples of VAT filling ....................................................................... 15
3.6.1. Financial advisor ..................................................................................... 15
3.6.2. Tradesman .............................................................................................. 16
3.6.3. Teacher ................................................................................................... 16
4. PERSONAL INCOME TAX {Da z pjm fyzickch osob} ......................................... 18
4.1. Administrator of the tax ................................................................................. 18
4.2. PIT Rate and calculation of the tax ................................................................. 18
4.3. The tax base.................................................................................................... 19
4.3.1. Business profit ........................................................................................ 19
4.3.2. Salaried income ...................................................................................... 19
4.3.3. Other profit............................................................................................. 20
4.4. Deductions from the tax base ........................................................................ 20
4.5. Tax rate ........................................................................................................... 21
 4.6. Deductions from the tax................................................................................. 21
4.7. Income excluded from income tax ................................................................. 21
4.8. Double taxation .............................................................................................. 21
4.8.1. Czech tax residents ................................................................................. 21
4.8.2. Avoidance of double taxation ................................................................ 22
4.8.3. Income from sources in abroad.............................................................. 22
4.8.4. The securement of the tax ..................................................................... 23
4.9. Payment of the tax ......................................................................................... 23
4.10. Examples......................................................................................................... 24
4.10.1. Mr. Smith ................................................................................................ 24
4.10.2. Mr. Black ................................................................................................. 24
4.10.3. Mrs. White .............................................................................................. 25
5. SOCIAL AND HEALTH INSURANCE (SHI) .................................................................. 26
5.1. Social Insurance (SI)........................................................................................ 26
5.1.1. How much to pay?.................................................................................. 26
5.1.2. SSZ Statement of income and expenses {Pehled o pjmech a
vdajch OSV}........................................................................................................ 27
5.1.3. Instructions for filling in the Statement of income and expenses ......... 27
5.2. Health insurance............................................................................................. 29
5.2.1. Health Insurance of Foreigners .............................................................. 29
5.2.2. The rate .................................................................................................. 30
5.2.3. Advances ................................................................................................ 30
5.2.4. Health Summary form for freelancers {Pehled pro OSV} ................... 30
5.2.5. The VZP Summary form .......................................................................... 30
5.2.6. Instructions for filling in the VZP Summary form ................................... 31
6. BOOKKEEPING ........................................................................................................ 33
6.1. Single or double-entry bookkeeping .............................................................. 33
6.2. Single-entry bookkeeping............................................................................... 33
6.3. Foreign currency............................................................................................. 33
7. ROAD TAX {Silnin da} ......................................................................................... 34
7.1. The road tax.................................................................................................... 34
7.2. Rates of road tax ............................................................................................ 34
7.3. The road tax return and payment .................................................................. 34
8. WORKING CONTRACT............................................................................................. 36
8.1. Agreement on Performance of Work {Dohoda o proveden prce} .............. 36
8.2. Agreement on Working Activity {Dohoda o pracovn innosti} ..................... 36

2
8.3. Income tax from working contracts ............................................................... 36
8.3.1. Monthly wage up to 10,000 Czk ............................................................. 36
8.3.2. Monthly wage over 10,000 Czk .............................................................. 37

3
 PREFACE
If you feel like a dummy when you have to file a tax return, you might feel like begging
for help or for an easy guide in English on how to do it. Learning even some simple
facts can help you complete your taxes by yourself and to save money that you would
normally pay to a tax advisor.

Czech taxes are not complicated, but you need to know some basic principles. Life
brings many different and sometimes very complicated situations which can`t be
covered by this Guide; however we tried to cover the most usual tax situations and their
solutions.

This guide should help foreigners who want to start their own business in the Czech
Republic (CR) and who want to be oriented in Czech taxes, insurance and other
requirements imposed by the Czech law. The guide is focused on freelancers and their
problems; not on companies and relating laws.

Followings are the most typical questions that you will have when starting your
business here in the CR. You will find answers to these and other questions in this
guide.

1. Do I need a Trade license for my business in CR? (chapter 1)

2. Where to register my business? (chapter 2)

3. Do I need to register as a VAT payer? (chapter 3)

4. How do I fill in an Income tax return? (chapter 4)

5. Do I need to pay Social and Health Insurance (SHI)? (chapter 5)

6. How do I do the bookkeeping? (chapter 6)

7. Do I need to register for Road tax? (chapter 7)

8. What is Working contract and must I pay SHI from the salary? (chapter 8)

4
 Abbreviations
TLA Trade Licensing Act {ivnostensk zkon .455/1991Sb.}
SHI Social and Health Insurance {Sociln a zdravotn pojitn}
ITA Income Tax Act {Zkon o dani z pjmu . 586/1992Sb.}
CR Czech Republic {esk Republika}
VAT Value Added Tax {Da z pidan hodnoty}
PIT Personal Income Tax {Da z pjmu fyzickch osob}
PITR Personal Income Tax Return {Piznn k dani z pjmu fyzickch osob}
YE Year End
DTT Double Taxation Treaty {Smlouva o zamezen dvojho zdann}
LC Labor Code {Zkonk prce . 262/2006 Sb.}
APW Agreement on Performance of Work {Dohoda o proveden prce}
AWA Agreement on Working Activity {Dohoda o pracovn innosti}

5
 1. TRADE LICENSE
Trade License {ivnostensk list} is a certificate, which entitles you to create your
business. By receiving the Trade License you become a self-employed
entrepreneur/freelancer {OSV= Osoba samostatn vdlen inn}.

1.1. Freelancer without a trade license

Based on 3 of Trade licensing Act (TLA) and 7(1,2) of Income tax Act (ITA); you
don`t need a trade license for these activities:
- Agriculture production, forestry and water management (in these cases you just
have to announce your business at Municipal house)
- Writing (i.e., Authors)
- Independent employment (such as actor, musician, dancer, writer)
- Activities that require a state certification (such as tax advisor, lawyer, court
bailiff, interpreter)

In other cases, you need a Trade license, if you want to run a business in CR.

1.2. Types of trade licenses

Based on the fact, if the issuing of the trade license is conditioned by some education or
practice, we distinguish between Free {Voln}, Bound {Vzan} and Licensed trade
{Koncesovan} activity.

In all cases, you have to fulfill the following general conditions for obtaining the trade
licence:
- 18 years old
- Legal capacity
- Impeccability (demonstrated by the extract from the criminal records)
- Visa (only non-EU citizens)
- For the business seat, the rent agreement and permission of the owner of the flat
- Payment of the 1000 Czk fee

Free activity is an activity, which does not require any professional qualification (such
as manufacturing and trade activity, IT and SW consultations, other consultations, PR
and advertising activities, designers, photographers, after-school education, operation of
cultural events, seminars, housekeeping, cleaning and other activity which are not
Bound (all Free activities are named in Appendix 4 to TLA {Ploha .4
ivnostenskho zkona}.

You will receive Trade license for Free activity after the payment of the 1000 Czk fee
and filling in the Registration form.

6
Bound activity and Licensed trade is activity which require professional qualification.
Bound activities are named in Appendix 2 of TLA {Ploha . 2 ivnostenskho
zkona}. Licensed trades are named in Appendix 3 of TLA {Ploha . 3
ivnostenskho zkona}.

You will receive Trade license to Bound activity or Licensed trade after the payment of
the 1000 Czk fee, filling in the Registration form and proof of your professional
qualification. It can be a work agreement that proves your practice or university or other
school diploma.

As a foreigner, you need to prove the qualification, which is same or similar to the one,
which is required by Czech law for a particular Bound activity. You will need official
translations of your documents (eg. Diplomas).

7
 2. TRADE LICENSING
OFFICE

You have to register your business at the Trade licensing office before you start your
business in Czech republic. You can go to whatever Trade licensing office in R.

List of all Trade licensing offices can be found at:

http://www.statnisprava.cz/rstsp/ciselniky.nsf/i/d0056

2.1. Registration form

At the office you fill in the Registration form {Jednotn registran formul}. You can
also ask the clerk to do your registrations which are needed at the beginning of your
business (such as income tax registration and SHI registration chapter 5). However, it
is always better to visit or to call the Tax office and SHI offices in 3 weeks after the
registration to be sure, that the registration was made correctly!

Tax office:
You will be registered at Prague district, where is your business seat address or where
you have temporary residency.

List of all Tax offices can be found at:

http://www.statnisprava.cz/rstsp/ciselniky.nsf/i/d0027

All tax returns (except of Property tax return) must be sent to the tax office where you
are registered.

Social office:
You will be registered at Prague district, where is your business seat address or where
you have temporary residency.

List of all Social offices can be found at:

http://www.cssz.cz/cz/kontakty

They don`t speak usually English at the Trade licensing offices; you should come with
your Czech speaking friend or to ask the tax specialist to make the registration for you.

For the Trade license registration you will need:

- Extract from criminal records (not older than 3 months); if you are not czech
citizen, you will need Extract from criminal records from your country
translated to Czech (Sworn translation).
- ID

8
- Confirmation of your landlord, that you can use his address as your business
seat. If you can`t get it, you have to buy Virtual business seat. We recommend
this: www.praguevirtualseat.cz
- Education or work experience certificate, if necessary (see section 1.2)

9
 3. VALUE ADDED TAX
VAT (DPH)

3.1. What is VAT?

Value added tax is a tax which is imposed on all goods and services sold by VAT
payers.

In CR there are three VAT rates:

15% VAT (mostly foodstuffs)

21% VAT (the majority of goods and services)
10% VAT (used very sporadically)

VAT exempt fulfillments are services such as:

Post, TV and radio broadcasting, financial services, pension, insurance, transfer and rent
of land and buildings, flats and business premises, education, health, social help, lottery
(51 of VAT Act).

3.2. Who has to register as a VAT payer?

You have to register as VAT payer, if your turnover is higher than 1 million Czk in 12
months. The 12 months does not mean calendar months, but really in any timespan of
12 months (for example from March till February).

You are a VAT payer from the day that you exceed the 1 million Czk limit! For that
reason, you have to watch your turnover very carefully. From that moment, you have to
invoice your goods or services with the price 21% (or 15% or 10%) higher. These 21 %
you must pay to the tax office, however, you can reduce them by the VAT that you pay
to your suppliers.

VAT registration is also necessary if you import from other EU countries cars, tobacco,
alcohol, fuel (with excise duties) or goods exceeding a value of 326,000 Czk.

You can register as a VAT payer also voluntarily if your turnover is below 1 million
Czk. There are arguments for the registration such as:
- Your Czech or international suppliers require you to be a VAT payer
- You invoice to VAT registered clients in the EU, but you have expenses in the
CR. In this case you will never have to pay VAT to the tax office (as on EU
sales there is no VAT), but you will receive VAT back from the tax office.
- You are planning some major expenses, such as buying a car or equipment.
VAT payers can claim the VAT paid at the tax office.

10
3.3. Person identified for VAT
You have to register as a Person identified for VAT {Identifikovan osoba} at the tax
office if:
- You provide services to a VAT-registered client based in another EU country;
- You acquired goods from another EU country in amount over 326,000 Czk
during one calendar year;
- You received services from EU (non Czech) VAT-registered persons
- You received goods that require installation or building from EU (other than
CR) VAT-registered persons.

If you are a Person identified for VAT, you behave like you are not a VAT payer for the
CR, but for the rest of the world you are. You`ll have to file the VAT return, if you
receive services or goods from an EU VAT payer. If you receive or provide service only
to Czech client, you won`t need to file the VAT return.

If you provide services or sell goods to another EU country, you`ll also have to file
(beside of the regular VAT return) an EU Sales list (chapter 3.5.).

3.4. VAT Return

VAT return is a universal blank form to be filled in by VAT payer and person identified
for VAT. You should fill in the cells and rows of the form with a white background. If
there is no data filled in into any row, then it is judged as there was no taxable
fulfillment.

If you are registered for VAT, you have to file a VAT Return monthly. After two years
from your registration, you can file a request to change the period to quarter.

If you invoice to another EU country, you also have to file a monthly EU Sales list.

From 2016, there is new required form, which must be filed by all VAT payers. It is
VAT ledger (Kontroln hlen) and it includes detailed list of all invoices (issued and
received) in individual amount over 10 000 Czk including VAT.

A VAT payer is obliged to file a VAT return (with all appendixes) by the 25th day of
the month following the taxable month.

3.4.1. Example of VAT Return

VAT return can be downloaded from:

http://www.financnisprava.cz/cs/danove-tiskopisy/databaze-aktualnich-danovych-tiskopisu.aspx

under the form number 25 5401.

11
3.4.2. Instructions for filling in the VAT return

Section A:
1 - Name of the region of the tax administrator (eg. Hlavn msto Praha)
2 - Name of the city of the tax administrator (eg. Praha 1)
3 - DI = tax identification number
4 - Birth number (if you have it; if not, leave it blank)
5 - Mark a type of tax return (regular {dn}, additional {dodaten} or
corrective{opravn})
6 - Reason of filling in the additional VAT Return (see chapter 3.4.3.)
7 - Number of attachments/sheets
8 - Taxable period (month {msc}, quarter {tvrtlet}, year {rok})
9 - From {od} to {do}
10 - If you are a VAT Payer, mark the cell with name {Pltce dan}, if you are
VAT identified person, mark the cell with name {Identifikovan osoba}
11 - Name of your company (let it blank if you are natural person, not company)
12 - Your name, if you are natural person
13 - Business seat (if company) or address if natural person( a)City b)Post code
c)phone number d)street number e)number of house f) e-mail g)country
14 - Dominant economical activity

Section B:
1 If your tax return isn`t prepared by tax advisor or any proxy or attorney,
leave it blank
2 Name of proxy/attorney
3 Birth date of proxy/attorney or identification number of the tax advisor
4 Name of statutory body {Jednatel}, if the return is for a company
5 Date of preparation of the return; stamp; signature
6 Name of person, who prepared the tax return (if different from you) and
his/her phone number

Section C:
Part I Tax liability {Zdaniteln plnn}
1&2 - realized taxable supplies with a place of supply in the CR
Row 1 is for basic rate (21%) {zkladn} and row 2 for lower rate (15%)
{snen}.
3&4 - acquisition of goods from another EU country
5&6 - supply of service by a person registered for VAT in another EU country
7&8 import of goods
9 - acquisition of new means of transport
10&11 received construction and installation works in regime reverse charge
12&13 other tax liability

Part II Other liability and liability with place of supply out of CR {Ostatn
plnn a plnn s mstem plnn mimo tuzemsko s nrokem na odpoet dan}
20 supply of goods to another EU country
21 supply of service with taxable fulfillment with a place of performance in
another EU country

12
 22 export of goods out of EU
23 supply of a means of transport to EU VAT non-payer
24 shipment of goods to another EU country
25 provided construction and installation works in regime reverse charge
26 other liability with entitlement to VAT deduction

Part III Supplementary data {Doplujc daje}

30&31 - Mentioning a value of acquisition and supply of goods through an
intermediary using simplified procedure at tripartite trade ( 17).
32 import of goods VAT exempt ( 71g)
33&34 correction of the tax relating to receivables to debtors in insolvency

Part IV Tax deductions {Nrok na odpoet dan}

40&41 - received taxable supplies with a place of supply in the CR
42 tax deduction from imported goods, when the tax administrator is customs
office
43&44 VAT deduction from fulfillments on rows 3 to 13
45 correction of tax deduction (based on 74(4), 77; 79 to 79c)
46 total of tax deductions (sum of rows 40 to 45)
47 acquired or created long-term business assets

Part V Reduction of tax deduction {Krcen nroku na odpoet dan}

Note: this part is applicable only for VAT payers who provides both VAT and
VAT exempt fulfillments
50 VAT exempt fulfillment without the entitlement to VAT deduction (such
as post, TV, broadcast, finance, pension, insurance services, etc. (51))
51 Fulfillments that are exempt from coefficient calculation (76 (4))
52 VAT deduction in reduced amount
53 Settlement of VAT deduction (76 (7) to (10))

Part VI Calculation of VAT liability

60 Correction of VAT deduction, based on 78 to 78d
61 VAT returning to person from a non-EU country (84)
62 VAT liability (calculated as sum of rows 1 to 13 minus row 61)
63 VAT deduction (calculated as sum of rows 46; 52; 53)
64 Final VAT liability (row 62 minus row 63; if 62>63)
65 Excessive deduction (row 63 minus row 62; if 63>62)
66 Difference in VAT from regular tax return (this row is filled in only in the
case of an additional VAT return)

3.4.3. Corrective and Additional tax return

Corrective tax return:

Before an expiration of a time-limit for submitting a regular tax return, a VAT payer
could submit a corrective tax return. So this corrective tax return will be used for
assessment proceedings and previous tax return will not be taken into account.

Additional tax return:

13
An additional tax return is submitted independently only for one taxable time period till
the end of a month following finding out a reason to submit a tax return. A VAT payer
could submit an additional tax return within the time-limit of three years from the end of
a taxable time period in which an obligation to submit an additional tax return became
effective, in the case that it reduces a tax liability by a correction summary.

3.4.4. Sending of the VAT return and payment of VAT

You have to file VAT return electronically.

You can also use on-line VAT return:

https://adisepo.mfcr.cz/adistc/adis/idpr_epo/epo2/uvod/vstup_expert.faces

After filling out the on-line form, the final page gives you the opportunity to:
- Save the working document (so it can be uploaded to this application again)
{Uloen prac. souboru}
- Print the form {pln opis k tisku}
- Send to the Data box {Uloen k odesln do datov schrnky}
- Send the form with electronic signature or without it {Odesln psemnosti}

If you don`t have either an electronic signature or a data box, you have to choose the
option Do not sign the form {Nepodepisovat podn}. The application will create the
Confirmation of sending the VAT return, which you have to print, sign and send to the
tax office within five days.

You have to pay VAT by the 25th day of the month following after the taxable period
(usually month) to the bank account of the tax office.

Here is the bank account of Prague tax office for VAT payments: 705-77628031/0710.
As Variable symbol you should use your DI.

Rest of the bank accounts can be found at:

http://www.financnisprava.cz/cs/dane-a-pojistne/placeni-dani/bankovni-ucty-financnich-uradu

3.5. EU Sales list {Souhrnn hlen VIES}

If you are a Person identified for VAT or a VAT payer, you have to file monthly EU
sales list, but only if you invoiced in EU during this period (you provided some services
with place of fulfilment in other EU country or sold some goods to other VAT-
registered person in other EU country).

EU sales list should be filed only if you have something to submit; it should not be filed
blankly. You have to fill in the DI (tax identification number) of your client, number
of taxable fulfillments and the code of the country of your client to the EU sales list.

14
3.5.1. Instructions for filling in the EU sales list

Section A is very similar to VAT return Section A, please use chapter 3.4.2. for
section A.

Section B:
{Kd zem} Client`s Country code
{DI poizovatele zbo} Tax identified number of the client
{Kd plnn} Code of the fulfillment:
0 supply of goods to other EU country
1 transfer of business assets to other EU country
2 supply of goods through an intermediary using tripartite trade
3 service provided with taxable fulfillment in other EU country
{Poet plnn} Number of taxable fulfillments
{Celkov hodnota plnn v K} Total value of the fulfillment in CZK

3.5.2. Sending of EU sales list

You have to fill in the EU sales list in an on-line application EPO:

https://adisepo.mfcr.cz/adistc/adis/idpr_epo/epo2/uvod/vstup_expert.faces

After filling in the on-line form, the final page gives you the opportunity to:
- Save the working document (so it can be uploaded to this application again)
{Uloen prac. souboru}
- Print the form {pln opis k tisku}
- Send to the Data box {Uloen k odesln do datov schrnky}
- Send the form with electronic signature or without {Odesln psemnosti}

If you don`t have either electronic signature or the data box, you have to chose the
option Do not sign the form {Nepodepisovat podn}. The application will create a
Confirmation of sending the Sales list, which you have to print, sign and send to the tax
office within five days.

Do you still need the help with your VAT return? Ask www.expattaxes.cz for help.

3.6. Simple examples of VAT filling

3.6.1. Financial advisor

Financial advisor provides consultations to Czech clients and also to VAT-registered

EU clients and to one US company. His turnover is over 1 million CZK in 12 months.

In this case, the advisor has to register as a VAT payer, because his turnover is over 1
million CZK.

15
He will automatically be a monthly payer. After the end of the month, he prepares a
VAT return and also an EU sales list as he provided services to EU clients.

VAT return: he uses row 1 for his revenue from consultations to Czech clients; he uses
row 21 for revenue from his EU consultations; he uses row 40 and 41 for the costs and
VAT he paid in this month; he uses row 62 to 65 for the calculation of tax.

EU sales list: As his EU client is Italian, he use IT as Country code and 3as Code of
fulfillment.

He sends both forms to the tax office, where he is registered and pays the tax by the 25th
day of following month.

3.6.2. Tradesman

The tradesman buys goods in another EU country and sells in the CR. In June he
realized, that he acquired goods in the amount of (without VAT) 330.000 CZK from the
EU. In September he realized that his turnover from October till September was over 1
million CZK.

In June, he has to register as a VAT identified person and from June he has to file an EU
Sales list, if he sells goods to another EU country.

In October he has to register as a VAT payer, because his turnover was over 1 million
Czk (his past registration is cancelled automatically). From October he has to file a
VAT return and an EU sales list.

VAT return: he uses row 1 for his Czech revenues; he uses row 3 for the value of
acquired goods from the EU; he fills in the same value to row 43; if he has some costs
from CR (for example office supplies), he shows it on row 40; he uses row 62 to 65 for
the calculation of tax.

EU Sales list: he would use Fulfillment code 0, if he sold the goods to another EU
country. However in our example, he sold only to the CR and for that, he does not need
to file an EU sales list.

3.6.3. Teacher

The teacher teaches in a Czech language school and makes translations for a US
company and he uses Google AdWords advertising (Ireland). His turnover is below 1
million CZK in 12 months.

The teacher doesn`t need to register as VAT payer, because he has turnover below one
milion Czk. The teacher doesn`t need to register as VAT Identified person from the title
of teaching a non-EU client; However the teacher recieved services from EU (VAT
registered) supplier the Google AdWords advertising and for this reason, he has to
register as VAT Identified person.

16
VAT return: In the month in which he received AdWords advertising services he has to
file the VAT return.

EU sales list: If the teacher provides his services only to CR and US clients, he doesn`t
need to file an EU sales list. He only files an EU sales list if he has something to submit
for it; it should not be filed blank.

17
 4. PERSONAL INCOME
TAX {Da z pjm
fyzickch osob}

4.1. Administrator of the tax

The administrator of your Personal Income tax (PIT) is the local tax office nearest to
your permanent address (if you are Czech) or temporary residency address (if you
registered it at the foreign police) or business seat address. List of all Tax offices can be
found at: http://www.statnisprava.cz/rstsp/ciselniky.nsf/i/d0027

For the registration you will need:

- Copy of Trade licence
- ID
- Registration form

After the registration, you will receive the letter from the tax office, where your DI
(Tax identification number) is stated.

At the tax office you can choose, if you want to register yourself only for Income tax or
also for other taxes, such as VAT or road tax. (see chapters 3 and 7).

You have to announce to your tax administrator, if you change your address.

You don`t need to file a Income tax return (ITR), if your annual income was below
15,000 Czk; in this case, you have to write the letter to your Administrator and
announce this fact (within the time period for filling the tax return).

The Income tax return can be downloaded from:

http://www.financnisprava.cz/cs/danove-tiskopisy/databaze-aktualnich-danovych-tiskopisu

For Czech version see form number 25 5405; for English version see form number
25 5405/AJ.

4.2. PIT Rate and calculation of the tax

For the calculation of the PIT, you need to know your tax base (see below). The rate of
PIT is 15 % from the tax base.

18
4.3. The tax base
The tax base is calculated as a sum of Business profit, Wage from your Employment
and Other profit.

4.3.1. Business profit

You should use Attachment 1 of PITR for calculation of your business profit. The
business profit is calculated as annual Revenues less annual Costs.

You can choose, if you will deduct Real costs or Fictitious costs.

a) Real costs are all expenses, which you paid during the year and for which you
have invoices or receipts (and of course relate to your business).
b) Fictitious costs are calculated as percentage from revenues. In this case you
don`t need to keep any receipts or invoices (you have to keep only issued
invoices). Fictitious costs are limited to the amounts stated below.

Real costs real costs are all costs which directly relate to your business and which
were paid by you. It can be: phone bills, internet bills, tram tickets, books, office
supplies, rent of office or part of rent of your flat, if you work from home; printers, PC,
training, car expenditures petrol, parking, repairements, etc.. If you want to claim car
expenditures, you have to pay Road tax for the car; if you use the car also for personal
purposes, than you can claim only part of the expenditures, which relates to the
business.

The percentage is:

80% - craft trades, agriculture, water management and forestry (but max. 1,6Mil
Czk)
60% - majority of trade license free, bound, licensed trade (but max. 1,2Mil Czk)
40% - income from copyright; persons trading based on the special law (but max.
800 000 Czk)
30% - income from rent (but max.600 000 Czk)

The Partial tax base from your business, which you calculate in the row 113 of the
Att.1, has to be transferred to the row 37 of the ITR.

The Attachment 1 of the ITR can be downloaded from:

http://www.financnisprava.cz/cs/danove-tiskopisy/databaze-aktualnich-danovych-tiskopisu

For Czech version see form number 25 5405/P1; for English version see form number
25 5405/P1a.

4.3.2. Salaried income

In addition to the tax base you have to add also salary (i.e. gross salary plus social and
health insurance paid by the employer on behalf of the employee). Your employer
should give you a Confirmation of your annual salary and insurance at the end of the

19
year {Potvrzen o zdanitelnch pjmech ze zvisl innosti a funknch poitk}. In
this confirmation, you will see, how much your annual salary and insurance was.

If you have only Income from your employment and If your salary was not subject to
Solidarity tax, your employer will file your income tax return.

4.3.3. Other profit

Use Attachment 2 of ITR to file your Other profit.

Other profit includes also:

Lease - of flat, building, other property (which is not included in your business
property); rent of equipment, etc. You can use 30% fictitious costs or real costs
(depreciation, renovation, heating, water, etc.) as deduction from your lease
income.
Other profit (e.g. occasional activity, sale of property, occasional lease of
property, occasional agricultural production). You can deduct costs of achieving
the income against this income. (Income from occasional activity, lease of
property and agricultural production lower of 30,000 Czk is income tax
excluded).

The Partial tax base from Other profit, which you calculate in the Att.2, has to be
transferred to the rows 38-40 of the ITR.

The Attachment 2 of the ITR can be downloaded from:

http://www.financnisprava.cz/cs/danove-tiskopisy/databaze-aktualnich-danovych-tiskopisu

For Czech version see form number 25 5405/P2; for English version see form number
25 5405/P2a.

Capital Gain

Capital gain is for example received interests (not dividends) or income from sold
shares. Income from sold shares is tax free if not exceed 100 000 CZK in one year.
Income from sold shares which you held more than 3 years is also tax free. Capital gain
should be included only in the row 38 of ITR.

4.4. Deductions from the tax base

Your tax base can be lowered by standard deductions:
a) Paid interest from your mortgage (max. 300,000 Czk)
b) Life insurance up to 12,000 Czk
c) Retirement savings calculated as annual savings less 12,000 Czk (max. 12,000
Czk)
d) Gifts to organizations named in law up to 10% of the tax base (min. 1,000
Czk)
e) Loss from your business from previous years

20
4.5. Tax rate
The tax rate is 15% from the tax base after deductions (chapter 4.4.); however, there is a
new progressive taxation (so-called "solidarity tax") in case of annual income which
exceeds 1,277,328 Czk; the tax rate is then higher by 7 %.

4.6. Deductions from the tax

There are more deductions which you can use. These deductions are deducted from the
calculated tax, but only till zero tax. (with the exception of the child deduction which is
refundable).

Annual deductions:
a) Personal deduction 24,840 Czk (everybody can use it)
b) Child benefit 1. child 13,404 Czk; 2.child 15,804 Czk, 3.child
17,004Czk (only one parent can use it)
c) Non-working spouse deduction (earning max. 68,000 Czk) 24,840 Czk
d) Student deduction 4,020 Czk (up to 26 years)
e) Kindergarten deduction 9,200 Czk
You have to reduce the annual deduction of 1/12 of the amount for every month in
which you are not student or don`t have a child.

!!! You can`t use Child benefit and Non-working spouse deduction in your income tax
return if you use Fictitious costs (chapter 4.3.1.)!!!

4.7. Income excluded from income tax

Excluded from income tax is all income which was already taxed by withholding tax
(e.g. income from employer up to 10,000 Czk monthly; royalties on articles in
newspapers, TV, radio, dividends; gain from lotteries and many other quite unusual
incomes, which are named in 4 of ITA.)

4.8. Double taxation

4.8.1. Czech tax residents

Czech tax residents are subjected to tax on their worldwide income regardless of where
it is received.

Czech tax non-residents are liable to Czech income tax on Czech source income only.

Income is regarded as arising in the CR if it is from:

- Work carried out in the CR
- Activities carried out through a permanent establishment located in the CR

21
- Business, technical or other consultancy services and similar activities, provided
in the CR
- Rental income, capital gains, dividends and other income.

For the proper establishment of your tax residency, you should read the double tax
treaty (DTT) between CR and your country. In the majority of countries you are the tax
resident of the country, where:
- You have a permanent flat available for your use (not the same as permanent
address)
- You have the center of your vital interest (your family, friends, income)
- You live for the majority of the year

For example, if you have a permanent flat only in the CR, you are Czech resident.
If you have a permanent flat in the CR and in the US as well, but your center of vital
interest is in the CR, than you are a Czech tax resident. If you are not sure about your
center of vital interest, you are the resident of the country where you lived the majority
of the year. Your tax residency can be different every year.

4.8.2. Avoidance of double taxation

The CR has concluded about 70 DTT that closely follow the wording of the OECD
Model Tax Convention. DTT can also reduce the withholding tax rate applicable to
Czech non-residents income from Czech sources and they stipulate the method for the
avoidance of double taxation to be used with respect to particular types of income
(exemption or simple credit methods).

If no DTT has been concluded between the CR and your country, the Czech sourced
income of yours will be subject to Czech taxation according to domestic Czech tax
legislation.

Exception method means that the income is not included in the Czech Income tax return
at all.

Credit method means that the income is added to Czech income (to the tax base) and
from the final Czech tax you can deduct the tax paid in the other respective country.

4.8.3. Income from sources in abroad

Foreign income should be filled in the Attachment 3 of the ITR. You have to use the
Ministry of finances annual fixed exchange rate (on the website of the Ministry) as the
exchange rate. If you have income from more countries, use for calculation of each
country extra Free sheet of the Attachment 3.

The Attachment 3 of the ITR can be downloaded from:

http://www.financnisprava.cz/cs/danove-tiskopisy/databaze-aktualnich-danovych-tiskopisu

For Czech version see form number 25 5405/P3; for English version see form number
25 5405/P3a.

22
Your income from abroad, besides of the Att.3, has to be also included in ITR on the
rows 31 40; depends what type of income it is.

4.8.4. The securement of the tax

The securement of the tax is defined in 38e of ITA. It must be applied only on the
income of non-EU tax residents. The customer/client (tax payer) must secure the tax
from the amount paid to the non-EU tax resident, who invoiced him for some service or
goods. A customer can do that only if he knows, that the supplier is a non-EU tax
resident.

The securement tax rate is 10% from the invoiced amount in most cases (exceptions are
in 38e (3,4)). It means, that if you are a client of a non-EU tax resident supplier and he
charges you 1,000 Czk for his services, you should secure 100 Czk and send it to the tax
office and the rest of amount you should send to the supplier.

The secured tax you have to send to the tax office by the end of the next month
following the month in which you paid your supplier. Together with the secured tax,
you have to send The Announcement about secured tax to the tax office {Hlen o
proveden zajitn dan}.

If you are non-EU tax resident and your customer secured your tax during the year, you
can deduct the secured tax from your total tax liability.

If you are a non-EU tax resident, you can apply at your tax office for the remission of
the securement. If you have this remission, nobody can secure your tax. If you need help
with the application for the remission of the tax, you can contact Expat Taxes s.r.o..

4.9. Payment of the tax

You have to pay the tax calculated in the Tax return by the end of March to the bank
account of the tax office.

Here is the bank account of Prague tax office for PITR payment:
PITR: 721-77628031/0710

Rest of the bank accounts can be found at

http://www.financnisprava.cz/cs/dane-a-pojistne/placeni-dani/bankovni-ucty-financnich-uradu

Do you still need some help with your ITR? Ask www.expattaxes.cz for help.

23
4.10. Examples
4.10.1. Mr. Smith

Mr. Smith is a designer. He is employed and also has his own business (income 200,000
Czk, real costs 100,000 Czk). He has a child for the whole year and paid 50,000 Czk as
mortgage interest.

Attachment 1: Mr. Smith will use the Att. 1 for the calculation of his business profit.
He can use the fictitious costs (60% from his Income = 120ths, because it is more than
his real costs). His profit is (200ths less 120ths) 80ths Czk.
He will fill in rows 101, 102, 104, 113; part 2.B and 2.C.

Tax return: From his employer he received a Confirmation of his annual salary. The
annual salary is 500ths Czk and insurance 100ths Czk. He will fill in the salary to row
31 and insurance to row 32 of the return. In row 42 he`ll fill in the sum of his salary,
insurance and business profit (500ths + 100ths + 80ths = 680ths).

Deductions from tax base: Interest from mortgage can be deducted from the tax base;
shown in row 47. The tax base after deductions (row 55) is (680ths -50ths) 630ths.
From this amount he will calculate 15% of the tax = 94,5 ths Czk.

Deductions from the tax: From the tax, he can deduct personal (row 64) and child (row
72) deductions (25ths +13ths) 38ths. The final tax is (94,5ths 38ths) 56,5ths Czk.

4.10.2. Mr. Black

Mr. Black is an architect and Czech tax resident, with Czech business income 1million
Czk, real costs 700,000 Czk and US business income 100,000 Czk, costs 50,000 Czk; In
US he paid 7,000 Czk tax from his profit.

Attachment 3: He will use Att. 3 for his US income. He will fill in rows 321-330.

Attachment 1: He will use Att. 1 for his CZ business income. In the row 101 he`ll show
his worldwide income (1 mil + 100 ths) and in the row 102 his worldwide costs (700ths
+ 50ths). He`ll calculate his profit as 350 ths Czk (row 113; fill in also Sections 2.B,
2.C, 2.D)

Tax return: In row 34 he`ll fill in profit 350 ths and in row 57 the tax 52,5 ths. In row
58 he`ll fill in the difference between CZ tax (52,5 ths) and US tax (7 ths) Czk 45,5 ths.

Deduction from the tax: Mr. Black can use only personal deduction (25 ths). His final
tax is (45,5ths 25ths) 20,500 Czk.

24
4.10.3. Mrs. White

Mrs. White is a hairdresser. She had Czech income 200ths Czk, real costs 20ths Czk.
She rented her flat for 50ths Czk. She recieved 20ths Czk as the interest from a loan
provided to her colleague.
She paid 14ths Czk as retirement savings and she had a child for the whole year.

Attachment 1: She`ll use Att1 for calculation of the business profit. She can use 60%
from business income as fictitious costs. Her business profit is (200ths 120ths) 80ths
Czk (rows 101-104 and 113 of Att1 and row 38 of the tax return).

Attachment 2: She will use Att 2 for the declaration of her income from rent. She can
use 30% from rent income as fictitious cost. Her rent profit is 35ths Czk. She will fill in
rows 201-203 and 206 of Att2 and row 39 in the tax return.

Tax return: She`ll declare her capital gain (interest) in row 38. Tax base is 135ths Czk
(80ths + 35ths + 20ths) (row 45).

Deduction from the tax base: In row 49 she`ll declare her retirement savings deduction
reduced of 6ths Czk (14ths 6ths = 8ths Czk).

Deduction from the tax: Mrs. White can use personal deduction (25ths Czk) and child
benefit (13ths Czk).

Final tax: From the tax base is deducted 8ths Czk (retirement savings). The tax is
calculated from amount (135ths 8ths) 127ths Czk (row 55 and 56); the tax is 19ths
Czk (row 57). The tax less personal and child deduction is 19 ths Czk (19ths 25ths
13ths). However the only deduction, which is refundable is the child benefit. The tax
office will return to her the child benefit of 13ths Czk (row 91).

25
 5. SOCIAL AND HEALTH
INSURANCE (SHI)

5.1. Social Insurance (SI)

SI includes pension insurance, sickness insurance and a contribution to the state
employment policy. SI must be paid from your income. If you are employed, your
employer has to pay the SI from your wage.

You have to pay SI:

- if you have trade licence and business activity (as freelancer = OSV)
- if you have salary for your work as a member of statutory body or chairman or
owner of the company
- if you work on APW {dohoda o proveden prce} and you got more than 10ths
Czk per month.
- If you are employed

You have to register at the local Social office (nearest to your permanent or announced
address) by the 8th day of the month following after the month when you started your
business. You can register yourself for social insurance at Trade licensing office, when
you register your business. However, as you are a foreigner and the social office can
have some additional questions on you, it is better to call there or visit your Social
office to find out, if everything was processed correctly.

You can find the nearest Social office on the website: http://www.cssz.cz/cz/kontakty

You will receive a letter from your local Social office after registration. In this letter you
will find your Variable symbol, the amount of advances that you have to pay and Bank
account number of your Social office.

5.1.1. How much to pay?

The rate is 29,2% from the assessment base which is basically 14,6% from your
business profit.
The payment rules depend on if the business activity is your Main or Side activity.

Business activity is your Side activity, if you are besides your business also a(n):
- Employee or
- Pensioner or
- On maternity or parental leave or
- Student

26
In these cases, you don`t have to pay any advances if your annual profit was below
63 865 Czk. If your profit was over this amount, you have to pay advances calculated
from your last year profit. Minimum amount is 789 Czk per month.

If your business activity is your Main activity, you have to pay advances. The first year
you will pay advances in minimum amount (1,972 Czk). In following years you have to
pay advances in the amount that you calculate in the Statement of income (chapter
5.1.2.).

Advances are paid always by the 20th day of next month to the Social office, where you
are registered.

5.1.2. SSZ Statement of income and expenses {Pehled o pjmech a

vdajch OSV}

After YE you have to file Statement of income and expenses. The deadline for sending
the form is 30.4.. You can send the form to the social office by mail or deliver it
personally.

If you calculated the additional payment, you have to send the money by 30.4. to the
social office where you are registered. The bank account numbers are here:
http://www.cssz.cz/cz/kontakty/
As variable symbol of the payment use the Variable symbol from registration letter.

You can download Interactive form from:

https://eportal.cssz.cz/web/portal/tiskopisy-osvc-2014 Vyplnit tiskopis
This form calculates some rows automatically!

5.1.3. Instructions for filling in the Statement of income and expenses

Mstn pslun OSSZ/PSSZ/MSSZ Brno Code of your Social office

Variabiln symbol dchodovho pojitn Variable symbol

Section A
1 Surname
2 First Name
3 Title
4 Birth date and Birth number
5 Street
6 Street number
7 City
8 Post code
9 Country
10 Phone number
11 Email and ID of your data box (if you have)

27
Section B (ano yes; ne no)
12 Was your ITR made by the tax advisor? (usually no)
13 Are you obliged to file Income tax return? (usually yes)
14 Is your income tax set by fixed amount? (usually no)
15 Date of the Protocol stated fixed tax (blank, if you have no in row 15)
16 Date of Decision about prolongation of your tax return (usually blank)
17 Do you use the fiscal year? (usually no)

Section C
18 Business activity is my Main {Hlavn} or Side {Vedlej} activity?
In which months was your business the Main and Side activity?

Section D (leave blank whole section, if your business is your Main activity)
For which reason was your business only a Side activity?
19 - employment
20 - retirement or invalidity
21.1. - parental contribution
21.2. - maternity contribution
21.3. - taking care of invalid child under 10 years
22 - you are a soldier
23 - taking care of studying child who finished primary school

Section E
24 Voluntary payment of illness insurance (usually no)
In which months? (leave it blank, if you have no in row 19)
25 Voluntary payment of retirement savings (usually no)

Section F
!If you use an Interactive form, you can fill in only rows 26,28 and 35,39; the
rest of rows are calculated automatically!
26 Tax base (row 113 of the Att. 1 of ITR)
27 number of months in which your business was a Main/Side activity
28 number of months in which you run the business (usually same as row 27)
29 Average tax base (row 26 divided by row 28)
30 Division of the tax base (only for persons whose business was part of year
Main and part of year Side activity); (row 29 multiplied by row 28)
31 Assessment base (row 26 multiplied by 0,5; but if your business was only a
Side activity and your tax base was below 63 865 Czk, leave it blank)
32 Partial assessment base (only for persons whose business was Main for
part of the year and Side activity for part of the year)
33 Minimal assessment base:
Only Main activity: Same amount as in row 31, but min. is 79,836 Czk and
max. 1,277,328 Czk.
Only Side activity: Same amount as in row 31, but min. is 31,944 Czk and max.
1,277,328 Czk.
The Main and Side during one year: Sum of row 31 {Hlavn + Vedlej}; but
not less then the sum of row 32. Max. 1,277,328 Czk.

28
 34 Voluntary increased assessment base (if you want, you can increase your
assessment base and pay higher insurance; if you don`t, write the same amount
as in row 35)
35 Assessment base from employment (only if you were employed)
36 Sum of row 34 and 35
37 Assessment base from business (If row 36<1,277,328 Czk-> than write
amount from row 34; If row 36>1,277,328 Czk -> than write the difference
between 1,277,328 Czk and row 35)
38 Insurance (row 37 multiplied by 0,292 rounded up on crowns)
39 Advances paid
40 Difference between row 38 and 39 (amount which you have to pay or you
will get from the social office)

Section G
Fill in only if you have overpayment on your insurance. Fill in the way, how the
social office should send you the money back (a)bank transfer b)by mail)

Section H
Mark the row Main{Hlavn} if your business will be your Main activity in
next year, in other case mark Side{vedlej}.
41 Monthly assessment base (Row 26 multiplied by 0,5 divided by row 27,
but not less than 6,752 Czk (for Main) and 2,701 Czk (for Side) and not more
than 108,024 Czk.
42 Monthly advance payment (row 41 multiplied by 0,292, but min. 1,972
Czk (for Main), 789 Czk (for Side) and max. 31,544 Czk.
43 Monthly illness insurance (voluntary) (row 34 diveded by row 28
multiplied by 0,023; min. 115 Czk)

Section I
Information about co-operating self-employed person (usually blank)

Section J
Voluntary payments of retirement savings Ano (yes); Ne (no)

Section K
Fill in only if you are sending corrective form

Section L
Name of your Social office
Date
Number of attachments
Signature (OSV = you; SSZ = Social office)

5.2. Health insurance

5.2.1. Health Insurance of Foreigners

29
EU Citizens (Schengen) and people with Permanent residency permit can use the public
health system. The public health system can be used also by people employed by a
Czech company.

Freelancers from third countries have to use Commercial Complex insurance.

Commercial Complex insurance is provided by many insurers in CR (e.g. Maxima,
VZP, Slavia, Uniqua). The insurance payments depends on your age and the length of
the insurance. You are not obliged to file any form after year end, if you have
Commercial insurance.

The rest of this chapter deals with Public health system.

You can choose from many Public health insurers (e.g. VZP (the most common),
Zdravotn pojiovna ministerstva vnitra, Oborov zdravotn pojiovna, etc.)

5.2.2. The rate

The rate of Health insurance is 6,75% of your annual profit.

If you are employed, the employer pays your insurance. You have to pay the insurance,
if you have income from a business.

5.2.3. Advances

Obligation to pay advances and in which amount depends on if the business is your
Main or Side activity. Side activity is the case, if you are also employed and your
employer pays the health insurnace from your wage.

Main if the business is your main activity, you have to pay advances in min. amount
of 1,823 Czk.
Side you are not obliged to pay advances if business is your Side activity.

In case the state pays your health insurance (if you are a student, mother of a young
child or pensioner), you`ll pay the insurance only if youve had profit in previous year.
The amount of advances depends on the profit of previous year and is calculated in the
Health Summary form (chapter 5.2.4).

Advances are due always by the 8th day of the following month.

5.2.4. Health Summary form for freelancers {Pehled pro OSV}

You have to file Health Summary form after year end if you use Public health care.
Each insurer has its own Summary form. The most common is insurer VZP {Veobecn
zdravotn pojiovna; tel: +420844117777}; for that reason we use the VZP form in this
guide.

5.2.5. The VZP Summary form

30
You can download the Summary form from:
http://vzp.cz/platci/tiskopisy/prehled-o-prijmech-a-vydajich-osvc

5.2.6. Instructions for filling in the VZP Summary form

Mark the row with name opravn if the form is corrective to other, previously
sent. In other cases mark dn.

Section 1
Pjmen surname; Jmno name; Titul title; Ulice street; slo street
number; slo pojitnce number of insured person (birth number); PS
Post code; Obec city; Identifikan slo indentified number; Pojistn
platm mark {poukzkou} if you pay advances by mail, mark {pevodem} if
you pay advances by bank transfer; Bankovn spojen bank number; Telefon
phone number;

Section 2
In the first part mark months in which you were also employed or ill for whole
month.
In the second part mark months in which:
a) Your insurance is also paid by the state (pensioners, mothers)
b) You were also employed
c) You were ill the whole month
d) You had severe invalidity/disability
e) You are of retirement age, but you are not retired
f) You take care of a child less than 7 years old or two children less than
15 years old.

Section 3
Are you obliged to file ITR?
Do you have a tax advisor?

Section 4
1 Annual Business income (Row 101 of the Att 1 to the ITR)
2 Annual Business expenses (Row 102 of the Att 1 to the ITR)
4 Number of months in which you ran the business
5 Number of months in which you were insured by VZP and ran the business
6 Number of months in which min. assessment base applied to you (usually
12 months, if any of the points a)-f) of the Section 2 does not apply to you)
9 13,305.5 x Row 6
12 Row 1 less row 2
14 Row 12 multiplied by 0,5 (but min. is amount in row 9)
16 Insurance (0,135 x (row14c x row 5)/row 4

Section 5 (To be paid)

41 Advances paid
43 To be paid/overpayment (Row 41 less row 16)

31
 If you don`t have overpayment, mark Nemm peplatek; if you want your
overpayment to be use as your future insurance, mark Nedm o vrcen; if
you want the overpayment to be paid back, mark dm o vrcen and write
amount of overpayment (row 42).

Section 6 (New advances)

51 new advances (0,135 x 0,5 x Row 12/Row 4)
Mark a)1,823 if row 51 is lower than this amount; mark b) vpoet if row
51 is higher than 1,823 Czk; mark 0 if you are also employed.

Do you still need the help with your SHI forms? Ask www.expattaxes.cz for help.

32
 6. BOOKKEEPING

6.1. Single or double-entry bookkeeping

The single-entry bookkeeping system or single-entry accounting system {Daov
evidence or Jednoduch etnictv} is a method of bookkeeping relying on a one sided
accounting entry to maintain financial information. Single-entry systems are used
because of their simplicity. They are usually less expensive to maintain than double-
entry systems which require a significantly larger amount of expertise. If a double-entry
system is needed, then the services of a trained person are often required.

The single-entry bookkeeping system is based on accounting only cash receipts and
payments. A double-entry bookkeeping system is a set of rules for recording financial
information in a financial accounting system in which every transaction or event
changes at least two different nominal ledger accounts.

6.2. Single-entry bookkeeping

This system is easy and can be used by majority of freelancers (if your annual turnover
is below 25 million Czk).

You have to list all your cash income, payments (expenses) and paid property. You can
use Excel for example, where on one sheet you list all income (Date of issue, date of
payment, number, subject, client, amount) and on the second sheet, all expenses like
paid invoices, receipts, etc. (Date of payment, document number, type, amount). For
every payment, you should have some receipt or invoice.

You don`t need to show all your documents to the tax office as part of the ITR, however
you have to archive all documents (invoices, receipts, etc.) for three years. If you are
VAT payer, you have to archive all documents for 10 years (the period, when the tax
office can control your accounting).

6.3. Foreign currency

You can use fixed (usually monthly rate) or actual foreign exchange rate announced by
NB (esk nrodn banka) for the recalculation of foreign currency to Czech crowns.

http://www.cnb.cz/cs/financni_trhy/devizovy_trh/kurzy_devizoveho_trhu/denni_kurz.jsp

33
 7. ROAD TAX {Silnin
da}

7.1. The road tax

The road tax must be paid for the month in which you used a car for business purposes
at least one day. It doesn`t matter if you have the car in your business assets or not.

7.2. Rates of road tax

Rates are in 6 of the Road tax Act. The rate for the personal cars is differenciated
based on the engine capacity:

to 800 cm3 1 200

over 800 cm3 to 1250 cm3 1 800
over 1250 cm3 to 1500 cm3 2 400
over 1500 cm3 to 2000 cm3 3 000
over 2000 cm3 to 3000 cm3 3 600
over 3000 cm3 4 200

The rate can be lowered, if your car is newer than 9 years (from first registration of the
car). You will decrease the rate:

Of 48% - during first 36 months from the first registration of the car
Of 40% - during next 36 months
Of 25% - during next 36 months

7.3. The road tax return and payment

You have to pay advances quarterly:

- By the 15th of April; 15th of July; 15th of October; 15th of January
The advance payment amount is 1/12 of the annual rate for every month, in which we
used the car.

After YE, you have to file the Road tax return and send it to the regional tax office by
the end of January. By the end of January you also have to pay the additional payment
(if any) on the bank account of the regional tax office.

34
Here is the bank account of Prague tax office for Road tax payment. Rest of the bank
accounts can be found at
http://www.financnisprava.cz/cs/dane-a-pojistne/placeni-dani/bankovni-ucty-financnich-uradu

Road tax: 748-77628031/0710

The road tax return can be downloaded from:

http://www.financnisprava.cz/cs/danove-tiskopisy/databaze-aktualnich-danovych-tiskopisu
under the number of form 25 5407.

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 8. WORKING
CONTRACT

Besides the Employment contract, you can work for your employer on a Working
contract. A working contract is used for part-time work. Czech law recognizes two
different working contracts Agreement on performance of work and Agreement on
working activity. Both contracts are described in 74-77 of LC.

8.1. Agreement on Performance of Work {Dohoda

o proveden prce}
APW must have written form. On this contract you can work up to 300 hours per year
for one employer. You can conclude the contract with more than one employer.

Social and health insurance is not paid from the wage up to 10ths Czk per month. If the
wage is over 10ths Czk per month, your employer will register you to SHI and starts to
pay SHI from your wage.

8.2. Agreement on Working Activity {Dohoda o

pracovn innosti}
If you conclude AWA, you can work for your employer up to half of normal working
hours for whole year. AWA must have written form and must include type of work,
number of working hours, time for which is contract concluded.

Social and health insurance is not paid from the wage up to 2,499 Czk monthly.

8.3. Income tax from working contracts

Income tax is treated differently for wages up to 10,000 Czk and over 10,000 Czk.

8.3.1. Monthly wage up to 10,000 Czk

The taxation depends on if you sign the Declaration of the tax payer, {Prohlen
poplatnka dan} or not.

Declaration of the tax payer can be signed only at one employer and it is declaration,
that you want your employer to reduce your tax of the standard deductions (chapter
4.6.).

If you sign the Declaration, the employer will pay to the tax office advance tax less
standard deduction. After YE, the employer will provide you with the Confirmation of
your annual salary and insurance {Potvrzen o zdanitelnch pjmech ze zvisl innosti
a funknch poitk} and you HAVE TO add the salary to your tax base in ITR.

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If you don`t sign the Declaration, the employer will tax your wage by 15% withholding
tax. After YE, the employer will provide you with the Confirmation of your annual
salary and insurance {Potvrzen o zdanitelnch pjmech ze zvisl innosti a funknch
poitk} and you CAN add the salary to your tax base in ITR.

8.3.2. Monthly wage over 10,000 Czk

The employer will pay advance tax of 15% from the salary. If you sign the Declaration
of the tax payer, the employer deducts from the advance the standard deductions.

After YE, the employer will provide you with the Confirmation of your annual wage
and insurance {Potvrzen o zdanitelnch pjmech ze zvisl innosti a funknch
poitk} and you have to add the wage to your tax base in ITR.

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