Who exactly should make the advanced payments on income taxes in the Czech Republic, what are the payments due dates and what are the risks for ones who ignore the obligation to pay? We will shed the light on these questions in this article.
The tax obligations for some tax-payers are not limited by submitting financial statements to the Tax office and covering possible debts. Tax-payers who must and must not make the advanced payments on the income tax for the following year are indicated in the 38 (a) paragraph of the Law on income tax. The paragraph contains the following.
The advanced payments are not paid by:
• tax-payers whose latest paid tax did not exceed 30000 CZK;
• urban part or region;
• a testator since the date of one’s death;
• tax-payers who pay taxes in lump sum payments;
*Lump sum payments. Sole proprietors in the Czech Republic have a right to pay taxes in a particular amount of money, the so-called lump sum payments each month.
The advanced payments are made by:
• tax-payers whose latest tax was more than 30000 CZK and less than 150000 CZK;
• tax-payers whose tax amount exceeded 150000 CZK.
These two groups have different conditions and terms of payment. The first group (more than 30000 CZK, less than 150 000 CZK). A tax-payer makes advanced payment in the amount of 40% of the latest paid tax. The advanced payment is divided into two parts. Terms: till 16th of June and 15th of December. As a result, a tax-payer pays 80% of one’s full tax obligation.
The second group (more than 150 000 CZK). A tax payer makes an advanced payment in the amount of 1/4 part of the latest paid tax quarterly. Terms: till the 15ht of March, till the 15th of June, then till 15th of September, and finally, till the 15th of December.
Penalties
As the Law establishes strict terms on making advanced payments on the income tax, if a payment is delayed, there are penalties.
A penalty is applied for each day of the delay in payment till the date when the payment is made. It is calculated by annually set account rate of the Czech National bank increased by 14%. The penalty is applied after the 5th day of the delay in payment, for 5 years maximum and is not paid if does not increase 200 CZK.
Drawback of the Law: it turns that a sole proprietor or a company should make the advanced payments calculated from the previous year of its commercial activity. If previous year was successful for business, and the current one is not – an entrepreneur is at a disadvantage. However, one should not be afraid of it as these are just advanced payments and in case the amount of an actual income tax is lower than the advanced payment, an extra sum will be refunded by the Tax office of the Czech Republic.
If you have any further questions, do not hesitate to contact us. We not only conduct the entire accounting for our clients, but also inform them about all the tax obligations and changes in laws in a timely manner.
