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Czech Republic: Living There - Tax Issues

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Living There

INDIVIDUAL TAXATION

Tax residents in the Czech Republic are taxed on their worldwide income. An individual becomes a tax resident if he has a permanent home in the country or he stays for 183 days in the calendar year, except for stays for studies or medical treatment.

INCOME TAX

Resident taxpayers are taxable on almost all kinds of income. Taxable income is generally computed as the aggregate of all forms of income less allowable expenses and deductions. Income is taxed at a flat rate of 15% for 2008.

The following items are deductible from the aggregate taxable income:

• Donations made to approved charitable, educational and political organizations that are at least 2% of the taxable base or CZK1,000 (€37) and not more than 10% of the taxable base.
• Premiums paid for private life insurance not more than CZK12,000 (€446) per year, provided that the benefits will only be paid after 60 months and not before the insured reaches the age of 60 years.
• Contributions made to a state-contributory settlement pension fund not less than CZK6,000 (€223) and not more than CZK12,000 (€446) a year.
• A basic personal tax credit of CZK24,840 (€922) may be set off against the income tax liability.

The following tax credits are granted to residents, and non-residents earning at least 90% of their income from sources in the Czech Republic:

• CZK24,200 (€922) is granted for a spouse living in the taxpayer’s household, if the spouse’s annual income is not more than CZK68,000 (€2,525).
• CZK2,520 (€94) is given to taxpayers entitled to partial disability pensions.
• CZK5,040 (€187) is given to taxpayers entitled to full disability pensions.
• CZK16,140 (€599) is granted if the taxpayer is severely disabled.
• CZK4,020 (€149) if the taxpayer is studying and is not older than 26 years.
• CZK10,680 (€397) per dependent child (up to 18 years or 26 years if the child is still studying)
• Mortgage interest and interest on housing saving loan for the taxpayer’s primary residence not exceeding CZK300,000 (€11,140) per year.

If the amount of the tax credit available to a taxpayer exceeds his tax liability, and his taxable income is earned only from employment, business, capital and rents, the difference is refunded up to a maximum of CZK52,000 (€1,938), provided that his income exceeds CZK48,000 (€1,782) in 2008. If the taxpayer’s income is earned solely from rents, the refund is granted, provided that his expenses are not greater than his income.

CAPITAL GAINS
Gains from the sale of immovable property are included in the calculation for aggregate taxable income. Capital gains are generally computed as selling price less acquisition costs and allowable deductions.

Gains from the sale of a property that was used as the taxpayer’s primary residence for at least two years are exempt from tax. If the property was used for less than two years, the exemption is granted if the gains will be used for the taxpayer’s housing.

PROPERTY TAX

Real Estate Tax

Real estate tax is levied on all properties in the Czech Republic, payable by the owner. The tax applicable to residential structures used for business purposes is CZK1 (€0.037) per square metre, plus CZK0.75 (€0.028) per square metre above the ground floor, multiplied by a coefficient varying from 1.0 to 5.0 depending on which municipality the property is located.

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