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Dear readers,

the date 15 February 2023 is near, i.e. the deadline within which you should sign an individual income tax payer’s declaration (the “Declaration of the taxpayer liable to personal income tax from dependent activity”) for 2023, and an application for annual settlement of tax advances and tax advantages, where applicable, if you want your employer to carry out such settlement for 2022.

Declaration of the taxpayer liable to personal income tax from dependent activity for 2023

Employees sign a “Declaration of the taxpayer liable to personal income tax from dependent activity” within 30 from starting their employment, and subsequently on an annual basis by 15 February; the Declaration can always be signed with only one employer at a time.

The Declaration is referred to in calculating monthly tax advances and in using tax relieves and tax advantages. The basic abatement for a taxpayer is CZK 30,840 for 2023 (i.e. the amount of CZK 2,570 will be used by an employer in calculating the monthly income tax advances); in addition to this, the employer can use the following in 2023:

• Basic disability abatement: disability of the 1st and 2nd degree, CZK 210 a month;
• Extended disability abatement: disability of the 3rd degree, CZK 420 a month;
• Abatement for a holder of the “particularly seriously disabled/with a guide” card, CZK 1,345 a month;
• Abatement for a student in the amount of CZK 335 a month; this relief can be used in case of continual preparation for a future career in the form of studies up to 26 years of age and in case of the classroom form of studies in a PhD programme up to the age of 28 years; and
• Tax allowance for a maintained children; this advantage applies to a maintained child living in the taxpayer’s household (where the dependent child lives with more than one taxpayer, only one of the taxpayers can take this tax advantage):
  
  
• In the amount of CZK 1,267 a month for the first child;
• In the amount of CZK 1,860 a month for the second child; and
• In the amount of CZK 2,320 a month for the third and each additional child. If the child is a holder of the “particularly seriously disabled/with a guide” card, the above-specified amount is increased (CZK 2,534 for the first child; CZK 3,720 for the second child; and CZK 4,640 for the third child).

* Note: Only the basic abatement for a taxpayer (CZK 2,570 a month) and a student (CZK 335 a month) can be used by Czech tax non-residents. If such employee wants to also use other relieves (or tax advantage / non-taxable portion of the tax base), he or she has to file a tax return (provided that his or her income from sources in the Czech Republic accounts for no less than 90% of all income).

Tax Clearance of Income from Dependent Activities versus Filing a Tax Return

If you are an employee, your employer can provide for “Tax Clearance of Income from Dependent Activities” for the completed taxation period 2022. However, you need to sign an application for the annual settlement of tax advances and tax advantages by 15 February 2023. In addition, your employer must also be provided with all necessary documentation and confirmations by that date.

The employer will also take into account abatement for a spouse, abatement for a placed child and non-taxable portions of the tax base (such as gifts, interest on a housing loan or pension insurance premium) in the annual settlement.

However, the annual tax advance settlement can only be made if you are not obliged to file a tax return for the completed taxation period. While the annual settlement is performed by the employer, the tax return has to be filed by the employee.

There is a general rule that where the employee is obliged to file a tax return, his or her employer cannot carry out the annual tax settlement. The annual tax settlement for 2022 can only be carried out if:

• The employee had income exclusively from a single employer in one calendar year (or from more than one employer one after another) and signed a “Taxpayer’s Declaration” (the pink form) with such employer/all employers;
• The employee had no income higher than CZK 6,000 (i.e. income from a business, capital income, lease income or other income) other than from dependent activities; and
  **Note: This amount has been increased to CZK 20,000 effective since 2023 (to be applied from the 2023 taxation period).
• The employee is not obliged to file a tax return for another reason (such as early termination of a private life assurance or supplementary pension insurance contract where the employee previously used tax deductions).

As the date 15 February 2023 is near, we recommend checking if you are obliged to file a tax return for 2022. If not, your employer can carry out the annual settlement. However, all related official duties need to be complied with. If unsure or clueless, please feel free to contact us. We will be happy to help you.

Michalela Kozminská                                      Lenka Kolmanová
kozminska@edmutilitas.cz                              kolmanova@edmutilitas.cz