The Czech Tax system is administered by the Ministry of Finance, the Financial Directorates (regional level) and the Tax Offices (local level). The system is composed of 199 Tax Offices and 8 Financial Directorates. The Czech Tax Administration offers complete information on the system.
The income tax rate for individual's income in 2010 is a flat rate of 15 percent.
An individual pays tax on his income to provide for social and government services. The amount is automatically deducted by an employer on a monthly basis. A self-employed person must prepay taxes that will be offset on making an annual tax return. The advances are determined on the basis of the previous year's tax return. In the case of a new business, the prepayments are calculated on the basis of estimates made by the owner of the business.
Tax for an individual who meets the criteria of a "permanent resident" is calculated on the income earned inside the Republic and abroad. A foreign resident who is employed in the Czech Republic pays tax only on income earned in the Republic.
Standard VAT rate in the Czech Republic is 20 percent. There is a reduced rate of 10% on food, books and the supply of some services. Financial and postal services are also exempt from Czech VAT.
In 2004, the Czech Republic adopted the European Union VAT regime. VAT Directives, issued by the EU, lay out the principles of the VAT regime to be implemented by each member country.
VAT Refunds may be made if a foreign company is providing taxable supplies in the Czech Republic, but unable to obtain a Czech VAT number, or simply incurring Czech VAT on local goods or services. VAT refund applications are made through the Tax Authorities of the applicants home country.
Corporate tax in 2010 was 19%. Pension and investment funds pay 5% corporate tax. A tax of 15% is imposed on dividends paid by Czech corporations.
The tax year in the Czech Republic is the calendar year ending on December 31. If your income is derived solely from a salary, you are not bound to file a yearly return. In all other cases, the annual return must be submitted by March 31.
If you are represented by an authorized Czech tax advisor, you may make an application to submit the return by June 30. A delay in submitting an annual return will entail fines, in most cases, of 10% of the tax payable. Fines are imposed even after tax has been prepaid.
The Tax Portal enables taxpayers to gain information on the status of their personal tax accounts. This helps people communicate with the tax office throughout the process of reporting.
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