Michal Radvan
CZECH TAX LAW
2
Czech Tax Law
Michal Radvan
Reviewed by JUDr. Petr Mrkývka, Ph.D.
Published by Masaryk University, 2010
Faculty of Law Publications no. 454 (editions of textbooks)
Editorial Board: J. Kotásek (head), J. Bejček, V. Kratochvíl, N. Rozehnalová, P. Mrkývka,
J. Hurdík, R. Polčák, H. Šabata
Printed by TRIBUN EU s.r.o., Gorkého 41, Brno
3rd
edition, 2010
ISBN: 978-80-210-5269-7
3
TABLE OF CONTENTS
INTRODUCTION....................................................................................................................................5
1 CZECH TAX SYSTEM.....................................................................................................................6
2 PERSONAL INCOME TAX ...........................................................................................................12
2.1 INCOMES FROM DEPENDENT ACTIVITIES AND FUNCTION BENEFITS..................................................12
2.2 INCOMES FROM BUSINESS ACTIVITIES...............................................................................................14
2.3 INCOMES FROM CAPITAL ..................................................................................................................14
2.4 RENTAL INCOMES .............................................................................................................................14
2.5 OTHER INCOMES ..............................................................................................................................15
2.6 INCOMES NOT LIABLE TO TAX AND EXEMPT INCOMES ......................................................................15
2.7 TAXPAYERS OF PERSONAL INCOME TAX............................................................................................16
2.8 HOW TO ASSESS PERSONAL INCOME TAX ..........................................................................................16
2.9 PERSONAL INCOME TAX ADMINISTRATION, CONDITIONS OF PAYMENT AND BUDGET DESTINATION ..18
3 SOCIAL SECURITY.......................................................................................................................20
4 CORPORATE INCOME TAX .......................................................................................................21
4.1 OBJECT OF CORPORATE INCOME TAX AND EXEMPTIONS FROM TAXATION........................................21
4.2 TAXPAYERS OF CORPORATE INCOME TAX .........................................................................................21
4.3 HOW TO ASSESS CORPORATE INCOME TAX .......................................................................................22
4.4 CORPORATE INCOME TAX ADMINISTRATION, CONDITIONS OF PAYMENT AND BUDGET DESTINATION22
5 REAL ESTATE TAX .......................................................................................................................24
5.1 LAND TAX.........................................................................................................................................24
5.2 BUILDINGS TAX ................................................................................................................................26
5.3 FLATS AND NON-RESIDENTIAL PREMISES TAX ..................................................................................29
5.4 REAL ESTATE TAX ADMINISTRATION, CONDITIONS OF PAYMENT AND BUDGET DESTINATION ............30
6 INHERITANCE TAX ......................................................................................................................32
7 GIFT TAX.........................................................................................................................................34
8 REAL ESTATE TRANSFER TAX.................................................................................................37
9 ROAD TAX AND OTHER CHARGES ON USING ROADS......................................................38
9.1 ROAD TAX........................................................................................................................................38
9.2 TIME CHARGE ..................................................................................................................................40
9.3 ELECTRONIC TOLL ...........................................................................................................................41
10 VALUE ADDED TAX....................................................................................................................42
4
11 SELECTED EXCISE TAXES.......................................................................................................44
11.1 EXCISE TAX ON PETROLEUM OILS ..................................................................................................44
11.2 EXCISE TAX ON SPIRIT ....................................................................................................................45
11.3 EXCISE TAX ON BEER......................................................................................................................45
11.4 EXCISE TAX ON WINE AND SEMI PRODUCTS....................................................................................46
11.5 EXCISE TAX ON TOBACCO PRODUCTS.............................................................................................46
11.6 TAX ON EARTH GAS AND OTHER GASES ..........................................................................................46
11.7 TAX ON SOLID FUELS.....................................................................................................................46
11.8 TAX ON ELECTRICITY......................................................................................................................46
11.9 SELECTED EXCISE TAXES ADMINISTRATION, PAYMENT AND BUDGET DESTINATION ........................47
12 LOCAL CHARGES.......................................................................................................................48
12.1 ADMINISTRATION OF LOCAL CHARGES ...........................................................................................50
13 OTHER CHARGES ......................................................................................................................52
14 TAX ADMINISTRATION.............................................................................................................53
14.1 BASIC TERMS AND PRINCIPLES .......................................................................................................53
14.2 TAX ASSESSMENT PROCEDURE .......................................................................................................55
14.3 TAX PAYMENT.................................................................................................................................57
14.4 REMEDIAL INSTRUMENTS................................................................................................................59
14.5 OTHER (FORMERLY REMEDIAL) INSTRUMENTS ...............................................................................60
15 DOUBLE TAXATION PREVENTION TREATIES...................................................................61
LITERATURE........................................................................................................................................63
5
INTRODUCTION
The aim of this information package is to provide basic information on the Czech tax law and
tax system used in the Czech Republic. It has been designed primarily for foreign students and
LL.M. and MPA students studying tax law in the Czech Republic but, as I hope, there is a lot
of information useful for any alien liable to tax in the Czech Republic. Every tax is described
according to its structural items (components – object of taxation, subject liable to tax,
possibilities for exemptions, tax base and the tax rate, tax administration). Many of theoretical
and research problems we are discussing in the Czech Republic in given area is not the goal of
this package but author offers additional consultations for the readers. For further information
you can check for example Radvan, M. et al. Finanční právo a finanční správa - Berní právo.
Brno: Masarykova univerzita et Doplněk, 2008. ISBN: 978-80-210-4732-7.
The Czech tax law and tax system are quite new. After the great changes in 1989 (so called
“velvet revolution”) it was necessary to prepare a completely new tax system because of
changing economic and social atmosphere. In 1993 former Czechoslovakia split up into two
separate states– the Czech Republic and the Slovak Republic. It was necessary to prepare the
tax system for the new independent Czech Republic before the end of 1992. That system was
created too quickly to be without any mistakes. To tell the truth, there were many mistakes and
it was necessary to amend the tax acts several times. Even so many of these acts are still too
vague and there are a lot of difficulties with their application and interpretation.
In addition, in 2004 (1 May) the Czech Republic became the Member State of the European
Union. The EU claims that taxes are in discretionary powers of individual states but in fact it is
not true. Especially when we speak about indirect taxes, there are many EU directives binding
individual Member States and we are gradually becoming aware of the EU’s intervention into
direct taxation. Due to this fact, the Czech Republic must amend or make completely new tax
acts, such as VAT Act or Excise Taxes Act. In the future we can expect that numerous changes
in the taxation will be introduced and it will be necessary to prepare a new edition of the book
dealing with Czech taxation.
Because of many changes in legal regulation of Czech tax system it is necessary to modify the
last edition of the information package “Czech Tax Law”. That is why now you hold in your
hands the third edition of this publication. Most information in this booklet may be referred to
the acts in force as of 1 July 2010. But for example chapter on tax administration is a little bit
“in advance”: the new act called Code of Tax Procedure is already valid, but it will come into
force on 1 January 2011.
Brno, 7.7.2010
Michal Radvan
6
1 CZECH TAX SYSTEM
Talking about taxes, we are somewhere between economy, politics and law. There is no doubt
that every government has its own ideas how to create a tax system but political aspects are
very subjective and uncertain in time. Taxpayer is not only a subject with his duty to comply
with the incomes incurred into the public budgets but a voter, too. We can usually say that the
level of tax duties corresponds with the level of state intervention to social life. But sometimes
high tax rates can be the result of a former government policy, international situation, etc.
When we are thinking about an optimal level of taxation, we must respect not only political
criteria but economic aspects, as well. An economic model is more important than anything
else. The limits of taxation are in effectiveness of economic system.1
As we can see, not only in the Czech Republic especially the fiscal function of taxes is the most
important one. Its purpose is to guarantee the incomes of the State and municipal budgets and
other (public corporation) budgets because taxes are the most important incomes for these
budgets. Thanks to taxes it is possible to affect activities of economic subjects because tax is an
instrument for regulation of income and property distribution. The fiscal function is closely
connected with the regulation function: using taxes, the State can effectively correct the
incomes while transferring money between economical subjects and public funds. A good tax
system can affect the effectiveness of economy. But the State must be very careful in tax rates:
the tax burden must respect the tax capacity. Too high taxes do not motivate people to work, to
run a business. The last one of the basic functions of taxes – the stimulation function means
using tax instruments to impress an economic subject. It is executed by using several tax rates
that can stimulate the development of some activities or stifle others. Other possibilities are for
example the catalogue of tax reduction or exemptions from taxation.
Although there are many tax acts in the Czech Republic, they lack the definition of “tax”. The
answer to the question what the tax is can be found just in the tax theory: a tax is an obligatory
amount defined by an act with a laid down rate which is more or less regularly collected from
the incomes of economic subjects to the public budgets on the irrecoverable principle.
We can find something similar to the definition of tax in the Czech legislation; in the Code of
Tax Procedure (Act no. 280/2009 Sb., as amended, Section 2(3)) there is legislative shortcut of
tax: tax means taxes, fees, transfers, advance payments and other assessments.
The main rule concerning taxes is included in the Charter of Fundamental Rights and
Freedoms. Its Article 11(5) assigns that taxes and fees can be imposed only by acts. It means
not only taxes, but as well all the fees, must be imposed by acts, not just by ordinances of
municipalities or ministries.
We have the same problem with the definition of tax as with the definition of “fee”. The tax
theory describes the fee2
as an obligatory irrecoverable amount defined by an act and collected
by the State or other public corporations for certain legal acts. In contrast to tax this amount is
irregular (ad hoc) and the fee payor is eligible to ask for some consideration. It means that fee
is very similar to the price and sometimes we can even see somebody to collect “fee” for
baggage deposit or coat deposit (though it is not the right term).3
1
See Mrkývka, P. in: Mrkývka P. a kol. Finanční právo a finanční správa – 2nd
part. Brno: Masarykova univerzita
v Brně, 2004. ISBN: 80-210-3579-X. P. 7. Široký, J. Daňové teorie s praktickou aplikací. Praha: C. H. Beck,
2003.
2
The term “fee” means the same as the term “charge”.
3
See Mrkývka, P. in: Mrkývka P. a kol. Finanční právo a finanční správa – 2nd
part. Brno: Masarykova univerzita
v Brně, 2004. ISBN: 80-210-3579-X. P. 6.
7
To tell the truth, the difference between “tax” and “fee” is really more theoretical than
practical. For example in a lot of municipalities the “dog charge” is in fact the “dog tax”: the
holders of dogs (the taxpayers) do not get any plastic bags for the excrements, municipality
does not install waste baskets, does not clean pedestrians and roads, etc. On the other hand, the
“road tax” is rather “road charge” because the whole revenue must be invested by the State
Fund of Transport Infrastructure to modernization of existing roads and building new ones.
All Czech legal acts dealing with taxes and fees do have very similar structure according to the
basic structural components:
Object of taxation is a legally relevant situation described by law that is connected with
a tax duty. It is usually obvious what the object of taxation is just from the title of the
tax. Incomes, possession or using property, transfers with property, consumption, etc.
can be the object of taxation;
Correction components are some possibilities for the taxpayer not to pay the tax or pay
less than it is usual. Tax reduction and exemptions from taxation are most common.
Sometimes but not very often, the correction components can have the opposite effect:
they can increase the tax duty;
Czech tax administration knows two types of taxpayers:4
o a natural person or legal entity whose income, property or legal acts (legal
transactions) are object of taxation (taxpayer),
o a natural person or legal entity that has responsibility to calculate the tax, collect
it or withheld it and transfer it in time to the tax administrator (payor);
Talking about the tax base, we mean the quantity of the object of taxation. As the tax
base is usually economic income (for income taxes), value (for VAT, inheritance tax,
gift tax, real estate transfer tax, partly excise taxes), area (real estate tax) or something
different (for example combination of weight and number of axles or engine capacity
for the road tax);
Tax rate determines the amount of the tax to the tax base. Several kinds of tax rate are
distinguished:
o fixed tax rate – fixed amount of money irrespective of the quantity of the tax
base,
o percent tax rate – tax includes several percent of the tax base and there are three
possibilities for percent tax rate:
 linear tax rate – the same percentage for a different tax base,
 progressive tax rate – the higher the tax base, the higher the percentage,
 degressive tax rate – the higher the tax base, the lower the percentage
(this kind of tax rate is not used because of its injustice);
Payment conditions are usually terms and fundamentals of payment. Some taxes are
paid in one term, others can be paid in several part payments. Sometimes the taxpayer is
obliged to pay advance payments before he knows his annual tax duty.
We have numerous tax administrators in the Czech Republic but most often the tax
administrator is the tax office. In other situation taxes can be administrated by other
4
These terms are no more in Czech legal order, but legal acts are still operating with them and using them.
8
public administration bodies, by courts or by customs offices. The most important task
for a tax administrator is to make everything so that all the taxes will be collected in
time and in the right amount;
The budget destination is very important for all citizens; it means which of the public
funds will get collected money. These are usually the state budget and local budgets
(municipal budgets and region budgets).5
Tax Municipal budget Region budget State budget
Personal income tax
(withholding tax) 21,4 %6
8,92 % 69,68 %
Personal income tax
(from business activities)
- remaining 60 %
30 %7
21, 4 % 8,92 %
10 %
69,68 %
Personal income tax
(from dependent activity) 21,4 % + 1,5 %8
8,92 % 68,18 %
Corporate income tax9
21,4 8,92 % 69,68 %
Real estate tax 100 %10
Inheritance tax 100 %
Gift tax 100 %
Real estate transfer tax 100 %
Road tax 100 %
VAT 21,4 % 8,92 % 69,68 %
Excise taxes 100 %
Table 1: Budget Destination in the Czech Republic
There are numerous possibilities how to classify taxes. Some are more practical, some are less.
Just two of them will be mentioned in the following text:
Classification according to impact,
Classification according to object of taxation.
The most typical and the most common class is the classification according to tax impact. We
may distinguish between direct taxes and indirect taxes. Direct taxes are assessed to every
taxpayer according to his / her incomes, property and they usually respect the personal situation
of the taxpayer. The group of direct taxes includes income taxes, road tax, real estate tax,
transfer taxes, etc. On the other hand indirect taxes are paid and collected in the prices of
goods, service, etc. and does not respect personal situation of the taxpayer. The most important
indirect taxes are VAT and excise taxes.
The other useful classification of taxes is the classification according to the object of taxation.
There are:
5
Vide in Pařízková, I. Finance územních samosprávných celků. Brno: Masarykova univerzita, 1998. ISBN: 80-
210-1997-2. Pařízková, I. Finanční právo: finance územní samosprávy. Brno: Masarykova univerzita, 2005.
ISBN: 80-210-3601-X. Marková, H., Boháč, R. Rozpočtové právo. Praha: C.H. Beck, 2007. ISBN: 978-80-7179-
598-8. Netolický, M. Rozpočty obcí v naší legislativě. Brno: Tribun EU, 2008. ISBN: 978-80-7399-340-5.
6
Tax incomes are distributed according to:
1. Area of the municipality,
2. Number of inhabitants in the municipality,
3. Multiples of gradations; valid for all 21,4 %.
7
According to permanent address of the entrepreneur.
8
According to number of employers working in the municipality.
9
Corporate income taxes paid by municipalities and regions are the incomes of their budgets.
10
According to location of the real estate.
9
Income taxes – taxes on income of natural persons and legal entities, usually not only
income in money but income in kind and emoluments of office-holders, too. There are
two income taxes in the Czech Republic: personal income tax and corporate income
tax;
Property taxes – taxes on ownership, holding, lease or using of property. Real estate tax
and road tax are the most typical property taxes in the Czech Republic. Transfer taxes
(inheritance tax, gift tax and real estate transfer tax) and several local charges such as
dog charge are very often mentioned between property taxes;
Transfer taxes are collected from transfer or transference of ownership title, the main
transfer taxes are inheritance tax, gift tax and real estate transfer tax;
Subject taxes are paid because of the existence of a subject, they do not exist any more
not only in the Czech Republic;
Turnover taxes are paid from the value added by every processor, the turnover tax is
value added tax (VAT);
Excises (excise taxes) are imposed on the consumption of selected commodities such as
petroleum oils, spirit, beer, wine and tobacco products, since the beginning of 2008 on
the consumption of gas, coal and electricity, too.
The system of taxes and fees in the Czech Republic is very similar to the ones in other
developed European countries. To tell the truth, nowadays there is no act dealing with the tax
system in the Czech Republic. There used to be Act No. 212/1992 Sb. that created the whole
system of taxes in 1993. But this Act had no practical importance; there was no problem to
approve some new tax acts. That is why that Act was abolished in 2003.
Nowadays the system of taxes in the Czech Republic looks as follows (for better orientation
the classification according to impact is used):
10
Graph 1: System of Taxes in the Czech Republic
TAXES
Direct Taxes Indirect Taxes
Selected Excise
Taxes
General Excise
Tax
Income Taxes Property Taxes
Value Added Tax
(Act no. 235/2004 Sb.)
Tax on Beer
(Act no. 353/2003 Sb.)
Tax on Wine and
Intermediary Products
(Act no. 353/2003 Sb.)
Tax on Tobacco
Products
(Act no. 353/2003 Sb.)
Tax on Petroleum Oils
(Act no. 353/2003 Sb.)
Tax on Spirit
(Act no. 353/2003 Sb.)
Tax on Earth Gas and
some other gases
(Act no. 261/2007 Sb.)
Tax on Solid Fuels
(Act no. 261/2007 Sb.)
Tax on Electricity
(Act no. 261/2007 Sb.)
Personal Income Tax
(Act no. 586/1992 Sb.)
Corporate Income Tax
(Act no. 586/1992 Sb.)
Real Estate Tax
(Act no. 338/1992 Sb.)
Inheritance Tax
(Act no. 357/1992 Sb.)
Gift Tax
(Act no. 357/1992 Sb.)
Real Estate Transfer Tax
(Act no. 357/1992 Sb.)
Road Tax
(Act no. 16/1993 Sb.)
11
The definition of fees was mentioned above. Considering the tax system, just local fees are
important but there are some other kinds of fees. In the following graph the system of fees is
described:
Graph 2: System of Fees in the Czech Republic
FEES
Administrative Fees
(Act no. 634/20041992 Sb.)
Court Fees
(Act no. 549/1991 Sb.)
Local Fees
(Act no. 565/1990 Sb.)
Other fees; for example
charges for using highways
(road toll), ecological fees,
etc.
Charge for Permission to
Enter Selected Places by
Motor Vehicle
Charge for Permission to
Enter Selected Places by
Motor Vehicle
Charge on Communal Waste
Dog Charge Charge for Spa or Recreation
Stay
Charge for Using Public
Places
Charge on Entrance
Charge for Housing Capacity Charge on Gambling
Machine and Other Technical
Game Facilities
12
2 PERSONAL INCOME TAX
In the Czech Republic, the personal income tax is regulated together with the corporate income
tax by an act called Income Taxes Act (Act no. 586/1992 Sb., as amended).11
This Act lies
down that the objects of taxation are the following types of income (no matter if it is a
monetary or a non-monetary income or the income was acquired by exchange):
Income from dependent activity (employment) and emoluments of office-holders
(function benefits);
Income from business and from other independent gainful activity;
Capital property income;
Rental (lease) income;
Other income.
Each of these incomes are described individually in Sections 6 – 10 of the Income Taxes Act
and for each of these incomes it is necessary to calculate so called partial tax base and at the
end every taxpayer must calculate these partial tax bases together to get the tax base.
2.1 Incomes from Dependent Activities and Function Benefits
Incomes from dependent activities are defined as incomes from the recent or former labor
relationship, service relationship or membership relationship or a similar relationship if the
taxpayer – employee – must respect the payor’s – employer’s – commands in the course of
execution of work for the payor.
Besides that incomes for work of pupils and students in practice training, incomes for work
done by members of co-operatives, associates and agents of limited liability companies and
limited partners of limited partnerships, incomes for work of company liquidators,
remunerations of members of statutory bodies and other bodies of legal entities and incomes
following in connection with recent, future or former execution of dependent activity or of
function regardless of whether they follow from the payor for whom the taxpayer executes he
dependent activity or function or from the payor for whom the taxpayer does not execute the
dependent activity or function are considered to be the incomes from dependent activities.12
The income is even 1 % (but not less than 1 000 CZK13
) of the input price of a motor vehicle in
each month, if the employee can use it not only for business but for himself, too.
Function benefits are defined as function salaries of members of the government, deputies and
senators of the Parliament of the Czech Republic and salaries of chiefs of central authorities of
the state administration and remunerations for execution of function in authorities of
municipalities, in other authorities of territorial self-governance, state authorities, civic and
professional associations, chambers and other authorities and institutions.14
11
Vide for example Pařízková, I., Radvan, M. in: Radvan, M. et al. Finanční právo a finanční správa - Berní
právo. Brno: Masarykova univerzita et Doplněk, 2008. ISBN: 978-80-210-4732-7. Marková, H. Zákon o daních
z příjmů. Komentář. Praha: C. H. Beck, 2007. 80-7179-474-0. Mrkývka, P. Opodatkowanie dochodu w Republice
Czeskiej. in: Etel, L. (ed.). Opodatkowanie dochodu w wybranych krajach Europy Środkowej i Wschodniej.
Białystok: Temida2, 2006. P. 93-128. ISBN 83-89620-17-0.
12
See Section 6(1) Income Taxes Act.
13
25 CZK = 1 EUR.
14
See Section 6(10) Income Taxes Act.
13
There are several incomes that are not liable to tax from dependent activity, for example
reimbursements of travel expenses provided in connection with execution of dependent activity
up to the sum provided by a special regulation as well as value food provided by employer in
case of a work journey, value of personal protection working means, washing, cleaning and
disinfection means provided in the extent provided by a special regulation including costs spent
in order to maintain personal protection means and working means as well as value of provided
uniform including contributions to their maintenance and value of working dress designed by
the employer for the purpose of execution of work including contribution to its maintenance,
sums received by the employee from the employer as an advance payment, reimbursements of
wear of own tools, facilities and items necessary for execution of work granted to the employee
and reimbursements of expenses provided in connection with execution of function to that a
legal claim arises according to special regulations.15
Income charged or paid by the employer with its registered office or residence in the Czech
Republic after corrections shall be a separate tax base for taxation under a special tax rate (15
%), if the total sum paid (gross income) by the same employer does not exceed the sum of 5
000 CZK in one calendar month.
Besides common exemption from taxation, there is rather long list of exemptions from work
taxation and several possibilities how to “forestall taxes” should be mentioned. The reasons for
exemptions are mostly social and economical and in the list of exemptions16
there are for
example sums spent by the employer in order to improve his employees’ professional skills or
for reskilling, value of food given by the employer to the employees as a non-monetary
performance, value of soft beverages given by the employer to the employees as a nonmonetary
performance, non-monetary performance given by the employer to the employees
from a fund of cultural and social needs or from the social fund, privileges granted by the
employer running public personal transportation to his employees and members of their
families in the form of free or cheaper tickets, value of non-monetary gifts provided from a
fund of cultural and social needs according to the relevant regulation (this exemption shall
apply up to the sum of 2 000 CZK yearly for each employee), money performance for dress
and food requisites given to members of armed forces and corps according to special
regulations and compensations for loss of service income (salary) given to members of armed
forces and corps according to special regulations, value of temporary accommodation up to
3 500 CZK monthly, money privileges following to employees in connection with provision of
interest-free loans or of loans with lower than usual interest granted by the employer from a
fund of cultural and social needs according to a special regulation (for flat purposes up to the
sum of 100 000 CZK or in order to overcome a difficult financial situation up to the sum of 20
000 CZK), income up to the sum of 500 000 CZK granted by the employer to the employee as
a social assistance in direct connection with overcoming of his extraordinarily difficult
condition due to elemental disaster, environmental or industrial accident occurred in territories
where a state of emergency was declared, the employer’s contribution to additional pension
insurance with state contribution remitted to his employee’s account at a pension fund up to the
sum of 24 000 CZK from one employer, in-kind performance and reimbursement of expenses
in the sum of money value of in-kind performance granted according to special legal
regulations to representatives of state power and of several state authorities and to judges, or
sums as a refund of wages or salary for the period of temporary sickness leave.
15
See Section 6(7, 11) Income Taxes Act.
16
See Section 6(9) Income Taxes Act.
14
The partial tax base shall be defined as income from dependent activity or function benefits
increased by sums of social security insurance premium, contribution to the state employment
policy and general health insurance premium that must be paid by the employer according to
special regulations.17
The “social security” paid by employer is very high – 34 % of the gross
income.
2.2 Incomes from Business Activities
Incomes from business activities are incomes from agriculture production, forestry and fish
farming, income from business (trade), shares of partners in profits of a general partnership and
general partners’ shares in profits of a limited partnership. Incomes from other independent
profitable activities such as the income from the use or provision of industrial or other
intellectual property and from copyright, income from pursuit of an independent profession,
income of an expert, an interpreter, an arbitrator, income from activity carried out by a
bankruptcy trustee, etc. are ranked between incomes from business activity.
Partial tax base is created by the above mentioned incomes reduced by the expenses incurred
to generate, assure and maintain income specified in Section 24 of the Income Tax Act. If the
taxpayer does not have enough expanses, he may claim lump sum expenses:
80 % of the income from agricultural production, forestry and fish farming and from
handicraft industry;
60 % of the income from other industry and trades;
40 % of the income from other business (for example lawyers, doctors, etc.) and other
incomes like incomes from intellectual property, etc.
2.3 Incomes from Capital
The object of tax on income from capital are dividends based on ownership interest in a joint
stock company, a limited liability company or a limited partnership, a silent partner’s share in
profits, interests, benefits from private life insurance and benefits received from statecontributory
supplementary pension insurance.
A withholding tax should be usually used for all these incomes.18
2.4 Rental Incomes
Rental incomes are the incomes from the lease of real estate or flats and the incomes from
lettings of movable property except for occasional leasing (occasional leasing is the object of
income tax on other incomes).
Partial tax base is the difference between the above mentioned incomes and expenses incurred
to generate, assure and maintain income specified in Section 24 of the Income Tax Act. But the
17
Till the end of 2007 the tax base was defined as income from dependent activity or function benefits reduced by
sums of social security insurance premium, contribution to the state employment policy and general health
insurance premium that must be paid by the employee according to special act. The “social security” paid by
employee was 12,5 % of the gross income.
18
For details see Section 36 Income Taxes Act.
15
taxpayer does not often have any expenses at all; for this situation the taxpayer can claim lump
sum expenses at 30 % of his income.
2.5 Other Incomes
All the other incomes are taxed by the tax on other incomes. Other incomes are above all:
Income from occasional activities or occasional lease of movable assets (up to 20 000
CZK this income is exempt);
Income from the transfer of real estate including flats and non-residential premises,
movable asset or security;
Winnings in lotteries, betting and other games of chance;
Prizes from public competitions and sporting competitions, etc.
Partial tax base includes the incomes reduced by expenses which can be submitted as having
been incurred in order to generate such income. But the Income Tax Act defines in particular
expenses for almost every kind of other incomes.
2.6 Incomes Not Liable to Tax and Exempt Incomes
There are several incomes that are not liable to personal income tax in general mentioned in
the Personal Taxes Act, for example the income attained by inheritance, donation, restitution,
further credits and loans, the income in the amount which the Czech Republic is bound to settle
as satisfaction accorded by the European Court for Human Rights, the incomes of au-pairs
from abroad, etc.19
Even though some other incomes are liable to tax, the taxpayer can use tax exemption (they
can be tax-exempt). Since there are a large number of exemptions, only several of them will be
mentioned:20
Income from the sale of a family house or a flat including the land related thereto, if the
seller had his residential address there for at least two years immediately before the
sale;
Income from the sale of real estate, flats or non-residential premises (spaces), if the
seller owned that property for at least five years;
Income from the sale of movable assets;
Compensations received for damages;
Compensations received for restitution;
Alimony payments;
Social welfare benefits, state social support grants;
Rewards paid to donors of blood and other human biological materials;
Subsidies from public budgets, etc.
19
See Section 3(4) Income Taxes Act.
20
For the whole list of exemptions see Section Income Taxes Act, and other provisions concerning tax exemption
in this act, for example Section 10(3).
16
2.7 Taxpayers of Personal Income Tax
There are two types of taxpayers liable to personal income tax:
1. Tax residents – natural persons with a residential address in the Czech Republic or
individuals who usually stay in the Czech Republic (it means for at least 183 days in the
relevant calendar year, either continuously or intermittently); these persons are liable to
tax on income arising from sources in both the Czech Republic and abroad;
2. Tax non-residents – natural persons not mentioned above as tax residents, student
from abroad or patients staying in the Czech Republic for the purpose of medical
treatment; they are liable to tax on incomes arising only from sources in the Czech
Republic.
2.8 How to Assess Personal Income Tax
First of all the taxpayer must sum up all the partial tax bases to one tax base. This tax base in
not final, it shall be reduced by so called tax allowances to get modified (reduced) tax base.
The most common tax allowance is the value of gifts donated for charitable purpose21
in case
that the total value of gifts in the taxable periods does not exceed 2 % of the tax base or 1 000
CZK and the total maximum allowable deduction is 10 % of the tax base. Other tax allowances
are offered to the taxpayers paying contributions to the state-contributory supplementary
pension insurance scheme (sum paid within the taxable period reduced by 6 000 CZK; the
maximum amount is 12 000 CZK in one taxable period) or paying private life insurance
premiums (sum paid within the taxable period; the maximum amount is 12 000 CZK in one
taxable period). As a tax allowances are considered the amount equal to the interest paid in the
taxable period on a loan provided from a housing saving scheme or the amount equal to the
interest on a mortgage loan or the amount equal to the interest on a loan provided by a housing
savings bank. The contributions paid by a member of a trade union organization up to 1,5 % of
the taxable income (the maximum amount is 3 000 CZK in one taxable period) and
remunerations for exams verifying the result of continuing education up to 10 000 CZK are the
last tax allowances according to Czech law.
Besides tax allowances, the taxpayer can use items deductible from the tax base22
to reduce
his tax base, too. The most important item deductible from the tax base is a tax loss which was
recorded and assessed in five previous taxable periods. There is one other important deductible
item: 100 % of costs for research and development.
The tax rate is percentual linear of 15 % calculated from the reduced tax base:23
The tax (gross tax) can be reduced by the tax reductions. The following amounts are valid per
year, but 1/12 of them (with several exemptions, for example the taxpayer must sign so called
21
For details see Section 15 (1) Income Taxes Act.
22
For details see section 34 Income Taxes Act.
23
Till the end of 2007 the tax rate was percentual progressive between 12 – 32 %, since the beginning of 2009 it
will be 12,5 %. In 2008 the withholding tax rate is at the same level of 15 %.
17
statement24
) can be used during the calculations of advance tax payments by the payors in
particular months:25
24 840 CZK for each taxpayer (so called basic tax reduction);
24 840 CZK for a spouse living with the taxpayer in one household (but the spouse’s
own income may not exceed 38 040 CZK in the taxable period), if the spouse is the
holder of ZTP/P card, the amount is double;26
2 520 CZK for the beneficiary of a disability pension (1st
and 2nd
grade of disability);
5 040 CZK for the beneficiary of a disability pension (3rd
grade of disability);
16 140 CZK for the ZTP/P card holder (very handicapped person with a guide);
4 020 CZK for the student up to 26 years or Ph.D. student up to 28 years.
Other tax reductions can be used if the taxpayer employs disabled employees.27
People with children living in their household have right to use so called tax preferences for
children. For each child one parent can deduct as the tax reduction an amount of 11 604 CZK
in a year (or 1/12 in a month). If the tax after this reduction would be in minus, the tax
preference is divided into two parts: tax reduction up to zero tax and tax bonus. If the taxpayer
is economically active, the tax bonus (up to 52 500 CZK) should be paid him back!
a. Structure of assessing the advance tax payment and net wage
Gross wage
+ Social security and health insurance paid by employer (34 % of gross wage28
)
Tax base (rounded up to whole hundreds)
Advance tax payment brutto I (15 % of the tax base)
- Tax reductions (1/12)
Advance tax payment brutto II ≥0
- Tax preferences for children
Advance tax payment netto / Tax bonus
Gross wage
- Social and health insurance paid by employee (11 % of gross wage)
- Advance tax payment / + Tax bonus
Net wage
24
In the statement there are information for the employer about tax reductions and tax preferences; the employee
can sign the statement only for one employer and if he does not do that, he has no right for tax reductions and tax
preferences.
25
See Section 35ba Income Taxes Act.
26
This amount can be used only after the end of taxable period.
27
18 000 CZK for every disabled employee, 60 000 CZK for every severely disabled employee. Closer see
Section 35 Income Taxes Act.
28
35 % in 2011.
18
b. Structure of assessing personal income tax from dependent activity
Gross wage / wages
+ Social security and health insurance paid by employer (34 % of gross wage29
)
Tax base
- Tax allowances
Modified tax base (rounded down to whole hundreds)
Tax brutto I (15 % of the tax base)
- Tax reductions
Tax brutto II ≥0
- Tax preferences for children
Tax netto / Tax bonus
- / + Advance tax payments / Tax bonuses
After payment / Over payment
c. Structure of assessing personal income tax
Partial tax base § 6
+ Partial tax base § 7
+ Partial tax base § 8
+ Partial tax base § 9
+ Partial tax base § 10
Tax base
- Tax allowances
Modified tax base (rounded down to whole hundreds)
Tax brutto I (15 % of the tax base)
- Tax reductions
Tax brutto II ≥0
- Tax preferences for children
Tax netto / Tax bonus
- / + Advance tax payments / Tax bonuses
After payment / Over payment
2.9 Personal Income Tax Administration, Conditions of Payment and Budget Destination
The tax administrator is the Financial Office determined by the residential address of the
taxpayer.
The taxpayer must submit his tax return before 31 March following expiry of the taxable
period. If the tax return is prepared and submitted by the tax advisor or barrister, the tax return
shall be filed latest six months following expiry of the taxable period but before unextended
due date expires (31 March), a power of attorney authorizing such representation must be
submitted.
In the tax return the taxpayer must state all necessary information relevant to the control of his
tax duty and he himself must calculate the tax.
There are just two possibilities given by tax acts, when the taxpayer does not have to submit his
tax return:
His incomes are lower than 15 000 CZK in the taxable period;
29
35 % in 2011.
19
His only income comes from employment at one employer or consecutively at more
employers. In this situation the taxpayer signs so called tax statement and his employer
will prepare annual account of tax advances.
It is very usual to pay tax advance payments not only in the Czech Republic. No tax advances
are paid by taxpayers whose last known tax liability did not exceed 30 000 CZK and in some
cases, if he has incomes from dependent activity. In other cases the taxpayer is obliged to pay
advance payments and their amount and frequency depends on the last known tax liability:
Taxpayer with the last known tax liability between 30 000 CZK and 150 000 CZK must
pay two advances in the amount of 40 % by 15 June and 15 December;
Taxpayer with the last known tax liability over 150 000 CZK must pay four advances in
the amount of 25 % by 15 March, 15 June, 15 September and 15 December.
The revenue from personal income tax is distributed between municipal budget (21,4 %),
region budget (8,92 %) and state budget (69,68 %).30
30
Closer see Chapter 1.
20
3 SOCIAL SECURITY
Even there are quite low taxes in the Czech Republic, one of the worst problems we have to
solve in the future is very high social security and health contributions.
Czech or foreign employers or Czech branch offices of foreign employers, all foreigners who
work for a Czech employer or are on the payroll of a branch office of a foreign company
participate in the Czech Republic social security system.
Most Czech legal entities must also make a contribution to an insurance fund for work-related
accidents and illness.
Here is the table of social security and health insurance rates for 2010 and 2011:
Employee (%) Employer (%)
2010
Employer (%)
2011
Total (%)
2010
Total (%)
2011
Health insurance 4,5 9,0 9,0 13,5 13,5
Social security 6,5 25,0 26,0 31,5 32,5
- pension 21,5 21,5
- sickness 2,3 3,3
- unemployment 1,2 1,2
Total 11,0 34,0 35,0 45,0 46,0
Table 2: Social Security and Health Insurance Rates in the Czech Republic
21
4 CORPORATE INCOME TAX
The second (but not the second in importance) income tax is the corporate income tax regulated
together with the personal income tax in the Income Taxes Act (Act no. 586/1992 Sb., as
amended).31
There are five types of corporations in Czech legal system: general partnership
(shares of partners in profits are liable to personal income tax), limited partnership (general
partners´ shares in profits are liable to personal income tax, too, while limited partners´ shares
in profits are liable to corporate income tax), limited liability company, joint-stock company
and cooperative. Beside those we should mention silent partnership, too.
4.1 Object of Corporate Income Tax and Exemptions from Taxation
Income from all activities and from the management of all types of property is liable to tax.
There are just several exceptions (incomes that are not liable to corporate income tax) like
incomes obtained by inheritance or donation of real estate or movable asset or property rights,
or income in the amount which the Czech Republic is bound to settle as satisfaction accorded
by the European Court for Human Rights, etc.
Although almost all the incomes are liable to personal income tax, some are exempt. The list of
exemptions is very extensive, so at least several examples:32
Membership fees;
Income from collections in churches;
Income of state funds;
Income of the Children’s and Youth Fund;
Income from the operation of lotteries and similar games of chance;
Interest on mortgage bonds;
Income in the form of interest received due to tax overpayments caused by the tax
administrator;
Income in the form of interest received on overpayments caused by the social security
authorities;
Incomes of the Central Bank of the Czech Republic, etc.
4.2 Taxpayers of Corporate Income Tax
Defining the taxpayers of corporate income tax is not very easy because there is merely
negative definition in the Income Taxes Act (“Taxpayers liable to corporate income tax are
those who are not natural persons…”). The taxpayers are entities such as companies (limited
31
Vide Pařízková I., Radvan, M. in: Radvan, M. et al. Finanční právo a finanční správa - Berní právo. Brno:
Masarykova univerzita et Doplněk, 2008. ISBN: 978-80-210-4732-7. Marková, H. Zákon o daních z příjmů.
Komentář. Praha: C. H. Beck, 2007. 80-7179-474-0. Mrkývka, P. Opodatkowanie dochodu w Republice Czeskiej.
in: Etel, L. (ed.). Opodatkowanie dochodu w wybranych krajach Europy Środkowej i Wschodniej. Białystok:
Temida2, 2006. P. 93-128. ISBN 83-89620-17-0.
32
All the exemptions and other conditions are mentioned in Section 19 Income Taxes Act.
22
partnerships,33
limited liability company, joint-stock company and cooperative), civil
corporations, political parties, interest corporations, foundations, municipalities, state
corporations, banks, insurance companies, exchanges, investment corporations and investment
funds, state funds, pension funds, churches, organizational components of the State, etc.34
There is the same rule for corporate income tax as the one that was mentioned in the part
dealing with taxpayers of personal income tax: there are two types of taxpayers liable to
corporate income tax:
1. Tax residents – entities having their seat or head office in the Czech Republic are
liable to tax on income arising from sources in both the Czech Republic and abroad;
2. Tax non-residents – entities not having their seat or head office in the Czech Republic
are liable to tax on incomes arising only from sources in the Czech Republic.
4.3 How to Assess Corporate Income Tax
The taxpayer can read the economic income (it means incomes reduced by the expenses
incurred to generate, assure and maintain income specified in Section 24 of the Income Tax
Act) from the bookkeeping. This is the tax base which is not final, it shall be reduced by items
deductible from the tax base.35
The most important items deductible from the tax base are a
tax loss which was recorded and assessed in five previous taxable periods and 100 % of costs
for research and development.
The tax base reduced by items deductible from the tax base is called modified tax base and this
amount should be taxed by a linear percentual tax rate. This rate decreases year by year: in
2003 the rate was 31 %, in 2004 28 %, in 2005 26 % and in 2006 and 2007 24 %. In 2008 it
was only 21 %, next year it went down to 20 % and it finish at 19 % for this year (2010) and
following ones.
This tax is not final; the taxpayer can use several kinds of tax reductions (tax relieves):36
18 000 CZK for every disabled employee;
60 000 CZK for every severely disabled employee;
One half of the tax if the taxpayer employs at least 25 employees and more than 50 %
of them are disabled employees or severely disabled employees.
4.4 Corporate Income Tax Administration, Conditions of Payment and Budget Destination
The tax administrator is the Financial Office determined by the location of the registered
office of the taxpayer.
Other information concerning tax administration and conditions of payment are very similar to
the personal income tax: the taxpayer must submit his tax return at the latest three months
following expiry of the taxable period (usually 31 March). If the tax return is prepared and
submitted by the tax advisor or barrister, the tax return shall be filed latest six months
33
Only limited partners´ shares in profits are liable to corporate income tax, while general partners´ shares in
profits are liable to personal income tax.
34
See Pařízková I. in: Mrkývka P. a kol. Finanční právo a finanční správa – 2nd
part. Brno: Masarykova univerzita
v Brně, 2004. ISBN: 80-210-3579-X. P. 167.
35
For details see section 34 Income Taxes Act.
36
For details see section 35 Income Taxes Act.
23
following expiry of the taxable period but before unextended due date expires, a power of
attorney authorizing such representation must be submitted.
There is one exception: the taxpayer of corporate income tax can choose, whether he will use a
calendar year or an economic year (which must begin on the first day of any month and must
be twelve months long) as a taxable period.
The taxpayer must state all necessary information relevant to the control of his tax duty and he
himself must count the tax in the tax return.
Paying advance payments is much more usual dealing with corporate income tax but the rules
are the same as for personal income tax: no tax advances are paid by taxpayers whose last
known tax liability did not exceed 30 000 CZK. In other cases the taxpayer is obliged to pay
advance payments and their amount and frequency depends on the last known tax liability:
Taxpayer with the last known tax liability between 30 000 CZK and 150 000 CZK must
pay two advances in the amount of 40 % by 15 June and 15 December;
Taxpayer with the last known tax liability over 150 000 CZK must pay four advances in
the amount of 25 % by 15 March, 15 June, 15 September and 15 December.
The revenue from corporate income tax is distributed between municipal budget (21,4 %),
region budget (8,92 %) and the state budget (69,68 %) and every attentive reader can see that
there is no difference between personal income tax and corporate income tax.
24
5 REAL ESTATE TAX
The most common property tax not only in the Czech Republic is the real estate tax. Its
profitability is not very good and there are a lot of discussions whether to abolish this tax or
not. In fact, this tax can be very useful especially for municipalities as the beneficiaries of real
estate tax: a return from this tax is stable and there is hardly any tax evasion. We can expect
that the citizens paying real estate tax will try to use their property in the best way they can
(lease, reconstruction, land cultivating, etc.) if they are obliged to pay this tax.
The real estate tax is regulated by the Real Estate Tax Act (Act no. 338/1992 Sb., as
amended).37
There are two, respectively three parts of real estate tax: land tax, buildings tax,
and flats and non-residential premises (space) tax as a part of building tax.
This distinction is necessary because assessing of these taxes is individual (different taxpayers,
different tax base and tax rate). But the total sum of these taxes creates one real estate tax
written down in one tax return.
The following text is divided into three parts with regard to particular real estate taxes.
5.1 Land Tax
Since the 18th
century there has been the Real Estate Cadastre (land register) in the Czech lands
(Czech Republic) and it has been used as well for the definition of the object of land tax: the
object of land tax is created by the lands in the territory of the Czech Republic registered in
the land register. But the land tax is not imposed on some lands; they are although registered
in cadastre:
Lands within the area of the ground plan of building which is built on;
Woodlands, if they involve preventive forests and forests of special determination;
Water-covered areas, except ponds used for commercial fish-farming;
Lands used for defense of the state.
All the other lands are liable to tax:
Agricultural lands like arable land, hop-fields, vineyards, gardens, orchards and
permanent grass growth;
Commercial forests;
Ponds used for fish-farming;
Built-up areas and courtyards;
Development lands;
Other areas (playing fields, bathing places, cemeteries, etc).
Although numerous kinds of lands are liable to land tax, they can be tax-exempt. There are a
lot of reasons and many conditions for lands to be exempt from taxation. The most common
37
Vide Radvan, M. in: Radvan, M. et al. Finanční právo a finanční správa - Berní právo. Brno: Masarykova
univerzita et Doplněk, 2008. ISBN: 978-80-210-4732-7. Radvan, M. Theoretical Aspects of Real Estate Tax. in:
Sovremennye problemy teorii nalogovogo prava – The Modern Problems of Tax Law Theory. Voronezh:
Voronežskij gosudarstvennyj universitet, 2007. P. 439-446. ISBN 978-5-9273-1340-2. Radvan, M. Zdanění
majetku v Evropě. Praha: C. H. Beck, 2007. ISBN 978-80-7179-563-6.
25
condition is not to use the land for running business. The legislator was motivated especially by
public interest, ecological aspects and international treaties in creating exemptions. In several
cases the tax return does not have to be filed. This concerns lands owned by state,
municipalities, regions and diplomatic representatives. Other claims for exemptions must be set
up in the tax return. This rule concerns the lands owned by churches, schools and universities,
museums and galleries, hospitals, etc. All these lands are tax-exempt permanently. Other lands
are exempt just for several years:
Agricultural lands for five years following the year when they were returned to use in
agriculture after reclamation;
Woodlands for 25 years following the year when they were returned to use in forestry
after reclamation;
Lands affected by a natural disaster for a period up to five years to eliminate
consequences of natural disasters (this tax exemptions depends on opinion of
municipality);
Agricultural lands except gardens, if the municipality decides so.
In most cases the taxpayer of the land tax is the owner of the land. Sometimes the leaseholder
of the land can be the taxpayer. This rule is used especially for the lands registered in the Real
Estate Cadastre in the facile way, administered by the Czech Republic’s Land Fund or the
Administration of State Material Reserves, or transferred to the National Property Fund. Even
the user of the land can be the taxpayer of land tax. This can happen, if the owner of such land
is unknown or if the boundaries of the lands came into being in the terrain after such lands were
handed over as compensation for the original lands which were consolidated. If two or more
people should be the taxpayers of one land in co-ownership, they usually pay the tax jointly
and severally. If one of them pays the tax, the tax duty of the other is fulfilled. But one of them
can file his tax return only for himself, for his part of land. In this situation, the tax office
counts the tax for other co-owner(s) and every co-owner must pay a minimum tax at 50 CZK.
To be able to set up the tax, every taxpayer must know the tax base and the tax rate; he must
multiply the tax base by the tax rate.38
The system of assessment of the tax base and tax rate is different for every kind of land:
The tax base of agricultural lands such as arable land, hop-fields, vineyards, gardens,
orchards and permanent grass growth is the price of land determined as a multiple of
the actual area of the land in square meters and the average price per square meter of the
land laid down in a decree. The tax rate is different: lower (0,25 %) for permanent grass
growth (they have lower productivity), higher (0,75 %) for the other agricultural lands.
Assessing the tax base of commercial forests and ponds used for fish-farming, the
taxpayer can choose, what is better for him: whether to use the price of the land as
determined pursuant to the price regulations valid on 1 January of the taxable period or
the actual area in square meters multiplied by 3,80 CZK. The tax rate is just one – 0,25
%.
The tax base of other lands (built-up areas and courtyards, development lands and
other areas) is the actual area of the land in square meters, as ascertained on 1 January
of the taxable period. The tax rate per square meter is different for built-up areas and
courtyards and other areas (0,20 CZK) and for development lands (2 CZK).
Development land has another value depending on the fact whether it is in a small
38
The tax base and the tax must be rounded up to CZK.
26
village or in a city. That is why the tax rate of 2 CZK is not final and it is regulated
(multiplied) by a coefficient called location rent according to the number of inhabitants
(municipality can increase or reduce a basic coefficient by a generally binding
ordinance):
Number of inhabitants /
Municipality
Coefficient
Basic Reduced Increased
< 1 000 1,0 – – – 1,4
> 1 000 < 6 000 1,4 – – 1,0 1,6
> 6 000 < 10 000 1,6 – 1,0 1,4 2,0
> 10 000 < 25 000 2,0 1,0 1,4 1,6 2,5
> 25 000 < 50 000 2,5 1,4 1,6 2,0 3,5
> 50 000 + Františkovy Lázně,
Luhačovice, Mariánské Lázně,
Poděbrady
3,5 1,6 2,0 2,5 4,5
Prague 4,5 2,0 2,5 3,5 5,0
Table 3: Coefficients Used for Land Tax on Development Lands
The final tax (with the exception for agricultural lands) can by multiplied by the local
coefficient at 2, 3, 4 or 5 assessed by a generally binding ordinance. This resolution depends on
the municipality.
5.2 Buildings Tax
Both buildings for dwelling and buildings used for business are liable to buildings tax. The
objects of taxation are the buildings in the territory of the Czech Republic connected to the land
with fixed foundations. These buildings must have an acceptance certificate. There is a group
of several more buildings that are liable to tax:
Buildings that are used even if there is no acceptance certificate (but it should be);
Buildings that are used even if there is no acceptance certificate but the building owner
has a permission to use them;
Buildings for which the acceptance permission was not necessary but now it is.
Other buildings, especially small-sized buildings, are not liable to buildings tax, so that the
land under them is liable to land tax. Some other buildings are not levied as buildings, as well
as the land under them is not levied on lands. These are:
Buildings including flats or non-residential premises (they are liable to flats and nonresidential
premises tax);
Water dams and other structures used to regulate water flows, water conduits and
sewerages, city waste water treatment plants;
Energy distribution structures;
Public transport structures (roads, highways, railways, airports, ports, etc).
There are a large number of buildings that are liable to buildings tax but they are tax-exempt.
The reasons and conditions are very the same as the ones mentioned for the land tax. The most
common condition is not to use the land for running business. The legislator was motivated
especially by public interests, ecological aspects and international treaties in creating
exemptions but we can see motivations for economics, too.
27
Sometimes the tax return can not be filed. This rule is applied for buildings owned by state,
municipalities, regions and diplomatic representatives or used in public passenger transport.
Other claims for exemptions must be set up in the tax return. For better understanding it is
useful to create two parts of these exemptions:
Buildings those are tax-exempt permanently. This rule concerns buildings owned by
churches, schools and universities, museums and galleries, hospitals, etc;
Other lands are exempt just for several years:39
o Cultural monuments for eight years after the year following the year when a
building permit was issued for alterations undertaken by the owner;
o Buildings affected by a natural disaster for a period up to five years to eliminate
consequences of natural disasters (this tax exemptions depends on the opinion of
municipality), etc.
In general, the taxpayer of the buildings tax is the owner of the structure. If the structure is
managed by the Czech Republic’s Land Fund or the Administration of State Material Reserves
or transferred to the Czech Republic’s National Property Fund, these entities are the taxpayers.
But if these structures are leased, their lessees should pay the buildings tax. (This rule is not
used for residential buildings, where the above mentioned entities are the taxpayers.) If two or
more people should be the taxpayers of the land, they must pay the tax jointly and severally. If
one of them pays the tax, tax duty of the others is fulfilled. But one of them can file his tax
return only for himself, for his part of structure (in 2011 for the first time). In this situation, the
tax office counts the tax for other co-owner(s) and every co-owner must pay a minimum tax at
50 CZK.
The tax base is the same for all kinds of buildings and it is defined as built-up area in square
meters as on 1 January of the taxable period. The tax rate is different for separate kinds of
buildings:
The standard tax rate for residential buildings is 2 CZK per square meter of a built-up
area. This rate shall be increased by 0,75 CZK per each additional above-ground floor
(so called increased tax rate). This standard rate or increased rate shall be multiplied by
a location rent – a coefficient according to the number of inhabitants (the municipality
can increase or reduce a basic coefficient by a generally binding ordinance):
Number of inhabitants /
Municipality
Coefficient
Basic Reduced Increased
< 1 000 1,0 – – – 1,4
> 1 000 < 6 000 1,4 – – 1,0 1,6
> 6 000 < 10 000 1,6 – 1,0 1,4 2,0
> 10 000 < 25 000 2,0 1,0 1,4 1,6 2,5
> 25 000 < 50 000 2,5 1,4 1,6 2,0 3,5
> 50 000 + Františkovy Lázně,
Luhačovice, Mariánské Lázně,
Poděbrady
3,5 1,6 2,0 2,5 4,5
Prague 4,5 2,0 2,5 3,5 5,0
Table 4: Location Rent
39
Exemptions for newly-constructed residential buildings and flats in newly-constructed residential buildings (for
15 years) and for structures where the heating system was converted from use of solid fuels to more ecological
fuel (for 5 years) were abolished in 2009.
28
The standard tax rate for other structures that provide facilities for residential
buildings is 2 CZK per square meter of a built-up area, too but only for the area which
is in excess of 16 square meters. This rate shall be increased by an increased tax rate
(0,75 CZK per each additional above-ground floor). This standard rate or increased rate
shall be multiplied by a location rent.
The standard tax rate for houses and family houses used for individual recreation is
6 CZK per square meter of a built-up area. This rate shall be increased by an increased
tax rate (0,75 CZK per each additional above-ground floor) and by so called municipal
coefficient (1,5 – assessed by a generally binding ordinance). If such houses are located
in national parks or first-category protected countryside zones, there is another
coefficient of 2,0 that shall be used.
The standard tax rate for other structures that provide facilities for houses and
family houses used for individual recreation is 2 CZK per square meter of a built-up
area and this rate shall be increased by an increased tax rate (0,75 CZK per each
additional above-ground floor), by a municipal coefficient (1,5) and if such structures
are located in national parks or first-category protected countryside zones, the
coefficient at 2,0 shall be used.
The standard tax rate for garages constructed separately from residential buildings is 8
CZK per square meter of a built-up area. This rate can be multiplied by a municipal
coefficient (1,5).
The standard tax rate for structures for business activities depends on the type of
business activities:
o 2 CZK per square meter of a built-up area for structures used for primary
agricultural production, forestry and water management,
o 10 CZK per square meter of a built-up area for structures used for industrial
production, civil engineering, transport, power and other agricultural production
and for other business activities.
The standard tax rate shall be increased by an increased tax rate (0,75 CZK per each
additional above-ground floor) and by a municipal coefficient (1,5).
For other structures the standard tax rate is 6 CZK per square meter of a built-up area.
It can be increased by an increased tax rate (0,75 CZK per each additional aboveground
floor).
The final tax can by multiplied by the local coefficient at 2, 3, 4 or 5 assessed by a generally
binding ordinance. This resolution depends on the municipality.
29
In fact, knowing or even finding a correct tax rate in the Act is very difficult, so it might help
you to look at the following table:40
Object of buildings
tax
Standard
tax rate
(CZK/m2
)
Increases tax
rate
(additional
above-ground
floor)
Multiplied coefficients Local
coefficientAccording to
number of
inhabitants
Municipal National
park
Residential buildings 2 + 0,75 CZK/m2
* x 0,3 – 5,0 – – 2,3,4 or 5
Other structures that
provide facilities for
residential buildings
(over 16 m2
)
2 + 0,75 CZK/m2
* x 0,3 – 5,0 – – 2,3,4 or 5
Houses and family
houses used for
individual recreation
6 + 0,75 CZK/m2
* – none / 1,5 x 2,0 2,3,4 or 5
Other structures that
provide facilities for
houses and family
houses used for
individual recreation
2 + 0,75 CZK/m2
* – none / 1,5 x 2,0 2,3,4 or 5
Garages 8 + 0,75 CZK/m2
* – none / 1,5 – 2,3,4 or 5
Structures for
business activity –
primary agricultural
production, forestry
and water
management
2 + 0,75 CZK/m2
** – none / 1,5 – 2,3,4 or 5
Structures for
business activity –
industrial production,
civil engineering,
transport, power and
other agricultural
production and for
other business activity
10 + 0,75 CZK/m2
** – none / 1,5 – 2,3,4 or 5
Other structures 3 + 0,75 CZK/m2
* – – – 2,3,4 or 5
* If the area of a built-up additional above-ground floor exceeds two-thirds of the built-up area
** Always
Table 5: Buildings Tax Coefficients
5.3 Flats and Non-Residential Premises Tax
The flats and non-residential premises tax is a special category of the building tax. This tax
includes proportionate shares in common areas of the building such as laundries, hanging
rooms, corridors, etc. related to the flats and non-residential premises. Only flats and nonresidential
premises registered in the Real Estate Cadastre are liable to tax. Buildings, in which
flats and non-residential premises are objects of taxation, are not liable to buildings tax.
Exemptions from flats and non-residential premises tax are the same as the exemptions from
building tax.
40
The tax must be rounded up to the whole CZK.
30
The definition of the taxpayer of flats and non-residential premises tax is the same as the
definition of the taxpayer of buildings tax; it means the owner of the flat or non-residential
premise is usually the taxpayer of this tax.
The tax base of flats and non-residential premises tax is so called adjusted floor area, it means
the floor area of the flat or non residential premise in square meters as on 1 January of the
taxable period, multiplied by a coefficient of 1,20.
The tax rate is different for flats and for non-residential premises:
The standard tax base for flats is 2 CZK per square meter of the adjusted floor area.
This standard rate shall be multiplied by a coefficient according to the number of
inhabitants (a location rent).
There are usually some businesses activities run in non-residential premises. For this
situation the taxpayer must set his standard rate according to the business activity:
o 2 CZK per square meter of the adjusted floor area for flats and non-residential
premises used for primary agricultural production, forestry and water
management,
o 10 CZK per square meter of the adjusted floor area for flats and non-residential
premises used for industrial production, civil engineering, transport, power and
other agricultural production and for other business activity.
These standard rates shall be multiplied by the municipal coefficient of 1,5.
o If the non-residential premise is used as a garage, the standard tax rate is 8 CZK
per square meter of the adjusted floor area. This standard rate shall be multiplied
by the municipal coefficient of 1,5, too.
o If the non-residential premise is used for anything else, the standard tax rate is 2
CZK per square meter of the adjusted floor area and it can be multiplied by a
location rent.
The final tax can by multiplied by the local coefficient at 2, 3, 4 or 5 assessed by a generally
binding ordinance. This resolution depends on the municipality.
5.4 Real estate Tax Administration, Conditions of Payment and Budget Destination
The tax administrator is the Financial Office, in whose district such real estate is situated.
The tax return must be filed by the taxpayer by 31 January of the taxable period (the calendar
year). The real estate tax is assessed according to the situation as on 1 January of the calendar
year of which it is assessed.
In fact, the tax return is not necessary to be filed every year; usually if the tax return was filed
in any of the previous taxable period and there are no changes, the taxpayer does not have this
duty. Even if there are changes in the tax rate, in the average price of land, in the coefficients,
etc., there is no duty to file the tax return.
Every year the Financial Office sends the assessment with the tax duty to every taxpayer. If the
annual real estate tax does not exceed 5 000 CZK, it shall be payable in one payment no later
than 31 May of the current taxable period. If the tax exceeds 5 000 CZK, it shall be payable in
two equal installments no later than 31 May and 30 November. The taxpayers engaged in
farming and fish-farming have to pay the tax in two installments no later than 31 August and
30 November.
31
The revenue from the real estate tax is the income of the municipality in whose district is the
real estate situated.
32
6 INHERITANCE TAX
One of the transfer taxes – the inheritance tax – is regulated by the Act no. 357/1992 Sb.,
Inheritance Tax, Gift Tax and Real Estate Transfer Tax Act, as amended. The difference
between these three taxes is in fact, whether the transfer of the property is realized for money
(real estate transfer tax) or whether it is gratuitous (inheritance tax and gift tax). In the case that
transfer is gratuitous, it is necessary to know whether the transfer is inter vivos (gift tax) or
mortis causa (inheritance tax).41
Any acquisition of property (immovable asset, movable things, securities, receivables, property
rights, etc.) by inheritance is liable to inheritance tax. There is the difference of property liable
to tax depending on the citizenship and permanent address of the decedent and kind of
property:42
If the decedent was a citizen of the Czech Republic and he had his permanent address in
the Czech Republic, the tax is payable on the entire movable property (both property
located in the Czech Republic and abroad);
If the decedent was a citizen of the Czech Republic and he did not have his permanent
address in the Czech Republic, the tax is payable only on the movable property located
in the Czech Republic;
If the decedent was not a citizen of the Czech Republic, the tax is payable on the
movable property located in the Czech Republic;
Irrespective of the citizenship or permanent address of the decedent, the tax is payable
on every real estate located in the Czech Republic and no tax is payable on real estate
located abroad.
The most useful exemptions from taxation are the acquisitions of property by inheritance
concerns persons included in the first and in the second categories. There are several other
exemptions like:
Acquisition of movable property belonging to individuals, if the value of such property
does not exceed 20 000 CZK and acquisition of deposit in bank accounts, money
(financial means), securities, if the total amount of all these values does not exceed 20
000 CZK in respect of persons included in the third category. Tax is collected only on
that part of the values by which the above mentioned limits are exceeded;
Acquisition of movable assets, if a decedent was a person enjoying diplomatic
privileges and immunities;
Acquisition of property by the Czech Republic, self-governing local area units, etc.;
Acquisition determined for financial facilities and events relating to culture, science and
education, health care, social care, environment, physical education and sports, fire
protection, etc.;
Acquisition of property by churches, political parties and foundations, etc.
The taxpayer of inheritance tax is an heir who acquires an inheritance on the basis of a
testament or by operation of law or on both such legal grounds. The person of the taxpayer is
41
Vide Radvan, M. in: Radvan, M. et al. Finanční právo a finanční správa - Berní právo. Brno: Masarykova
univerzita et Doplněk, 2008. ISBN: 978-80-210-4732-7. Radvan, M. Zdanění majetku v Evropě. Praha: C. H.
Beck, 2007. ISBN 978-80-7179-563-6.
42
International agreements can provide for otherwise.
33
always set out in the final decision concluding inheritance proceedings issued by the competent
authority.
For the purpose of transfer taxes including the inheritance tax the persons are divided into
three categories according to the relationship of the taxpayer (in this case) to the decedent:
The first category includes direct relatives and spouses;
The second category includes other relatives and persons living with the decedent in
one household for at least one year before the death of the decedent and who took care
of the common household or were dependent on the decedent for their support;
The third category includes other natural persons and legal entities.
The tax base is the value of the property acquired by the heir (the price of the property
determined in inheritance proceedings) reduced by the debts of the decedent, the value of
property exempt from taxation, expenses related to the decedent’s funeral and remuneration to
the notary.
The tax rate is progressive and depends on the relationship of the taxpayer to the decedent and
on the value of the property. It is necessary to use the same proceedings as the ones used for the
gift tax43
and the final tax should be divided by two to calculate the inheritance tax.
The taxpayer must file a tax return with the competent Financial Office (the one in whose
district the decedent had his residential address or where he mostly stayed) within 30 day of the
day when court’s decision by which inheritance proceedings were completed became final. The
tax return shall not be filed on acquisition, if it is fully exempt. The taxpayer must state only
necessary information in the tax return. The Financial Office calculates the tax using the data in
the tax return and final ruling on inheritance sent by court.
The tax (if it is more than 100 CZK) must be paid within 30 days since the delivery of the
order of tax payment (tax assessment).
The revenue of the inheritance tax is the income of state budget.
43
See Chapter on Gift Tax.
34
7 GIFT TAX
Another transfer tax – the gift tax – is regulated by the same act as the other transfer taxes, by
the Act no. 357/1992 Sb., Inheritance Tax, Gift Tax and Real Estate Transfer Tax Act, as
amended. This tax is the same as the inheritance tax (the object of taxation is gratuitous
acquisition of property on the basis of an act in law) but dealing with the gift tax, this is the
transfer of the property inter vivos, not mortis causa (because of the decedent’s death). The
main purpose of this Act is to guarantee that decedents will not evade inheritance tax (will not
give gifts to the heirs during their life.44
Gift tax is imposed on the gratuitous acquisition of property (real estate, movable property,
other benefits) on the basis of an act in law (inter vivos), other than by a decedent’s death
(mortis causa). There are many acts in law that can be used for donation but the most common
is the contract of donation.
The object of taxation is donation of movable property from abroad to a presentee in the Czech
Republic or from the Czech Republic to a presentee abroad, too. The tax will be also collected
on movable property which is donated abroad or acquired abroad from the means donated to a
presentee abroad, if the donated or acquired movable property was imported by a presentee to
the Czech Republic. The donation of real estate located in the area of the Czech Republic is
always liable to gift tax.
There are several situations when the gratuitous acquisition of property is not liable to gift tax.
The gift tax shall not apply to benefits or gratuitous transfer of property on the basis of a duty
laid down in a legislative act, pension benefits, subsidies, contributions and supports, financial
means provided from the European Union’s budget or the National Fund, etc.
There are a lot of exemptions used for the purpose of gift tax. At least several of them will be
mentioned in the following text.
The most important are exemptions of the acquisitions of property by inheritance concerns
persons included in the first and in the second categories. Other common exemptions are:
Acquisition of movable property belonging to individuals, if the value of such
property does not exceed 20 000 CZK and acquisition of deposit in bank accounts,
money (financial means), securities, if the total amount of all these values does not
exceed 20 000 CZK in respect of persons included in the third category. The tax is
collected only on that part of the values by which the above mentioned limits are
exceeded;
Occasional free-of-charge acquisition of movable asset and another property benefit,
if the value of this benefit does not exceed 3 000 CZK;
Acquisition of movable assets, if a taxpayer was a person enjoying diplomatic
privileges and immunities;
Acquisition of property by the Czech Republic, self-governing local area units, etc.;
Acquisition determined for financial facilities and events relating to culture, science
and education, health care, social care, environment, physical education and sports,
fire protection, etc.;
44
Vide Radvan, M. in: Radvan, M. et al. Finanční právo a finanční správa - Berní právo. Brno: Masarykova
univerzita et Doplněk, 2008. ISBN: 978-80-210-4732-7. Radvan, M. Zdanění majetku v Evropě. Praha: C. H.
Beck, 2007. ISBN 978-80-7179-563-6.
35
Acquisition of property by churches, political parties, foundations, etc;
Free-of-charge transfer of flats, family houses, garages from housing co-operatives’
ownership to ownership of such housing co-operatives’ members (natural persons),
etc.
Usually the taxpayer of the gift tax is the presentee (donee, transferee). The donor is the tax
surety (guarantor). However, when a gift is donated to someone abroad, it would be very hard
to get the tax from abroad for the Czech Financial Office; that is why in these situations the
donor is the taxpayer of the gift tax.
If two or more persons are obliged to pay the gift tax, each of them has to file the tax return and
each of them has to pay his part of tax.
The tax base of the gift tax is defined as the price of the property45
reduced by debts and the
value of other liabilities pertaining to the object of tax, the value of tax-exempt property and
customs and taxes paid on the importation of movable things donated or imported from abroad.
To evade tax, many of the taxpayers are trying to divide the gift into parts. The Act remembers
these situations and sets that the price of gift from the same donor to the same donee within two
subsequent calendar years shall be added together and the sum of the prices is the tax base. If
the tax was paid in the first year, in the second year it will be credited against the tax assessed
on the subsequent acquisition of property.
As it was mentioned above, for the purpose of transfer taxes (including gift tax) the persons
are divided into three categories according to the relationship of the donee (in this case) to the
donor. It would be useful to repeat this division at this place again:
The first category includes direct relatives and spouses;
The second category includes other relatives and persons living with the donee in one
household for at least one year before the death of the decedent and who took care of
the common household, or who was dependent on the decedent for his/her support;
The third category includes other natural persons and legal entities.
The tax rate is progressive and depends on the value of the property:
Tax base from
(mil. CZK)
Tax base to
(mil. CZK)
Tax rate for persons incl. in the third category
(CZK + % from the tax base exceeding lower bound)
1 7,0
1 2 70 000 + 9,0
2 5 160 000 + 12,0
5 7 520 000 + 15,0
7 10 820 000 + 18,0
10 20 1 360 000 + 21,0
20 30 3 460 000 + 25,0
30 40 5 960 000 + 30,0
40 50 8 960 000 + 35,0
50 12 460 000 + 40,0
Table 6: Tax Rates of Gift Tax
The taxpayer must file a tax return with the Financial Office in whose district the real estate is
situated (donation of real estate) or the one in whose district the taxpayer has his residential
address or registered office (donation of movable property) within 30 day of the day when the
45
Price ascertained under Act no. 151/1997 Sb., as amended, Act on Property Valuation.
36
donation of a movable asset or some other property benefit took place or a contract on free-ofcharge
transfer of ownership title to specific real estate with a clause confirming its registration
to Real Estate Cadastre was served on the taxpayer. A tax return shall be accompanied by a
certified copy of the contract or other document by which ownership relations to specific real
estate are confirmed or certified. The taxpayer must enclose an expert’s valuation of the price,
too.
The taxpayer must state only necessary information in the tax return and the Financial Office
calculates the tax using the data in the tax return. The tax (if it is more than 100 CZK) must be
paid within 30 days of delivery of the order of tax payment (tax assessment).
The revenue of the gift tax is the income of state budget.
37
8 REAL ESTATE TRANSFER TAX
The last (but not least) transfer tax is the real estate transfer tax, regulated again by Act no.
357/1992 Sb., Inheritance Tax, Gift Tax and Real Estate Transfer Tax Act, as amended. The
aim of this Act is to draw a part of purchase price obtained from the sale of real estate. Since
the acquisition of property is not gratuitous, the tax rate is lower than for other transfer taxes.46
Real estate transfer tax is payable on the transfer of ownership title to the real estate for
consideration and the establishment of an easement without consideration upon the acquisition
of real estate by donation. Even in the cases, when this transfer is cancelled and the
cancellation renders the contract null and void from its inception, the transfer of ownership title
to real estate for a consideration is liable to the real estate tax. Exchange of real estate is
considered as a single transfer. The tax will be collected on the transfer of real estate with
higher tax.
The only important exemption is the exemption of the first transfer for consideration of
ownership title to a newly-constructed building, if such a building has not been used yet or to a
flat in a new building, if such a flat has not been used yet, on condition that the transferor is a
natural person or legal entity and such a structure is transferred in connection with a business
activity of the transferor, or if the transferor is municipality.
The real estate tax is paid mostly by the transferor (the seller). In this case the person acquiring
the real estate becomes the surety. In other cases the taxpayer is the beneficiary from an
easement or another benefit similar to an easement. Talking about the exchange of real estates,
both the transferor and the transferee are liable to pay the tax; both of them are obliged to pay
the tax jointly and severally.
The tax base is usually the price ascertained pursuant to the Act no. 151/1997 Sb., Property
Valuation Act, as amended, and valid on the day of acquisition of the real estate. But if the
negotiated price of real estate is higher than the price ascertained pursuant to the Property
Valuation Act, this negotiated price must be used as a tax base. The tax base can include as
well the price of an easement established without consideration, the price ascertained pursuant
to the Property Valuation Act and valid on the day of the acquisition of the real estate on the
basis of the relevant financial lease contract, the price from auction, etc.
The tax rate is percentual linear and it is 3 % of the tax base.
The taxpayer must file a tax return with the Financial Office in whose district the real estate is
situated latest by the end of the third month following the month when registration of such
transfer was made in the Real Estate Cadastre. A tax return shall be accompanied by a certified
copy of the contract or other document by which ownership relations to specific real estate are
confirmed or certified. The taxpayer must enclose an expert’s valuation of the price, too. The
taxpayer must state all necessary information in the tax return and calculate the tax. If the real
estate transfer tax stated in the tax return corresponds to the real estate transfer tax assessed, the
tax administrator does not need to notify the taxpayer of such assessment.
Tax must be paid within the time-limit for filing the tax return.
The revenue of the real estate transfer tax is the income of the state budget.
46
Vide Radvan, M. in: Radvan, M. et al. Finanční právo a finanční správa - Berní právo. Brno: Masarykova
univerzita et Doplněk, 2008. ISBN: 978-80-210-4732-7. Radvan, M. Zdanění majetku v Evropě. Praha: C. H.
Beck, 2007. ISBN 978-80-7179-563-6.
38
9 ROAD TAX AND OTHER CHARGES ON USING ROADS
A lot of motorists have to pay for using motorways and highways not only in the Czech
Republic. Nowadays there are three types of charges: the road tax, time charge and electronic
toll. The income of these charges is (even together with other sources of money, for example
part of excises) not enough to repair existing roads and to build new ones.47
9.1 Road Tax
The road tax is one of the direct taxes collected in the Czech Republic. The main purpose of
this tax is the taxation of using roads by motor vehicles. The tax base and the tax rate depend
on how the vehicle damages the roads. The road tax has been in operation since January 1st
,
1993 and it is adjusted in the Road Tax Act (Act no. 16/1993 Sb., Road Tax Act, as amended).
The objects of the road tax are all motor vehicles registered and operated in the Czech
Republic48
and used for running business. Vehicles of the total weight over 3,5 tons, registered
in the Czech Republic and determined solely for the freight transport are always liable to tax (if
they are used for the business activity or not).49
Some vehicles such as special tracked motor vehicles, tractors and their trailers, vehicles with
special number plate, etc. are not liable to the road tax.
Some operators of the motor vehicles have immunity from taxes; they do not have to pay road
tax. The tax exemption is usually motivated by public utility (police cars, fire brigade cars,
ambulance cars, army cars, breakdown service cars, road sweeping vehicles, etc.), ecological
aspects (cars with electric drive, cars using LPG, intercity buses) or international treaties. Tax
exemption is used for vehicles with less than four wheels (L category in a log-book), especially
motorcycles.
The taxpayer is the operator of the vehicle (a natural person or legal entity) and his name is
entered in vehicle registration papers (log-book). It means that the taxpayer is usually the
owner of the vehicle. In some special cases the taxpayer can be the employer: if the employer
sends his employee to a business trip and the employee uses his own vehicle, the employer is
the taxpayer and he is obliged to pay the road tax.
The tax base differs from the type of the vehicle:
For motor cars the tax base is the engine capacity in cm3
;
For trucks and semi-trailers the tax base is the sum of the highest admissible weights on
axles in tons and the number of axles (this combination is very pragmatic because truck
with more axles destroys the road less than truck with the same weight and lower
number of axles).
The tax rate is fixed for every vehicle. The tax is paid for every vehicle separately.
47
Vide Radvan, M. in: Radvan, M. et al. Finanční právo a finanční správa - Berní právo. Brno: Masarykova
univerzita et Doplněk, 2008. ISBN: 978-80-210-4732-7. Radvan, M. Zdanění majetku v Evropě. Praha: C. H.
Beck, 2007. ISBN 978-80-7179-563-6.
48
This rule respects the Article no. 5 of the Directive 1999/62/EC on the charging of heavy goods vehicles for the
use of certain infrastructures.
49
But government decree sets up several exemptions from this rule especially because of social and charitable
reasons.
39
For motor cars the annual tax rate is:
Engine capacity Tax rate
to 800 cm3
1 200 CZK
from 800 cm3 to 1 250 cm3
1 800 CZK
from 1 250 cm3 to 1 500 cm3
2 400 CZK
from 1 500 cm3 to 2 000 cm3
3 000 CZK
from 2 000 cm3 to 3 000 cm3
3 600 CZK
from 3 000 cm3
4 200 CZK
Table 7: Tax Rate of Road Tax for Motor Cars
For trucks and semi trailers the annual tax rate is:
Number
of axles
Weight Tax rate Number
of axles
Weight Tax rate
1 to 1 t 1 800 CZK 3 to 1 t 800 CZK
from 1 t to 2 t 2 700 CZK from 1 t to 3.5 2 400 CZK
from 2 t to 3.5 t 3 900 CZK from 3.5 to 6 t 3 600 CZK
from 3.5 t to 5 t 5 400 CZK from 6 t to 8.5 t 6 000 CZK
from 5 t to 6.5 t 6 900 CZK from 8.5 t to11 t 7 200 CZK
from 6.5 t to 8 t 8 400 CZK from 11 t to 13 t 8 400 CZK
from 8 t 9 600 CZK from 13 t to 15 t 10 500 CZK
2 to 1 t 1 800 CZK from 15 t to 17 t 13 200 CZK
from 1 t to 2 t 2 400 CZK from 17 t to 19 t 15 900 CZK
from 2 t to 3.5 t 3 600 CZK from 19 t to 21 t 17 400 CZK
from 3.5 t to 5 t 4 800 CZK from 21 t to 23 t 21 300 CZK
from 5 t to 6.5 t 6 000 CZK from 23 t to 26 t 27 300 CZK
from 6.5 t to 8 t 7 200 CZK from 26 t to 31 t 36 600 CZK
from 8 t to 9.5 t 8 400 CZK from 31 t to 36 t 43 500 CZK
from 9.5 t to 11 t 9 600 CZK from 36 t 50 400 CZK
from 11 t to 12 t 10 800 CZK 4 and
more
to 18 t 8 400 CZK
from 12 t to 13 t 12 600 CZK from 18 t to 21 t 10 500 CZK
from 13 t to 14 t 14 700 CZK from 21 t to 23 t 14 100 CZK
from 14 t to 15 t 16 500 CZK from 23 t to 25 t 17 700 CZK
from 15 t to 18 t 23 700 CZK from 25 t to 27 t 22 200 CZK
from 18 t to 21 t 29 100 CZK from 27 t to 29 t 28 200 CZK
from 21 t to 24 t 35 100 CZK from 29 t to 32 t 33 300 CZK
from 24 t to 27 t 40 500 CZK from 32 t to 36 t 39 300 CZK
from 27 46 200 CZK from 36 t 44 100 CZK
Table 8: Tax Rate of Road Tax for Trucks and Semi Trailers
If the tax liability arises or expires during the year, then the tax is just 1/12 of the annual rate
tax for every month when the taxpayer is obliged to pay the road tax. The tax liability arises as
of the calendar month in which decisive conditions are met and terminates in the calendar
month in which decisive conditions cease to be met.
In the case when the employer sends his employee to a business trip and the employee uses his
own vehicle, the employer is obliged to pay road tax and he has the possibility to pay a special
tax rate 25 CZK per day.
The Czech legislator decided to tax-prefer the operators of new vehicles (it is presumed, that
they fulfill ecological standards). That is why the tax rate for vehicles is only 52 % of the basic
40
tax rate during the first 36 months after the first registration of the vehicle, 60 % during the
next 36 months and 75 % during the next 36 months. If trucks and semi trailers of the total
weight between 3,5 and 12 tons are not used for running business, it is not necessary to pay any
tax. If the total weight of these vehicles is over 12 tons, the tax rate is only 52 % of the basic
tax rate.
On the other hand the taxpayers are obliged to pay the tax rate increased of 25 % for vehicles
registered till the end of 1989.
If using combined transport, the taxpayer can set up a claim to tax relief (tax reduction).
Combined transport means the transport of cargo on roads combined with the transport on
railroads or water roads. The distance between the place of loading or discharge and the
railway station or and the port must be 150 km at maximum. The amount of tax relief depends
on the number of drives made by combined transport during the year:
Number of drives Tax relief in % from
annual tax rate
vehicles used only for
combined transport
100
more than 120 90
from 91 to 120 75
from 61 to 90 50
from 31 to 60 25
Table 9: Tax Relief for Road Tax
If the distance on the railroad or in the water road is longer than 250 km, it is calculated as two
drives.
The tax return on the road tax must be filed by 31 January of the next year. In this tax return
the taxpayer must calculate his tax liability. The tax administrator is the Financial Office
determined by the location of the registered office of the taxpayer (legal entity) or residential
address (natural person).
The tax must be paid by 31 January of the next year. But the taxpayer is obliged to pay tax
advances during the year. There are four terms to pay tax advances: 15 April, 15 July, 15
October and 15 December.
The whole revenue from the road tax is the income of State Fund of Transport Infrastructure.
9.2 Time Charge
This charge is regulated by Land Roads Act (Act no. 13/1997 Sb., as amended). It is paid only
by the operators of motor vehicles with four wheels or the operators of road trains using Czech
motorways and highways. In other words anyone who wants to use motorway or highway must
pay no matter how many kilometers he goes on the paid stage.50
This system is not fair; the
operator has in fact the only opportunity to choose for how long he will need to travel on the
paid motorways: one year, one month, ten days or just one day. Vehicles of the total weight of
at least 3,5 tons do not pay time charge, because they are liable to electronic toll.
50
Charge on using motorways and highways by motor vehicles is paid on cca 750 km of roads; because of
ecological aspects it is not paid on motorways serving as city traffic circuits.
41
The allowance of the charge is verified by the tax sticker on the front window. Land Roads Act
sets up maximal level of taxation at 1.500 CZK per year.
According to the Act, shorter periods of taxation (month, ten days) are possible with sufficient
value of tax stickers. Concrete value of the time charge is set up in the government decree:
Validity period
Weight of vehicle
one year one moths ten days
to 3.5 t 1.200 CZK 350 CZK 250 CZK
Table 10: Time Charge
9.3 Electronic Toll
Electronic road tolls systems are quite modern systems replacing time charges in many
European countries. The same situation is in the Czech Republic, where electronic road toll has
been used since the beginning of 2007. Electronic toll is regulated by Land Roads Act, too. It is
paid only by the operators of motor vehicles with four wheels or the operators of road trains of
the total weight of at least 3,5 tons using Czech motorways, highways and selected other 1st
class roads. Concrete value of the time charge is set up in the government decree, with respect
to ecological limits, number of axles, kind of road and time:
up to EURO II EURO III or higher
Number of axles
2 3 4≤ 2 3 4≤
Fri
3-9 PM
Other
time
Fri
3-9 PM
Other
time
Fri
3-9 PM
Other
time
Fri
3-9 PM
Other
time
Fri
3-9 PM
Other
time
Fri
3-9 PM
Other
time
2,87
CZK/km
2,26
CZK/km
5,55
CZK/km
3,63
CZK/km
8,10
CZK/km
5,30
CZK/km
2,12
CZK/km
1,67
CZK/km
4,35
CZK/km
2,85
CZK/km
6,30
CZK/km
4,12
CZK/km
Table 11: Electronic Toll for Highways and Motorways
up to EURO II EURO III or higher
Number of axles
2 3 4≤ 2 3 4≤
Fri
3-9 PM
Other
time
Fri
3-9 PM
Other
time
Fri
3-9 PM
Other
time
Fri
3-9 PM
Other
time
Fri
3-9 PM
Other
time
Fri
3-9 PM
Other
time
1,37
CZK/km
1,08
CZK/km
2,70
CZK/km
1,77
CZK/km
3,90
CZK/km
2,55
CZK/km
1,00
CZK/km
0,79
CZK/km
2,10
CZK/km
1,37
CZK/km
3,00
CZK/km
1,96
CZK/km
Table 12: Electronic Toll for 1st
Class Roads
42
10 VALUE ADDED TAX
Value added tax (VAT) is the most typical indirect tax collected not only in the Czech
Republic. In fact, the Czech regulation of VAT is the same as in the other member states of the
European Union. VAT is a tax on transactions or better a tax on consumption. In fact, it is the
tax paid by a final consumer on the purchase of goods and services, even a lot of the consumers
do not know they are paying this tax.
In the Czech Republic VAT is quite a new tax: it was first introduced on 1 January 1993.
Nowadays there are a lot of changes concerning VAT in the Czech Republic because of
implementation of the Sixth VAT Directive.
VAT in the Czech Republic is regulated by Act no. 235/2004 Sb., Value Added Tax Act, as
amended.51
The objects of VAT are:
Supply of goods for payment by a taxable person, if a place of transfer is in the Czech
Republic; goods are all movable assets, heat energy, electric power, water, gas,
banknotes and coins, etc.;
Transfer or transference of real estate for consideration in an auction by a taxable
person, if a place of transfer is in the Czech Republic;
Supply of service for consideration by a taxable person, if a place of transfer is in the
Czech Republic;
Acquisition of goods from another member state of the European Union for payment;
Import of goods with a place of supply in the Czech Republic.
Several supplies are exempt from taxation. In this place, several of them should be mentioned
banking operations, insurance operations, postal service, radio and television broadcasting or
lease of real estate (lands and buildings).
Taxable persons (payors) are individuals and legal entities that carry out economic activities
such as trading, manufacturing activities and the provision of services in the Czech Republic.
Every taxable person must be registered to VAT once the statutory requirements for
registration are met. The taxable person is usually the one, whose turnover exceed 1 000 000
CZK in the past twelve months. This person must file the registration form and transfer it to the
Financial Office till the fifteenth day following after the end of a month when its turnover
exceeded above mentioned sum. It becomes the taxpayer of VAT in the first day of the third
month after the month when the turnover was exceeded.
Some persons use the possibility given by VAT Act to be registered voluntary. In this case they
do not have to pay on all purchases and they have a possibility to reclaim the amount of VAT
paid as a refund.
It is typical for VAT that it occurs in every phase of the turnover (it means for example the
acquisition of raw materials, phases of manufacturing and distribution, sale to the final
51
Vide Pařízková I., Radvan, M. in: Radvan, M. et al. Finanční právo a finanční správa - Berní právo. Brno:
Masarykova univerzita et Doplněk, 2008. ISBN: 978-80-210-4732-7. Kyncl, L. Value Added Tax (VAT) on
electronic services in the Czech republic. in: Sovremennye problemy teorii nalogovogo prava – The Modern
Problems of Tax Law Theory. Voronezh: Voronežskij gosudarstvennyj universitet, 2007. P. 365-368. ISBN 978-
5-9273-1340-2.
43
consumer). Every phase usually adds some value and this added value is the object of taxation.
The final, total sum of the tax is paid by the final consumer because every VAT payor has a
right to ask for the refund of the tax but the final consumer does not have this right.
The tax base is a monetary amount that was received or is to be received as a consideration by
a VAT payor from a person to whom the VAT payor realized a taxable supply. The tax base
also comprises customs, dues and charges (fees), excise taxes (incl. energy taxes), price
subsidies, accidental expenses, materials directly connected to rendered service, building and
fitting works connected to the construction, etc.
There are two tax rates to be used for assessing VAT in the Czech Republic. The basic tax rate
is 20 % and it is used both for the supplies of goods and services. The reduced tax rate is 10 %
and there is a list of goods and services liable to reduced VAT rate in annexes to the Value
Added Tax Act. Just several kinds of goods and services will be mentioned like foodstuffs
including beverages or water, pharmaceutical products, napkins for babies, books, newspapers
and journals, baby safety seats used in cars, water management, regular mass transport, cultural
activities, etc.
To assess the tax, we must use this formula: VAT = Tax Base x Coefficient, where Coefficient
= Tax Rate / 100. The tax can be rounded up to the whole hellers (0,01 CZK).
There is one more formula used in the situations, when we know the whole sum including
VAT: VAT = the Whole Sum x Tax Rate / (Tax Rate + 100), it means VAT = the Whole Sum
x 0,1667 for 20 % VAT rate and VAT = the Whole Sum x 0,0909 for 10 % VAT rate.52
There are two possibilities of the VAT period and two periods for submitting the tax return
depending on the VAT payor’s turnover in the previous calendar year:
For a VAT payor whose turnover in the previous calendar year was less than 2 000 000
CZK, the tax period is a calendar quarter;
A VAT payor whose turnover in the previous calendar year was more than 2 000 000
CZK but less than 10 000 000 CZK can choose whether the tax period will be a
calendar quarter or one month;
A VAT payor whose turnover in the previous calendar year was more than 10 000 000
CZK has a monthly taxable period.
Every taxpayer must submit his tax return by the 25th
day after the end of the relevant taxable
period.
The tax administrator is the Financial Office determined by the location of registered office
of the taxpayer (legal entity) or residential address (natural person) or customs offices in case
of export.
The tax must be paid in the term for filing the tax return. The whole revenue from VAT is the
income of the state budget.
52
The quotient is rounded to four decimal positions.
44
11 SELECTED EXCISE TAXES
Selected excise taxes are typical indirect taxes collected for many years not only in the Czech
Republic. In fact, not all the products are liable to excise taxes, just several of them chosen by
state. The states usually argue that these products are not healthy (alcohol, tobacco) or they are
dangerous for nature (petroleum oils). But mostly the real reason for these taxes is money for
public budgets. In fact, all these products are also liable to the value added tax that is why we
can talk about double taxation.
Historically there were five selected excise taxes (excise duties) in the Czech Republic:53
Excise tax on petroleum oils (hydrocarbon fuels);
Excise tax on spirit;
Excise tax on beer;
Excise tax on wine and semi products;
Excise tax on tobacco products.
Since the beginning of 2008 there are three new excise taxes, so called energy taxes or (more
often, but incorrectly) ecological taxes. The main principles of regulation correspond to the
Directive 2003/96/ES. These taxes are:
Tax on earth gas and other gases;
Tax on solid fuels;
Tax on electricity.
Nowadays “old” selected excise taxes are regulated by Act no. 353/2003 Sb., Excise Taxes
Act, as amended, and energy taxes are regulated by Act no. 261/2007 Sb., Public Budgets
Stabilization Act, as amended.54
These selected products are the objects of the excise tax if they are produced in the territory of
European Union or if they are imported to the territory of European Union.
There are two main groups of payors of excise taxes:
1. An individual or legal entity – the operator of the tax deposit, recipient or producer of
selected products;
2. An individual or legal entity that has a duty to pay the tax in case of import.
Since there are eight different selected excise taxes, the following text will be divided into
several parts. The same formula stands for all the excise taxes: Tax = Tax Base x Tax Rate.
11.1 Excise Tax on Petroleum Oils
Petroleum oils are all the motor petrol and aviation petrol-type fuels, medium oils and heavy
gas and heating oils, waste oils, liquefied petroleum gases and compressed gases and mixtures
of petroleum oils.
53
More detailed information can be found in the part dealing with tax bases and tax rates of excise taxes.
54
Vide Mrkývka, P., Radvan, M. in: Radvan, M. et al. Finanční právo a finanční správa - Berní právo. Brno:
Masarykova univerzita et Doplněk, 2008. ISBN: 978-80-210-4732-7. Radvan, M., Neckář, J. Ekologické daně. in:
Dny veřejného práva. Brno: Masarykova univerzita, 2007. P. 86, 577-582. ISBN 978-80-210-4430-2.
45
The tax base is usually 1 000 liters of petroleum oils at the temperature of 15 °C (motor petrol
and aviation petrol-type fuels, medium oils and heavy gas and heating oils, waste oils) or 1 ton
(liquefied petroleum gases and compressed gases). This amount must be rounded to two
decimal positions.
The tax rate is fixed and the tax rates are mentioned in the following table:
Description Tax rate
Motor petrol and aviation petrol-type fuels with a
lead content not exceeding 0,013 g per liter
12 840 CZK per 1000 liters
Motor petrol and aviation petrol-type fuels with a
lead content exceeding 0,013 g per liter
13 710 CZK per 1000 liters
Medium oils and heavy gas and heating oils 10 950 CZK per 1000 liters
Heavy heating oils 472 CZK per ton
Waste oils 660 CZK per 1000 liters
Liquefied petroleum gases 0 – 3 933 CZK per ton
Table 13: Excise Tax Rates on Petroleum Oils
11.2 Excise Tax on Spirit
If there is more than 1,2 % of ethanol in the product, this product is liable to the excise tax on
spirit.
The tax base is 100 liters (hectoliter) of ethanol at the temperature of 20 °C. The tax rate is
fixed and there is one basic rate and one reduced rate for the spirit in fruit spirits, distilled by
growers of fruit:
Description Tax rate
Spirit in fruit spirits, distilled by growers of fruit 14 300 CZK per hectoliter of ethanol
Spirit in other products 28 500 CZK per hectoliter of ethanol
Table 14: Excise Tax Rates on Spirit
11.3 Excise Tax on Beer
If there is more than 0,5 % of alcohol in the product, this product is liable to excise tax on beer.
Some producers of beer are not liable to the excise tax on beer, if they produce beer just for
themselves and they do not produce more than 200 liters of beer in one calendar year. They just
must announce this to the tax administrator.
The tax base is 100 liters (hectoliter) of beer. The tax rate for each whole percent of the
original primary brew is fixed but small independent breweries pay reduced tax rate:
Standard tax rate for each whole percent of the original primary brew
(in CZK per hectoliter)
Standard rate Reduced rate for small independent breweries according to output
in hectoliters
up to
10 000 hl.
10 000 –
50 000 hl.
50 000 –
100 000 hl.
100 000 –
150 000 hl.
150 000 –
200 000 hl.
32,00 16,00 19,20 22,40 25,60 28,80
Table 15: Excise Tax Rates on Beer
46
11.4 Excise Tax on Wine and Semi Products
Similarly to the excise tax on beer, some producers of wine are not liable to the excise tax on
wine, if they produce wine just for themselves and they do not produce more than 500 liters of
wine in one calendar year.
The tax base is 100 liters (hectoliter) of wine. The fixed tax rates are as follows:
Description Tax rate
Sparkling wines 2 340 CZK per hectoliter
Non-sparkling wines zero-rated
Wine semi products 2 340 CZK per hectoliter
Table 16: Excise Tax Rates on Wine and Semi Products
11.5 Excise Tax on Tobacco Products
Cigarettes, cigars, cigarillos and tobacco are liable to the excise tax on tobacco products.
There are two types of tax base in the Czech Republic:
1. Sale price, if the percentage tax rate is used (the sale price is directly fixed by state);
2. Units or kilograms, if the fixed tax rate is used.
The tax rate is a combination of a fixed and percentage tax rate. There is a minimum tax rate,
too. The total tax is the sum of a fixed tax rate and a percentage tax rate but it must be at least
the minimum tax:
Description Tax rate
fixed percentage minimum
Cigarettes 1,07 CZK / unit 28 % 3,01 CZK / unit
Cigars, cigarillos 1,15 CZK / unit
Tobacco for smoking 1 340 CZK / kg
Other tobacco for other purposes 1 340 CZK / kg
Table 17: Excise Tax Rates on Tobacco Products
11.6 Tax on Earth Gas and Other Gases
Tax on earth gas is imposed on gases. The most important exemption is the one for production
of heat for households. The payor is usually the supplier of gas. The tax base is the amount of
heat and tax rates correspond to the using purpose. It is fixed between 0 – 264,80 CZK/MWh
of heat. While gas is supplied continuously, the taxable period is one month.
11.7 Tax on Solid Fuels
Tax on solid fuels is imposed on coal, briquettes, coke, semi-coke, etc. The most common
exemptions are used in the production of electricity or coke. The payors are the suppliers
supplying solid fuels to the final consumers. The tax base is the amount of solid fuels in GJ of
heat. The tax rate is at the minimal level according to EU directive – 8,50 CZK per GJ of heat.
11.8 Tax on Electricity
The last one of selected excise taxes is tax on electricity. Electricity produced in an ecological
way (from sun energy, in water power plants, from biomass, etc.) is exempt from taxation. The
47
same rules are applied for the electricity produced in mounts or used for trains, tramways and
trolleybuses. The payors are the suppliers of electricity to the final consumers. The tax base is
the amount of electricity in MWh. The tax rate is 28,30 CZK per MWh. While electricity is
supplied continuously, the taxable period is one month.
11.9 Selected Excise Taxes Administration, Payment and Budget Destination
The taxable period for excise taxes is one month. Every taxpayer must submit his tax return
by the 25th
day after the end of the relevant taxable period – calendar month. One tax return
must be filed for every excise tax. If the goods are imported, there is no duty to file the tax
return because there is another document similar to the tax return – the customs declaration.
There is no tax return for the excise tax on tobacco products because the order of tobacco labels
serves as a tax return. For the future the same practice is being prepared for the excise tax on
spirit.
The tax administrator is the customs office determined by the location of registered office of
the taxpayer (legal entity) or residential address (natural person).
The tax must be paid by the 40th
day after the end of the relevant taxable period, in case of
export by the 10th
day after the delivery of the customs duty decree. The whole revenue from
selected excise taxes is the income of the state budget except the revenue from petroleum oils
excise tax, where the revenue is divided between the State Fund of Transport Infrastructure (9,1
%) and the state budget (90,9 %).
48
12 LOCAL CHARGES
Every municipality in the Czech Republic has a possibility to levy local charges (local fees,
local taxes55
). The authority for doing so is needed to be established by law. Not every
municipality levies every local charge, town council has an opportunity to decide whether the
municipality will levy the local charge and it can define the amount of this charge. In fact, the
income from the local charges is quite important for the municipalities and paying local
charges is the same duty as to pay every other taxes and charges. Local charges have (except
the fiscal function) regulative and protective function, too.
Dealing with local charges, the legal regulation of these charges is very important. The Charter
of Fundamental Rights and Freedoms (Act no. 2/1993 St., in current wording) in its Article
11(5) says that taxes and charges are possible to be imposed only in legal act. This act is Act
no. 565/1990 Sb., Local Charges Act, as amended. In its Section 14 it contains authorization
for municipalities to assess local charges by the ordinance. In this ordinance conditions for
levying, charge rate, charge maturity and eventual immunity must be given. The ordinance may
not exceed the conditions defined by Local Charges Act (for example absolute charge rate or
varieties of charges).56
Nowadays the municipalities in the Czech Republic have an opportunity to levy following local
charges:
1. Dog charge;
2. Charge for spa and recreation stay;
3. Charge for using public places;
4. Charge on entrance;
5. Charge for housing capacity;
6. Charge on gambling machines and other technical game facilities;
7. Charge on communal waste;
8. Charge for permission to enter selected places by motor vehicle;
9. Charge on evaluation of building land.
This list is complete and the municipality has no possibility to levy any other charge.
The most common charge in Czech municipalities is the dog charge. The taxpayer of this
charge is the holder of the dog, not the owner any more (since 1 January 2004). The definition
of the holder is not exact, I am afraid, because the Act just says that the holder is a natural
person or corporation with the residence in the Czech Republic. This definition can cause many
problems in application. A better definition is only in the explanatory note to the Act (the
55
See also Mrkývka, P. Některé úvahy o materiálním základu veřejné správy, Časopis pro právní vědu a praxi, no.
2/2003.
56
Vide Radvan, M. in: Radvan, M. et al. Finanční právo a finanční správa - Berní právo. Brno: Masarykova
univerzita et Doplněk, 2008. ISBN: 978-80-210-4732-7. Radvan, M. Zdanění majetku v Evropě. Praha: C. H.
Beck, 2007. ISBN 978-80-7179-563-6. Radvan, M. Poplatkové právo v ČR (Charge Law in the Czech Republic).
in: Current Questions of the Efficiency of Public Finance, Financial Law and Tax Law in the countries of Central
and Eastern Europe (Aktuálne otázky efektívnosti verejných financií, finančného práva a daňového práva v štátoch
strednej a východnej Európy). Košice: Univerzita Pavla Jozefa Šafárika v Košiciach, 2005. P. 41 + CD. ISBN 80-
7097-604-7.
49
holder of dog is a person that takes care of this dog in the same way as the owner of the dog
and there is no doubt that the dog is living with this person).57
The holders may not pay the charge for all dogs, just for the one older than three months. Some
holders are exempt from paying, for example blind people, people training dogs, taking care of
abandoned dogs, hunters, etc. Municipalities can extend the list of exemptions.
Every holder of the dog must pay the dog charge to the municipality covering every month in
the year, if the conditions for paying are fulfilled. The same rule must be used in the situation
when the holder moves from one town to another. The charge rate can run up to 1 500 CZK for
a dog and a year, for pensioners 200 CZK. For the second and every other dog the charge rate
can be increased by 50 %.
The taxpayers of the charge for spa and recreation stay are persons who stay in spas or other
recreation centers because of treatment or recreation. There are some more conditions that must
be fulfilled to levy the charge: the persons must stay at a spa or recreation center just for some
time and have to pay some money for accommodation. Just blind people, the handicapped,
young people (under 18) and old people (over 70) are exempt.
The taxpayers pay the charge together with the price for accommodation and the owner of hotel
or apartment must send the charge to the municipality. Because of problems with evidence the
owner has to keep the registration book with the information about his guests for six years after
the last record in the book. The charge rate can run to 15 CZK for a person per day. The first
day (the day of arrival) is free of charge.
The local charge for using public place can be levied by the municipality in the following
situations:
Positioning of temporary constructions for building or advertisement, for selling goods
or services;
Positioning of amusement parks, circuses;
Creating and running dumps;
Reservation of parking place;
Using public place for culture and sport or for shooting movies;
Pursuiting site excavation.
The municipality has the possibility to levy the charge only in these situations. Only actions
with charitable aims are exempt. The findings made by Constitutional Court lay down that
every municipality must define, what are the public place (name of the street, square and so
on). They are very important for practice because only at those place can the municipality levy
the charge for using public place.58
The charge rate is 10 CZK for a square meter per day, in some cases it can be even more (sales,
advertisement, amusement parks, etc.).
The charge on entrance is obliged to be paid by every person who organizes cultural, sport,
sale or advertisement action and collects an entrance. If the action has charitable aims, the
charge is not levied. For the right levying it was necessary to lay down, what the entrance is.
57
For the legal definition of the taxpayer of the dog charge it is necessary to use the definition of the possession in
civil law.
58
Finding of Const. Court no. Pl. ÚS 20/93 (in St. No. 141/1994 St.). In: Ústavní soud: Sbírka nálezů a usnesení –
svazek 4. C. H. Beck, Praha 1996, p. 163 – 169 (č. 68 Sb. n. u. – sv. 4).
50
The entrance means a sum of money paid by the participant to take part in the event (without
VAT). This means that the entrance charge has to be levied even if there is no official entrance
but the participant has to buy a card for meal or seat reservation ticket to get to the event. There
is no possibility to levy the charge for the entrance to castles and chateaux because this is not a
cultural event. A cultural event means only a single cultural event such as exhibition, dance or
theatre performance.59
The charge rate is 20 % from the entrance.
The housing capacity charge can be levied only at medical institutions, hotels and apartments,
etc., where the guests are obliged to pay for accommodation. Every person that owns or leases
a medical institution, hotel, apartment or something like that must keep the registration book
with the information about his guests for six years after the last record in the book and must
pay the housing capacity charge for every used bed. The charge rate is 6 CZK for a bed per
night.
Each municipality can impose charge on gambling machines and other technical game
facilities to every owner of a machine or game facility. Just one condition must be fulfilled:
there must be the permission to run the gambling machine (municipality) or the game facility
(Ministry of Finance). The charge rate has its maximum rate – 5 000 CZK and the minimum
rate – 1 000 CZK. This rate is not paid per annum but quarterly. The municipality has a
possibility to exempt the owner of a machine from paying.
Every person living in the town or owning a building for recreation in this town has to pay the
charge on communal waste. The charge rate has two parts. The first one is 250 CZK for a
person per year at maximum; the second one must respect real expenses of the municipality in
the area of municipal garbage and can be as well 250 CZK for a person per year at maximum.
It means 500 CZK for a person per year at maximum. The municipality must account for
expenses for one person in the ordinance. If a person moves from or to the town or sells or buys
his building for recreation, he must pay the charge just for the relevant months.
Everybody who has a permission for the access by a motor vehicle to chosen places and parts
of towns (and nobody else can not get there because of a road sign) has to pay charge for
permission to enter selected places by motor vehicle. Of course some people should be
exempt from paying, for example the persons living in this part of town, persons owning real
estates there, their families, the handicapped, etc. The charge rate is 20 CZK for one day at
maximum.
Charge on evaluation of building land is paid by the owner of the lot, if he has a possibility
to connect it to municipal water conduit or sewerage. The charge rate can be the difference
between the prices before and after the possibility to connect the lot to water conduit or
sewerage at maximum. The charge rate must be published in the ordinance.
12.1 Administration of Local Charges
If somebody has a duty to pay a local tax and he fails to do it (in time or he does not pay the
right amount), the municipality sends him an assessment. The amount due can be raised three
times in the assessment. The municipality must make a legal act to a debtor in three years after
the debtor had to pay the charge because then there is no chance to levy the charge. The
maximum term is ten years after the debtor had to pay the charge.
59
Finding of Const. Court no. Pl. ÚS 14/95 (in St. No. 280/1995 St.). In: Ústavní soud: Sbírka nálezů a usnesení –
svazek 1. C. H. Beck, Praha 1994, p. 245 – 250 (č. 33 Sb. n. u. – sv. 1).
51
The administration office is the municipality that levied the charge. The municipality has no
more the right to reduce the charge or to exempt the charge duty or accessories to the charge
from the beginning of 2011.
52
13 OTHER CHARGES
Besides local charges there are many other charges collected in the Czech Republic. We can
create three groups of these fees:60
Administrative charges;
Court charges;
Ecological charges.
The aim of the administrative charges is to contribute by the applicant (taxpayer) to the
administration of the state or local government administrative body, because this activity is
done in his interest and it would not be fair, if everybody should pay for these activities. The
second aim is to protect administrative bodies against useless administrative actions.
Legal regulation of administrative fees is in Act no. 634/2004 Sb., Administrative Charges Act,
as amended. The object of charge is the administrative proceedings and other activities of the
administrative office related with state administration. The concrete activities liable to charge
and the rates are in the appendix of the Act. The list of exemptions is very extensive, some
exemptions concern with the taxpayers, some with the activities.61
The tax rates are fixed or
percentual. If the charge is not paid, the charged operation will not be done.
There are two types of court charges: charges for proceedings and charges for activities. Both
are regulated in Act no. 549/1991 Sb., Court Charges Act, as amended. In the appendix of the
Act there is a list of charges with the rates. There are many exemptions because of economic
reasons and state interest in justice.62
The taxpayer is usually the plaintiff. If the charge is not
paid, the proceedings usually can not start. The tax base is the price of the object of
proceedings in CZK; the rate is usually percentual.
We have already mentioned one type of ecological charges – charges on using roads. But there
are several other ecological charges:
Charges on waste-water disposal into day water;
Charges on waste-water disposal into underground water;
Charges on injurant exhaust in air;
Charges on waste;
Charges on withdrawn of land from the agricultural land fund;
Charges on underground water take-off.
60
Vide Radvan, M. Poplatkové právo v ČR (Charge Law in the Czech Republic). in: Current Questions of the
Efficiency of Public Finance, Financial Law and Tax Law in the countries of Central and Eastern Europe
(Aktuálne otázky efektívnosti verejných financií, finančného práva a daňového práva v štátoch strednej a
východnej Európy). Košice: Univerzita Pavla Jozefa Šafárika v Košiciach, 2005. P. 41 + CD. ISBN 80-7097-604-
7.
61
See Section 8 Administrative Charges Act.
62
See Section 11 Court Charges Act.
53
14 TAX ADMINISTRATION
In the Czech Republic there is one very new general act dealing with the tax administration
called Act no. 280/2009 Sb., Code of Tax Procedure, as amended. It comes into force at the
beginning of 2011. This Act is used in the situations, when there is no special regulation in a
special tax act. It defines the most important terms, the principles of tax administration, the
delivery of tax decrees, the procedure of tax administration such as how to assess the tax, how
to pay it, legal remedies, tax execution, etc.63
The administration of taxes means the right to make measures necessary for correct and
complete ascertainment, determination and discharge of tax liability, it means the right to seek
out persons liable to tax, to assess, collect, account for and exact taxes and to supervise the
fulfillment of tax liabilities. The following text has several parts that more or less correspond
with the parts of the Code of Tax Procedure.
14.1 Basic Terms and Principles
The first and the most important term is the tax. At the beginning of this paper the definition of
tax was mentioned with the note that the term “tax” is defined just by the tax theory and there
is no definition in the Czech law. In the Code of Tax Procedure there is so called “legislative
short cut of tax” defined as taxes, charges (fees), customs and some other money
performances which are the revenue of public budgets.
Another important term is “subjects of tax” (persons liable to tax); there are two types of
persons liable to tax:
Taxpayer – a person whose income, property or acts in law are directly liable to tax;
Payor – person who has material liability to transfer collected or withheld taxes from
the taxpayer to the tax administrator.
However, these two definitions are no more the part of Czech law, even both terms are used not
only in tax acts very often.
Besides persons liable to tax there is a group of persons taking part in the tax proceedings
(third persons) such as:
Witnesses;
Persons who hold documents;
Experts, auditors, interpreters;
Guarantors;
Bankruptcy trustees;
State authorities and local government authorities;
Skilled consultant;
63
Vide Mrkývka, P., Radvan, M. in: Radvan, M. et al. Finanční právo a finanční správa - Berní právo. Brno:
Masarykova univerzita et Doplněk, 2008. ISBN: 978-80-210-4732-7. Mrkývka, P., Neckář, J. Tax Administration
in the Czech Republic. in: Sovremennye problemy teorii nalogovogo prava – The Modern Problems of Tax Law
Theory. 2007. Voronezh: University of Voronezh, 2007. P. 203-212. ISBN 978-5-9273-1340-2. Kindl, M.,
Telecký, D., Válková, H. Zákon o správě daní a poplatků – komentář. Praha: C. H. Beck, 2002.
54
Surety, etc.
The taxpayer can be substituted in the tax proceedings. There are several types of substitutions:
Legal representative mostly for children under 18 years old or for people with no or
limited capability;
Representative established by tax administrator for people without full capability and
without legal representative, for people with unknown place of residence or seat or for
mentally disordered people;
Personal representative with a warrant of attorney, mostly attorney or tax advisor;
Common representative used if there are more taxpayers with one tax duty (for example
co-ownership of real estate that is to be taxed by real estate tax);
Holder of procuration (a special type of substitution for corporation described in
Business Code).
Talking about tax administrators, first it is necessary to have a look into special tax acts. If
there is nothing about the tax administrator in the special tax act, then the answer is in the Code
of Tax Procedure. The tax administrator is usually the Financial Office determined in the case
of a legal entity by the location of its registered office in the Czech Republic, in the case of a
natural person by his residential address. For real estate (taxes imposed on real estate), the
locally competent tax administrator is the financial office in whose district such real estate is
situated. For some taxes (especially selected excise taxes and customs) the tax administrator is
not the financial office but the customs office.
Tax administrators engaged in the administration of taxes must respect several fundamental
principles. Just several of them will be mentioned:
Principle of self-application – the taxpayer must know if and when to file the tax return,
calculate the tax and pay it without any cooperation with the tax administrator;
Principle of legality – the tax administrator shall proceed in conformity with laws and
other generally binding statutory provisions;
Principle of collaboration – the tax administrator shall proceed in close collaboration
with the tax subjects, they shall select only means which cause the least inconvenience
to these persons;
Principle of non-public proceedings – tax proceedings are never made public;
Principle of discretion – everybody except tax subjects are to maintain confidentiality in
respect of everything learned during tax proceedings;
Principle of equality – all tax subject have equal rights and duties in the tax
proceedings;
Principle of cooperation – all tax subjects have the right and duty to cooperate with the
tax administrator;
Principle of effectiveness – tax proceedings should be quick, with respect to costs of the
taxpayer. All the information available for the tax administrator must be used without
asking the taxpayer for it;
Principle of foresee ability – in similar cases there should be no unreasonable
differences in the decision.
55
For the valid decision it is necessary to deliver this decision to the taxpayer. The most common
delivery should be by done electronically or during the oral proceedings, but still tax
administrators send usually official letters by post. In this case it is important to deliver official
letters to the taxpayer’s residential address (natural persons) or seat (corporation). If the
taxpayer is not catched at home, the letter is placed usually at the post office for ten days. The
last day is the day of delivery (fiction of delivery), even the taxpayer did not know about any
delivery. The official letter is posted in the post box next day. The only possibility for the
taxpayer, that has no real chance to pick up the official letter, is to ask the tax administrator to
pronounce the ineffectiveness of the delivery.
There are other possibilities for delivering but they are not used so often:
Delivery by public notice;
Delivery by means of a collective list relating to tax liability.
Almost every taxpayer has a registration duty; it means that within thirty days after he
receives permission or is authorized to engage in a business activity or undertakes other
independent gainful activity, he must submit an application for registration to the locally
competent tax administrator. Every change must be announced to the tax administrator within
fifteen days after this change occurred. If the taxpayer does not fulfill his registration duty, the
tax administrator registers the taxpayer ex officio. There are three groups of persons with no
registration duty:
Taxpayers with one time or accidental tax duty (for example inheritance tax, gift tax or
real state transfer tax);
Taxpayers paying tax for their real estate (real estate tax);
Taxpayers with a duty to pay tax through the payor (for example personal income tax
from dependent activity, tax from interests, from dividends and other types of capital
incomes).
The tax administrator allocates a tax identification number to a person liable to tax who is
registered. The tax identification number includes code “CZ” and an identifier. An identifier of
the natural person is his personal identification number; an identifier of a legal entity is its
identification number.
14.2 Tax Assessment Procedure
Everybody who has a duty arising under a tax act or who is called upon by the tax
administrator must submit the tax return. The taxpayer must himself calculate the tax in his
tax return including specifying exemptions, advantages, allowances and deductions. Mostly the
tax becomes due at the same time as the tax report.
There are two basic time limits for filing the tax return: at the latest three months following
expiry of the annual taxable period, or within 25 days after expiry of the taxable period shorter
than one year.
Other – special time limits for filing the tax return are defined for selected taxes such as:
Road tax (31 January);
Real estate tax (31 January);
56
Inheritance tax (within 30 day of the day when court’s decision by which inheritance
proceedings became final);
Gift tax (within 30 day of the day when the donation of a movable asset or some other
property benefit took place or a contract on free-of-charge transfer of ownership title to
specific real estate with a clause confirming its registration to Real Estate Cadastre was
served on the taxpayer);
Real estate transfer tax (latest by the end of the third month following the month when
registration of such transfer was made in the Real Estate Cadastre).
Besides these basic and special time limits there are four extended time limits for filing the
tax return:
Latest six month following expiry of the taxable period, if a taxpayer shall have a
financial statement verified by an auditor;
Latest six month following expiry of the taxable period, if the taxpayer’s return is
prepared and submitted by his tax advisor or by his barrister;
Basic time limit for filing the tax return extended by a maximum of three months, if the
taxpayer asks for this (the tax administrator need not accord a request);
Up to ten months following expiry of the taxable period, if the taxpayer with incomes
from abroad asks for this (the tax administrator need not accord a request).
The tax administrator has three possibilities in the tax assessment procedure:
1. Implied tax assessment – the assessed tax does not differ from the tax stated in the tax
return. In this situation the tax administrator is not obliged to inform the taxpayer about
the result of assessment. The last day of the time limit for filling the tax return is
considered as the day of the tax assessment and as the day of the delivery of the tax
decision;
2. Reproach proceedings – there are doubts about the correctness, truthfulness,
substantiation or completeness of the tax return. In this situation the tax administrator
informs the taxpayer about these doubts and calls upon him to give his views or
complete the incomplete data, etc. The tax administrator should set an appropriate time
limit in his call, not shorter than fifteen days. The tax administrator has more
possibilities to assess the tax: it can exercise a tax control or local tax examination, it
can hear the witnesses, go through the paper proofs, etc. At the end of these proceedings
the tax administrator sets the tax base and prescribes the amount of tax and notifies the
taxpayer by the reasoned tax assessment. The tax is payable within fifteen days of the
legal power of the decision (tax assessment);
3. Assessment using “other tools” – if the tax return was not filed in time (even the tax
administrator called to do so) or if the irregularities were not rectified within the time
limit, the tax administrator may determine the tax base and assess the tax according to
whatever materials and information without cooperation with the taxpayer. The tax
administrator notifies the taxpayer by the tax assessment. The tax is payable within
fifteen days of the legal power of the decision (tax assessment). In this situation there is
no possibility to appeal against the tax base and the tax and the taxpayer can object only
to the way of assessment procedure (that there were no legal reasons to use assessment
using “other tools”) or inadequacy of “other tools”.
For the tax assessment procedure the time limits for assessment are very important. These
time limits are times of extinction. The tax may not be assessed after the lapse of three years
57
from the end of the time limit to file the tax return or the time limit to pay the tax, if there was
no duty to file the tax return. If prior to the expiry of the time limit there is a tax control, a tax
return is filed or there is a call for filing the tax return, the three year period commences to run
anew from the day such an act had happened. If during last twelve months of the basic three
year period there is an additional tax return, a tax assessment, proceedings on remedial
instrument or a decision on nullity of the decision, the time limit will be one year longer. More
over, there are several situations when the time limit does not run (for example there is
proceedings at the court).
The tax may be assessed no later than ten years after the end of the time limit to file the tax
return or the time limit to pay the tax, if there was no duty to file the tax return.
14.3 Tax Payment
Everybody who is liable to pay the tax or who is liable to transfer collected and withheld tax is
a tax debtor and he is obliged to pay the tax. The tax must be paid to the competent tax
administrator mostly in Czech currency. The taxpayer can choose from eight possible ways of
tax payment:
1. By means of a transfer from a debtor’s bank account to the appropriate tax
administrator’s bank account;
2. In cash by means of a postal money-order or by means of bank to the appropriate tax
administrator’s bank account;
3. In cash to person authorized by the tax administrator to receive cash payments of tax
from tax debtors, usually at the tax office (maximum amount is 500 000 CZK per day at
one tax office);
4. By cheque;
5. In cash to the officer in the execution;
6. In cash to an employee of the tax administrator in cases of fines;
7. By means of revenue stamps;
8. By excess payment in respect of some other tax.
To fulfill the duty to pay the tax in time, it is necessary to know the dates of payment:
In the case of bank account transfers and in the case of cash payment by means of a
postal money-order or by means of bank the date of payment is the day when the
amount is put to the tax office’s account;
In the case of cash payment to person authorized by the tax administrator the date of
payment is the day when authorized person receives the money.
If the tax debtor fails to pay the amount of the tax in time, he is in arrears.64
In this situation he
must pay the interest on late payment of repo rate of the Central Bank + 14 % of the amount
outstanding for each day of delay for at maximum five years. The amounts of the interests are
payable at the moment they occurred. If the tax is additionally assessed by the tax administrator
(or by the taxpayer in the tax return), the penalty is 20 % of the amount of additionally
64
Vide on tax penalties Šramková, D., Schreiber, P. Theoretical and Practical Aspects of Legal Liability within
Czech Tax Legislation. in: Dny veřejného práva. Brno: Masarykova univerzita, 2007. P. 89, 599-606. ISBN 978-
80-210-4430-2.
58
assessed tax. The penalty is communicated to the tax debtor within the frame of the assessment
order and that is why it must be paid within fifteen days after the delivery of the assessment
order.
Several more institutes should be mentioned when talking about sanctions. For example if the
tax return is not submitted in time, the tax administrator assesses a fine for late tax return
filing (0,05 % of assessed tax for each day of the delay; minimum 500 CZK, maximum 5 % of
the assessed tax up to 300 000 CZK). The file notified by the tax assessment is payable within
30 days after the delivery of the assessment. Tax administrator can impose an order fine up to
50 000 CZK, too.
If the tax administrator has apprehension that some future payment will be uncollectible, he
may issue a securing order. In order to secure a tax receivable, the tax administrator may order
a lien.
On the other hand, sometimes the taxpayer can have overpaid tax. In this situation the tax
administrator can use this amount for arrears of any other tax or as an advanced payment.
Nevertheless the taxpayer can apply the overpaid tax to be refunded and the taxpayer must
refund the overpaid tax within thirty days of the delivery of the application. If the tax
administrator does it later or if the occurrence of the overpaid tax was caused by the tax
administrator, the interest of repo rate of the Central Bank + 14 % must be paid to the taxpayer.
In fact, there are situations in life when the tax debtor does not have enough money to pay the
assessed tax. In this case there are several possibilities mentioned in the Code of Tax
Procedure. The tax debtor can apply for the deferment of tax or for approval of installments
– the tax debtor will pay the interest of repo rate of the Central Bank + 7 % and such
permission can be made dependent on certain conditions.
For the tax payment the time limits on tax arrears exaction are very important. These time
limits are times of extinction. In general the right to collect and exact tax arrears ends six years
after the arrears became payable. If prior to the expiry of the time limit an act (like exaction of
arrears, lien, deferment of tax, and approval for installments) is undertaken, the six year period
commences to run anew from the moment this act was undertaken. There are several situations
when the tile limit does not run (for example during tax exaction). But the arrears may be
exacted for a maximum period of twenty years after the arrears became payable.
Dealing with the tax payment, the exaction of tax arrears must be mentioned. If the tax debtor
does not pay the tax in time, then the tax administrator can commence the exaction of tax
arrears. The possible execution titles are a final statement of tax arrears, an enforceable
decision imposing monetary payment, or a securing order.
The tax execution can be levied upon the issue of an execution order for:
Tax debt to be settled from monetary means held by tax debtor in his bank account;
Tax debt to be settled from other monetary receivables;
Amounts to be withheld from wages;
Infliction of other property rights;
Sales of movable assets;
Sales of real estate.
59
The tax debtor must pay the costs of execution:
Compensation for the writ of execution (2 % of the exacted arrears, no less than 500
CZK, maximum at 500 000 CZK);
Compensation for the costs of carrying out the sale (2 % of the exacted arrears, no less
than 500 CZK, maximum at 500 000 CZK);
Reimbursement of cash expenses (must be paid within fifteen days of the day when the
tax debtor was informed by the decision of the amount).
14.4 Remedial Instruments
There are two types of remedial instruments in the Code of Tax Procedure. Ordinary remedial
instruments can be used if the decision is not yet final, extraordinary remedial instruments are
used for final decisions.
On the other hand, the Code of Tax Procedure also divides remedial instruments (sensus
stricto) into remedial instruments (sensus lato) and supervisory instruments depending who is
allowed to start the remedial proceedings: in case of remedial instruments it is the tax subject,
in case of supervisory instruments it should be tax administrator ex officio.
There are two ordinary remedial instruments that can be used in tax administration:
Appeal;
Remonstrance.
The most common ordinary remedial instrument is the appeal. It is usually used in the
situations when the taxpayer is not satisfied with the determined tax base and imposed amount
of the tax by the tax administrator or with any other decision. An appeal must be submitted
within thirty days (in general) of the day after the day of delivery of the decision against which
the appeal is made. There is the common rule that the appeal has no suspensory effect. The
appeal proceeding has two phases; the tax administrator whose decision is challenged by the
appeal can decide on the appeal himself if it fully complies with it. It can also dismiss an
appeal if it is inadmissible or submitted after the time limit.
If the tax administrator does not make a decision, he passes the appeal to the appellate authority
(authority immediately superior). This authority can amend (even to the appellant’s
disadvantage), cancel or dismiss the contested decision.
The remonstrance is a special type of appeal against the central administrative body. It is
based on the same principles as a common appeal.
There is just one extraordinary remedial instrument that can be used in tax administration –
re-opening of tax proceedings. The proceedings will be re-opened if the taxpayer so applies
or ex officio (it means, it is also a supervisory instrument) and if there are new important facts
or proofs not yet used in former (original) proceedings with an effect for the final decision, or
there was some criminal act in the former proceedings such as forged or falsified document,
false statement of witness, false expert opinion, or preliminary query was decided differently.
An application must be submitted within six months of the day on which the applicant learned
of the grounds for re-opening proceedings and no later than the time limits for tax assessment
or tax payment have passed. In other cases the objective term is three years after the legal
power of the decision. When the re-opening of proceedings is approved (or ordered), it has
60
suspensory effects. It is absolutely new proceedings and a new decision annuls the original
decision.
The other supervisory instrument is review proceedings. It is used in the situations when the
decision is in conflict with statutory provisions. The review proceedings starts usually ex officio
within the control of financial bodies, but even any subject dealing with tax proceedings can
suggest this process. Review proceedings can be started no later than the time limits for tax
assessment or tax payment have passed. In other cases the objective term is three years after the
legal power of the decision. When the review proceedings is ordered, it has suspensory effects.
Former decision can be changed or abolished in the review proceedings, but if it is with respect
to the statutory provisions, the review proceedings will be stopped.
14.5 Other (Formerly Remedial) Instruments
Complaint deals with the withheld tax. If the taxpayer does not agree with the amount of a
withheld tax, he can ask his payor for an explanation within sixty days of tax withholding. The
payor must answer in thirty days and if the taxpayer does not agree with the explanation, he can
file a complaint within thirty days from the day when he received the information from the
payor. The decision of the tax administrator must be send to both the taxpayer and the payor
and they both may appeal against such decision.
In respect of the tax payment the taxpayer can raise the objection against any act of the tax
administrator. It must be raised within thirty days from the day on which the taxpayer learned
of such act.
Corrections of obvious errors and irregularities are made if the taxpayer so applies or ex
officio if the tax assessment relates to a person not liable to tax, or there is an obvious error in
computation or writing, or the tax liability is imposed twice, etc. It is necessary to correct the
tax appurtenances65
(penalties, increases of tax, costs arising from tax administrative
proceedings, interest and fines) in line with the corrections made to tax liability. Corrections
can be made no later than the time limits for tax assessment or tax payment have passed. In
other it depends on the characteristics of the tax duty that is to be corrected.
The tax waiver means for the taxpayers possibility to ask the tax administrator to waive the tax
because of any reason. Tax administrators usually do not agree. The other possibility is given
to the Minister of Finance. He (or she) can waive the tax because of inconsistencies ensuing
from the application of the tax acts or if there are natural disasters. Usually tax waiving in the
Czech Republic is in form of so called D-direction published by the Ministry of Finance.
65
Tax appurtenances follow the course of events of the tax to which they are attached.
61
15 DOUBLE TAXATION PREVENTION TREATIES
The Czech Republic is the signatory to a Treaty for the Prevention of Double Taxation with a
lot of countries not only in Europe but all over the world.
Every double taxation prevention treaty use one or more of the methods of double taxation
prevention:66
Full exemption – income liable to tax abroad is not liable to tax in the Czech Republic;
Exemption with progression – income liable to tax abroad is not liable to tax in the
Czech Republic but the taxpayer must use the tax rate for both incomes from abroad
and from the Czech Republic (possible only if there is a progressive tax rate);
Full credit – all the taxpayer’s incomes (from abroad and from the Czech Republic) are
liable to tax in the Czech Republic and from the final tax can the taxpayer deduct the
tax paid in abroad;
Ordinary credit – both the taxpayer’s incomes from abroad and from the Czech
Republic are liable to tax in the Czech Republic and from the final tax can the taxpayer
deduct tax paid in abroad. This amount can be at maximum amount of the tax that shall
be paid from incomes from abroad according to Czech tax rate.
If there is no double taxation prevention treaty including one of above mentioned methods or if
the tax paid abroad can not be used because of provisions in double taxation prevention
treaties, the taxpayer can use the tax paid in abroad as an expense incurred to generate, assure
and maintain income.
66
Vide Šramková, D., Radvan, M. in: Radvan, M. et al. Finanční právo a finanční správa - Berní právo. Brno:
Masarykova univerzita et Doplněk, 2008. ISBN: 978-80-210-4732-7. Schillerová, P. Mezinárodní spolupráce při
vymáhání pohledávek. in: Dny veřejného práva. Brno: Masarykova univerzita, 2007. P. 88, 591-598. ISBN 978-
80-210-4430-2.
62
Here is the list of double taxation prevention treaties between the Czech Republic and other
states:67
Country Valid since Act no. Country Valid since Act no.
Albania 10.9.1996 270/1996 Sb. Luxembourg 30.12.1992 73/1993 Sb.
Armenia 15.7.2009 86/2009 Sb. I. T. Macedonia 17.6.2002 88/2002 Sb. I. T.
Australia 27.11.1995 5/1996 Sb. Malaysia 9.3.1998 71/1998 Sb.
Austria 22.3.2007 31/2007 Sb. I. T. Malta 6.6.1997 164/1997 Sb.
Azerbaijan 16.6.2006 74/2006 Sb. I. T. Morocco 18.7.2006 83/2006 Sb. I. T.
Belarus 15.1.1998 31/1998 Sb. Mexico 27.12.2002 7/2003 Sb. I. T.
Belgium 24.7.2000 95/2000 Sb. I. T. Moldavia 26.4.2000 88/2000 Sb. I. T.
Bosnia and
Herzegovina
12.5.2010 Mongolia 22.6.1998 18/1999 Sb.
Brazil 24.11.1990 200/1991 Sb. Netherlands 5.11.1974 138/1974 Sb.
Bulgaria 2.7.1999 203/1999 Sb. New Zeeland 29.8.2008 75/2008 Sb. I. T.
Canada 28.5.2002 83/2002 Sb. I. T. Nigeria 2.12.1990 339/1991 Sb.
China 23.12.1987 41/1988 Sb. Norway 9.9.2005 121/2005 Sb. I. T.
CMEA
(legal entities)
1.1.1979 49/1979 Sb. Peoples Rep. of
Korea
7.12.2005 3/2006 Sb. I. T.
CMEA
(natural persons)
1.1.1979 30/1979 Sb. Philippines 23.9.2003 132/2003 Sb. I. T.
Croatia 28.12.1999 42/2000 Sb. I. T. Poland 20.12.1993 31/1994 Sb.
Cyprus 26.11.2009 120/2009 Sb. I. T. Portugal 1.10.1997 275/1997 Sb.
Denmark 27.12.1982 53/1983 Sb. Romania 11.8.1994 180/1994 Sb.
Egypt 4.10.1995 283/1995 Sb. Russia 18.7.1997 278/1997 Sb.
Estonia 26.5.1995 184/1995 Sb. Serbia and MN 27.6.2005 88/2005 Sb. I. T.
Ethiopia 30.5.2008 54/2008 Sb. I. T. Slovenia 28.4.1998 214/1998 Sb.
Finland 12.12.1995 43/1996 Sb. Slovakia 14.7.2003 100/2003 Sb. I. T.
France 1.7.2005 79/2005 Sb. I. T. Republic of
South Africa
3.12.1997 7/1998 Sb.
Georgia 4.5.2007 40/2007 Sb. I. T. Singapore 21.8.1998 224/1998 Sb.
Germany 17.11.1983 18/1984 Sb. Spain 5.6.1981 23/1982 Sb.
Greece 23.5.1989 98/1989 Sb. Sri Lanka 19.6.1979 132/1979 Sb.
Hungary 27.12.1994 22/1995 Sb. Sweden 8.10.1980 9/1981 Sb.
Iceland 28.12.2000 11/2001 Sb. I. T. Switzerland 23.10.1996 281/1996 Sb.
India 27.9.1999 301/1999 Sb. Syria 12.11.2009 115/2009 Sb. I. T.
Indonesia 26.1.1996 67/1996 Sb. Tajikistan 19.10.2007 89/2007 Sb. I. T.
Ireland 21.4.1996 163/1996 Sb. Thailand 14.8.1995 229/1995 Sb.
Israel 23.12.1994 21/1995 Sb. Tunisia 25.10.1991 419/1992 Sb.
Italy 26.6.1984 17/1985 Sb. Turkey 16.12.2003 19/2004 Sb. I. T.
Japan 25.11.1978 46/1979 Sb. Ukraine 20.4.1999 103/1999 Sb.
Jordan 7.11.2007 88/2007 Sb. I. T. United Arab
Emirates
9.8.1997 276/1997 Sb.
Kazakhstan 29.10.1999 3/2002 Sb. I. T. United
Kingdom
20.12.1991 89/1992 Sb.
Korea 3.3.1995 124/1995 Sb. USA 23.12.1993 32/1994 Sb.
Kuwait 3.3.2004 48/2004 Sb. I. T. Uzbekistan 15.1.2001 28/2001 Sb. I. T.
Latvia 22.5.1995 170/1995 Sb. Venezuela 12.11.1997 6/1998 Sb.
Lebanon 24.1.2000 30/2000 Sb. I. T. Vietnam 3.2.1998 108/1998 Sb.
Lithuania 8.8.1995 230/1995 Sb. Yugoslavia 17.4.1983 99/1983 Sb.
Table 18: International Double Taxation Prevention Treaties of the Czech Republic
67
Topical information at www.mfcr.cz.
in Collection (Sb.) or in Collection of International Treaties (Sb. I. T.)
in Collection (Sb.) or in Collection of International Treaties (Sb. I. T.)
63
LITERATURE
1. Kindl, M., Telecký, D., Válková, H. Zákon o správě daní a poplatků – komentář, Praha: C. H. Beck, 2002.
2. Kyncl, L. Value Added Tax (VAT) on electronic services in the Czech republic. in: Sovremennye problemy
teorii nalogovogo prava – The Modern Problems of Tax Law Theory. Voronezh: Voronežskij
gosudarstvennyj universitet, 2007. P. 365-368.
3. Marková, H. Zákon o daních z příjmů. Komentář. Praha: C. H. Beck, 2007.
4. Marková, H., Boháč, R. Rozpočtové právo. Praha: C.H. Beck, 2007.
5. Mrkývka P. a kol. Finanční právo a finanční správa. Brno: Masarykova univerzita v Brně, 2004.
6. Mrkývka, P. Některé úvahy o materiálním základu veřejné správy, Časopis pro právní vědu a praxi, no.
2/2003.
7. Mrkývka, P. Opodatkowanie dochodu w Republice Czeskiej. in: Etel, L. (ed.). Opodatkowanie dochodu w
wybranych krajach Europy Środkowej i Wschodniej. Białystok: Temida2, 2006. P. 93-128.
8. Mrkývka, P., Neckář, J. Tax Administration in the Czech Republic. in: Sovremennye problemy teorii
nalogovogo prava – The Modern Problems of Tax Law Theory. 2007. Voronezh: University of Voronezh,
2007. P. 203-212.
9. Netolický, M. Rozpočty obcí v naší legislativě. Brno: Tribun EU, 2008.
10. Pařízková, I. Finance územních samosprávných celků. Brno: Masarykova univerzita, 1998.
11. Pařízková, I. Finanční právo: finance územní samosprávy. Brno: Masarykova univerzita, 2005.
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