First and foremost, taxes are divided into two distinct charges, one is direct and the other being indirect. Direct taxes are related to the amount of income of the subject while indirect is related to the purchase of goods and services along with the consumption of it. The regulation, collection, and administration fall under the Ministry of Finance of the Czech Republic and its dependent tax authorities. It’s crucial to remember that if you’re running a business in the Czech Republic, you’re responsible for paying the appropriate taxes in agreement with the tax legislation.
Forms of Taxes
Below are the seven categories of taxes and their detailed explanations at your convenience.
- Value Added Tax (VAT): this is based on the regulations of the standard system of VAT as an indirect tax. The three distinct rates include two discounted prices of 15% and 10% with a basic rate of 21%.
- Income Taxes: the flat rate of income tax of legal entities is 19%, while the pension and investment funds fees are 5% corporate tax and a flat rate of 15% for income tax of natural individuals (this percentage is the same for self-employed and wage earners).
- Immovable Properties: usually applied to buildings and lands in the territory of the Czech Republic and registered in the Land Registry. The tax rate for these is outlined individually.
- Tax on the Acquirement of Immovable Property: applies to buildings, land, part of utilities that are living in the territory of the Czech Republic or the ownership share.
- Road Tax: applies to vehicles in use for businesses while vehicles used for personal necessities are exempt from this taxation. The rates for this taxation are determined as fixed annual amounts.
- Environmental Taxes: natural gas, some other gases, electricity, and solid fuels.
- Excise Duty Tax: specified types of goods such as spirit, beer, tobacco products, mineral oils, and wine.
Understanding the Czech Accounting System
The principal legislation governing accounting and financial reporting is the Act on Accounting. There are currently distinct standards and decrees as to how to report preparation and keep accounts. The orders vary between different companies like financial institutions to insurance companies and more. For more information, you can read the Ministry of Finance of the Czech Republic, Chamber of Auditors, Union of Accounts, and other institutions.
Financial statements are comprised of profit, balance sheet, notes, and loss statements. These statements may also include a statement of changes in equity and cash-flow statement. Yearly reports and financial statements must be filed in the Commercial Register while the accounting units that are committed to auditing must prepare their annual report. Archiving statements and yearly reports completed by the accounting units must be done for at least ten years.
Tax Registration Information
Provided below is a list of the VAT registration in the Czech Republic which emerges from the Czech VAT Act No. 235/2004 Coll., Value Added Tax. The list will define each category in detail to ensure clarity.
Taxable Individual: this person taxable within the registered office in the Czech Republic whose volume of business is 12 consecutive months and exceeds 1,000,000 CZK. This individual shall become a VAT payer between the time of the first day of the second month until the month in which they exceed the volume of a business unless they become a VAT payer in this Act previously.
Voluntary Registration-VAT Payer: this person or persons have a fixed company in the Czech Republic that implements transactions with deductibility of VAT or taxable supplies. If they do not have a set company in the Czech Republic but still perform operations with deduction of VAT or taxable supplies in the Czech Republic may apply for registration. Because of a grave breach of obligations, these people can apply for registration after a year from the date which the registration of VAT payer was canceled.
If and when the application is submitted by someone who does not have a VAT establishment or a seat in the Czech Republic, they must submit these attachments in their original documented form and authenticated translation to the Czech language. The documents include abstract of companies register, license to business activities; certificate of a registration for VAT in another country; and, any other attachments.
Obligatory Registration-VAT Payer: this individual should apply for registration within 15 days following the end of the month where they’ve exceeded the fixed volume of business. In some cases, they should apply for registration within 15 days from which they became a VAT Payer.