Tax updates for 2020
The new 2020 year brought a lot of changes and updates. Some of them took effect since the 1st of January, 2020; others will come into force after the 1st of May, 2020.
We will briefly describe the main news in this article.
The increase of a minimum wage since 01.01.2020
This change will influence almost everyone. According to the government decision № 347/2019 Sb. the amount of a minimum wage increased to 14.600 korunas (it was 13.350 korunas in 2019)
The amount of a minimum salary influences:
- The maximum tax discount for placing children in a preschool institution will increase to the amount of the new minimum salary: to 14.600 korunas (it was 13.350 CZK in 2019);
- Raising the annual income threshold to qualify for a tax bonus of 87.900 CZK (it was 80.100 CZK in 2019). Those who want to receive a bonus must earn at least 6 minimum wages;
- Increase in the minimum payment for health insurance to 1 971 korunas (it was 1803 korunas in 2019). The minimum amount of deductions for medical insurance is 13.5% of the minimum wage;
- The increase in the earned income for registration at the Labor Exchange will now be 7,300 korunas (6.675 korunas in 2019), which is half the minimum wage;
- Raising the annual threshold for the exemption of pension from income tax to 525,600 korunas (in 2019, 480.600 Czech korunas), this equals 36 minimum wages.
VAT rate reduction
Starting from the 1 of January 2020 the VAT rate for the supply of heat and cold decreased by 10%.
From 01.05.2020 due to the launch of the latest EET wave, the VAT rate is reduced from 15% to 10% for some goods and services:
– delivery of water and wastewater supply
– sale of ready meals (restaurants)
– sale of non-alcoholic drinks
– sale of draft beer
– cleaning, washing windows in residential premises
– the provision of care services for children, retirees, patients, people with disabilities
– minor work on sewing, shoe repair, bike repair
– hairdressing services
– e-books and audio books will be equated with books that were previously subject to a rate of 10%.
Some changes occurred in terms of the release of the goods sale between EU countries, for example when selling in a call-off-warehouse mode (more on this in the nearest future).
The increase in the limit of “Lump sum costs” by 2.000.000
Starting from 01.01.2020, the maximum amount of expenses is returned in the form of % of the revenue “Lump costs” to the previous size:
– 80% craft licenses, agricultural work and water management (up to 1.600.000 CZK)
– 60% other types of licenses (up to 1.200.000 CZK)
– 30% rental of real estate (long-term, up to 600.000 CZK)
– 40% of the rest are not licensed activities (auditors, tax and financial consultants and others, up to 800.000 korunas).
The amounts transferred are valid for income received in 2019, since the report for 2019 is submitted in 2020.
We would like to remind that when submitting the report for 2018, individual entrepreneurs could use the “Lump-sum costs” of the maximum income of 1.000.000, – CZK.
Last wave of EET
Starting from 01.05.2020 EET will cover the remaining sectors of the economy. Previously EET was used only for accommodation services (hotels), restaurants, catering and retail sales of goods. EET will thus be required for all sectors of the economy in which cash proceeds are accepted.
Some individual entrepreneurs will be able to register cash revenue on paper forms issued by tax authorities. They will also have the right to use an alternative method if the following conditions are met:
– they work themselves or with the help of a maximum of 2 employees
– they are not VAT payers
– their cash revenue does not exceed 600.000 korunas
An exception may also be taken by entrepreneurs or companies (regardless of form) that provide medical services that are paid for by state health insurance.
An entrepreneur that is subject to these standards can choose whether to record revenue electronically or using paper forms. Forms can be obtained for free at the tax office. Reporting for received forms and cash earnings must be submitted once a quarter. An application for the use of the alternative EET method can be submitted starting from 01.02.2020.
Entrepreneurs who will have an obligation to register for EET from 01.05.2020 will be entitled to a one-time income tax discount of 5000, – CZK.
We will soon describe EET registration process in a separate article.