New rules in the Czech Republic: who is required to file a tax return in 2024?

08.03.2024

Who needs to file an income tax return if you are employed under an employment contract or are a self-employed individual paying tax at a unified fixed rate? We address the question of who is obligated to file a tax return and who, conversely, is not required to do so.

38g of the Income Tax Act governs the requirement to file a tax return in the Czech Republic. Starting in 2024, the legally established limit has been raised—every employee whose annual taxable income exceeds 50,000 Czech crowns must file a tax return. This rule does not apply if the income is exempt from tax according to § 36 of the same law. An exception is made, for example, for employees who had only one employer and did not have any other sources of income.

The obligation to file a return also extends to those who, in addition to employment income (excluding income exempt from tax under § 36), have other sources of income according to § 7-10 of the Income Tax Act, exceeding 20,000 Czech crowns.

For example, an employee’s income comes from renting out property. Assume they rent out an apartment or have a stake in renting common areas in a building. As soon as this amount surpasses 20,000 crowns, they must file a tax return and cannot request that their employer conduct the annual tax settlement. Similarly, this applies to employees with additional taxable income. This arises, for example, if they have non-taxable income from the sale of stock or any other taxable income.

Furthermore, enterprises who record tax losses, as well as individuals who have received insurance payments under a personal life and health insurance contract or upon early termination, are required to file a tax return. If you deducted life insurance payments (except pure risk) or pension contributions from your taxable income, you must repay the deductions over a 10-year period.

Tax return submission deadlines

The deadlines for filing tax returns in the Czech Republic are similar to those of the previous year. The primary deadline is three months, ending on April 1st. Then there are two extended deadlines: a four-month deadline ending on May 2nd, which applies to those who will be submitting their tax returns electronically, and a six-month deadline ending on July 1st. The six-month deadline is only applicable if the tax return is prepared and submitted by a tax declaration specialist or if the taxpayer undergoes a mandatory audit.

Regarding the electronic submission deadline, or the four-month deadline for electronic submissions, it can be utilized by those who are legally required to submit their tax returns electronically and those who choose to do so voluntarily.

The shortest three-month term is theoretically permissible even if a tax consultant prepares the declaration. The advantage is that if the taxpayer has overpaid, they will receive a refund from the tax service much earlier.

Who can submit a tax declaration on paper?
Under the new legislation, all individual entrepreneurs—natural persons—in the Czech Republic were forced to set up electronic data collection boxes last year; thus, practically all individuals must now submit their disclosures electronically. Taxpayers with rental income who lack a legally constituted data collection box, for instance, use paper filing. It also applies to employees who did not request that their employer make an annual disclosure, possibly because they did not fulfill the requirements or chose to file tax declarations on their own.
According to the 2022 statistics, around one-third of taxpayers in the Czech Republic submitted paper statements two years ago. However, it should be emphasized that in 2022, numerous businesses that were supposed to file electronically still filed their declarations on paper. The tax administration was lenient, imposing no penalties, according to experts.

How do I submit a tax declaration electronically?

Currently, residents of the Czech Republic are strongly encouraged to use the Moje Daně portal, which is managed by the tax administration. It is very user-friendly, and selecting the correct electronic form on the website is straightforward. However, submitting a tax declaration electronically does not mean that an entrepreneur fills out the declaration, prints it, signs it, takes a photo, for example, with a mobile phone, and sends it via email to the tax office.

Submitting a tax declaration electronically means that it must be submitted in the officially announced format and structure, that is, in XML format. Therefore, if you submit the declaration through the Moje Daně portal, you will be prompted to fill out a file in XML format at the final stage.

As for how to send the document to the tax office, this can be done through the electronic data mailbox or, again, directly through the Moje Daně portal. To do this, an individual needs to identify themselves and log into the system, where they can use either the data mailbox login details or, for example, bank identification.

Beware of penalties

You can be fined for late submission of your declaration. Tax authorities in the Czech Republic still allow a grace period of up to five working days after the deadline. However, after this period, penalty charges of 0.05% of the assessed tax amount for each day of delay will apply. Beyond this period, the fine can increase to 5% of the assessed tax, warns Monika Lodrová, a tax consultant at BDO, adding that if the final penalty amount is less than 1,000 crowns, the authorities will not impose it on the taxpayer.

Penalties also threaten taxpayers who submit their declarations in the incorrect form, i.e., on paper when they are required to submit electronically. Initially, the tax office will point out this mistake. If you do not correct it, a fine of 1,000 crowns will be imposed.

This situation also affects those taxpayers for whom the state has legally established an electronic data mailbox. Although many taxpayers did not fulfill the new obligation last year, tax authorities did not issue fines even after taxpayers did not respond to the call for electronic submission. This year, the situation is expected to change.

Do employees need to file a tax declaration?

Although employees in the Czech Republic are usually not required to file tax declarations, there are certain situations where it is necessary. For example, if they were unable to provide their employer’s accounting department with documents proving their entitlement to the tax-exempt part of the tax base and tax benefits. Or if they have other sources of income that they do not want their employer to see.

Typically, those who only worked a portion of the year should also file declarations. Even in such cases, they are entitled to a tax refund for the entire year (while they only paid taxes during the months they worked), as well as possibly to tax-exempt portions that reduce the tax base or to a refund that directly reduces the calculated tax.

Similarly, declarations can be filed, for example, by parents on maternity or parental leave who only worked part of the year or by students who earned additional income working part-time and did not request an annual tax declaration from their last employer.

Is it true that self-employed individuals paying a unified tax do not need to file a tax declaration?

Czech individual entrepreneurs—natural persons—could have switched to the new system of paying a unified fixed tax over the last two years. The main advantage of this was that the self-employed, who pay the unified tax monthly (income tax as well as social and medical insurance contributions), are exempt from the obligation to file an annual tax declaration.

However, there are several situations that require filing a declaration even when paying the unified tax, and these situations also signify the end of the unified tax regime for entrepreneurs. These situations include when the entrepreneur: