Taxation of Individuals Robert Bezecný 23 February 2016 Practical tips & hints

2 © 2016 Deloitte Czech Republic Content Why Me? (Tax Residency Determination) What Income? (Employment / Self-Employment / Capital / Rental) Me or My Employer? (Tax Return vs Annual Reconciliation) Can I Save? (Tax-Deductible Items, Tax Allowances) What About My Social & Health Insurance? I. II. III. IV. V.

3 © 2016 Deloitte Czech Republic I. Why Me?

4 © 2016 Deloitte Czech Republic Tax Resident An individual residing or usually staying in the Czech Republic in the calendar year Residence – the place where the taxpayer has a permanent home under circumstances that indicate his/her intention to stay there permanently Length of stay – he/she usually stays in the Czech Republic for at least 183 days Taxation of worldwide income in the Czech Republic x Tax Non-Resident: taxable in the Czech Republic only on income from Czech sources Split residency possible

5 © 2016 Deloitte Czech Republic Tax Resident in More Countries Tax residency in more countries  Double Tax Treaty to decide (Article 4) Permanent home Centre of vital interest Habitual residence Nationality Agreement of both states

6 © 2016 Deloitte Czech Republic II. What Income?

7 © 2016 Deloitte Czech Republic Individual’s Income SectionLump-sum Expenses Tax LossOffset of Tax Loss Employment Income6N/ANo Self-Employment Income780 / 60 / 40 / 30 %Yes Rental Income930 %Yes Capital Income8N/ANoYes Other Income10Only Actual Expenses NoYes

8 © 2016 Deloitte Czech Republic Employment Income Current and previous employment and similar relationship Executives, members of board, limited partners Any income received in relation to the current, future or prior performance of dependent activity, regardless of the payer of such income  Priority against other types of income Taxed monthly via payroll Super-gross salary Incl. employee‘s stock option plans

9 © 2016 Deloitte Czech Republic Self-Employment Income Income from agriculture, forestry and water management Income from entrepreneurship (based on a trade licence) Freelancers and other businesses Income of authors (withholding tax if up to CZK 10,000 per month) Income of general partners and partners in an unlimited partnership Type of IncomeLump-sum Expenses Agriculture80 % Handicrafts80 % Businesses other than handicrafts60 % Freelancers40 % Rent of business property30 %

10 © 2016 Deloitte Czech Republic Capital Income Profit shares (dividends) Shares of a silent partner Interest income  No deduction of expenses

11 © 2016 Deloitte Czech Republic Rental Income Actual or lump-sum expenses (30 %, up to CZK 2,000,000) Other income Only actual expenses Income from occasional activities, sale of property, prizes from lotteries etc.

12 © 2016 Deloitte Czech Republic III. Me or My Employer?

13 © 2016 Deloitte Czech Republic Employer – Annual Tax Reconciliation Only employment income from one employer (or more consecutive employers), plus up to CZK 6,000 of other income Czech tax resident (or Czech tax non-resident not claiming any tax deductions or allowances) Income not exceeding CZK 1,277,328 per year 2015 Signature of a “Tax Reconciliation Confirmation” before 15 February 2016  Tax refund – through the payroll

14 © 2016 Deloitte Czech Republic Employee – Annual Tax Return Until 1 April 2016 (or 1 July / 1 October / 1 November 2016) Total income & tax deductions & tax allowances Tax underpayment to be settled by the tax filing deadline / tax refund from the tax authority within 30 days after the tax filing deadline

15 © 2016 Deloitte Czech Republic Income Tax Pre-Payments Based on the last tax liability From the filing deadline until the next tax filing Tax Liability (CZK)Pre-Payment RatePre-Payment Frequency 0 – 30,0000N/A 30,001 – 150,00040% of the taxSemi-annually 150,001 –25% of the taxQuarterly

16 © 2016 Deloitte Czech Republic IV. Can I Save?

17 © 2016 Deloitte Czech Republic Tax Deductions Charitable donations (incl. blood donation) – min. CZK 1,000, up to 15 % of the tax base Mortgage interest to finance primary housing – up to CZK 300,000 Private pension or life insurance – up to CZK 12,000 Trade union fees Certification of additional education (Act 179/2006 Coll.)

18 © 2016 Deloitte Czech Republic Tax Allowances Tax AllowanceAnnual Tax Relief Amount (Monthly Amount) Basic allowanceCZK 24,840 (CZK 2,070) Spouse tax allowanceCZK 24,840 (monthly not possible) Child tax allowance (1st Child)CZK 13,404 (CZK 1,117) Disability tax allowance (level I and II)CZK 2,520 (CZK 210) Disability tax allowance (level III)CZK 5,040 (CZK 420) Severe disability tax allowance (ZTP-P card holders) CZK 16,140 (CZK 1,345) Student tax allowanceCZK 4,020 (CZK 335)

19 © 2016 Deloitte Czech Republic Spouse Tax Allowance Spouse‘s own income less than CZK 68,000 per year Only for married couples (or registered partners) Wedding during the year: from the next month Czech tax non-residents – only if > 90% of income from CZ Child Tax Allowance Up to 18 years or students up to 26 years Czech tax non-residents – only if > 90% of income from CZ

20 © 2016 Deloitte Czech Republic V. Social Security and Health Insurance

21 © 2016 Deloitte Czech Republic What is Decisive? EU/EEA regulations International treaties (totalisation agreements) Local legal regulations

22 © 2016 Deloitte Czech Republic Contributions Employees Assessment base = tax base of the employee Rates Social security (capped at CZK 1,277,328 for 2015) Employee – 6.5 % Employer – 25 % Health insurance (no cap) Employee – 4.5 % Employer – 9 % Private entrepreneurs Assessment base = 50 % of tax base Rates Social security (capped at CZK 1,277,328 for 2015): 29.2 % Health insurance (no cap): 13.5 %

23 © 2016 Deloitte Czech Republic VI. Any Questions?

24 © 2016 Deloitte Czech Republic Your contacts at Deloitte Robert Bezecný Senior Manager

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