Flat Tax Registration(2023 Extended Rates)
Tax Rates vs Tax Bands vs Tax Brackets
- A tax rate band is the amount of income which will be taxed at a particular percentage (tax rate). The current tax rates are 40%, 60%, and 80%
- Example: the 60-40 tax reporting method is the most common. Using this method, the taxpayer deducts 60% of annual income, and pays tax on the remaining 40%
- Each tax bracket is a range of income with a different tax rate.
- In the Czech Republic, flat tax brackets are divided into earners up to 1 000 000 CZK, up to 1 500 000 CZK, or up to 2 000 000.
- The flat tax rate bands are further divided by the taxpayer’s reported deductible expenses: either at 40%, 60%, or 80%.
Tax Rates: 40%, 60%, and 80%
- 80% of income from agricultural production, forestry and water management and income from craft trades; however, you can claim expenses up to the amount of 1 600 000 CZK
- 60% of income from trade business; however, you can claim up to 1 200 000 CZK
- 40% of other income from independent activities (with the exception of income according to paragraph 1 letter. (d) and paragraph 6), however, you can claim up to CZK 800 000
- 30% of rental income from commercial property; however, expenses up to CZK 600 000 can be claimed at most.
Flat Tax Rate Band 1
- For annual income up to CZK 1 million, no matter where the income derives from; or
- Annual income up to CZK 1,5 million if at least 75% of income is from self-employment that can be reported using the 80-20 or 60-40 method; or
- Annual income up to CZK 2 million if at least 75% of income is from self-employment in which a tax rate of 80% can be applied
Flat Tax Rate Band 2
- For annual income up to CZK 1,5 million, no matter of the activity which the income derives from; or:
- Annual income up to CZK 2 million if at least 75% of income is from self-employment that can be reported using the 80-20 or 60-40 method
Flat Tax Rate Band 3
- For annual income up to CZK 2 million, no matter of the activity which the income derives from
Advantages and disadvantages to flat tax reporting
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