Expatriate tax ebook - Czech Republic

Basis of taxation

Charge to tax
Residence
Income from employment
Source of employment
Benefits (in kind)
Expatriate concessions
Relief for foreign taxes
Deductions against income

Charge to tax
Taxation in the CR of individuals depends upon residence.
Czech tax residents are liable to personal income tax on all sources of income, regardless of where the income is received from.
Non-residents pay tax only on CR sourced income, but they have limited possibility of using tax allowances and tax credits.

The following types of income are liable to personal income tax: Income from dependent activity (employment), income from entrepreneurial activity, income from capital, rental income and other income (such as immovable property sale).

Residence
The Czech tax residence of individuals is determined according to their permanent home or the length of their stay in CR (183 days or more in CR in the relevant calendar year, either continuously or periodically). However, a treaty “tie-breaker” rule overrides this provision if the individual had closer connections to another country.

Income from employment
All employment-related incomes (wages, salaries, overtime pay, bonuses, gratuities, perquisites, benefits, benefits from employees` stock options etc) are taxed in the CR.

The employer – mandatory health insurance and social security contributions paid are also regarded as employment income subject to tax (they enter a tax base and create the so called super-gross salary).

“Economic employer” – an economic employer (or deemed employer) is a Czech employer that has a foreign individual working for it who does not have a Czech employment contract. Such individuals are typically employed by a foreign company. In such cases, the deemed employer is obliged to act as payroll agent and must transfer the appropriate income tax advances to the Tax Office.

Source of employment
Remuneration for any work performed in the CR, regardless of who pays it and where or when it is paid, is taxable. In this regard the regulation of the double taxation agreements between CR and other countries apply accordingly.

Benefits (in kind)
Generally, all remuneration paid to an employee is subject to tax. Certain non-monetary income is exempt from tax in the hands of employees.

Expatriate concessions
There are no specific concessions available to expatriates in the CR.

Relief for foreign taxes
Double taxation will be avoided in accordance with the applicable double taxation treaties.

Deductions against income
Costs may be applied especially with income from entrepreneurial activity, rental income and other income.

There are some tax deductible amounts available (if special conditions are fulfilled): humanitarian gifts, interest paid on a credit from a building saving or a mortgage, additional pension insurance or private life insurance paid by individuals etc.

The basic tax credit in the amount of 23,640 CZK per tax payer can be claimed by all persons. Other tax credits are available only for taxpayers who are considered Czech residents, and for Czech tax non-residents whose total income from sources in the CR represented at least 90% of their world-wide income in the tax year.