Economic facts


New Tax Reform in the Czech Republic

photo:  (sxc.hu)

The tax reform adopted by the Czech parliament in the autumn of 2011 amends key tax, insurance and other legal norms in the Czech Republic. In total, it is related to seventy acts and regulations. The tax reform becomes valid on 1 January 2012 but it will be effective from 1 January 2014.

What will be different as a result of the tax reform?

The tax reform will change e.g. the following acts:

  • Act on income taxes,
  • Act on lotteries and other similar games (mainly the levies),
  • Act on local charges,
  • Act on inheritance tax, gift tax and real estate transfer,
  • Act on value added tax,
  • Act on social security contributions and contribution to the state employment policy, etc.
An overview of certain changes following from the tax reform
  • Super-gross wages will be cancelled (the super gross wage is the sum of an employee’s gross wage plus social and health insurance), tax rate amounting to 15% of the income; income tax amounting to 19% of the income of physical persons will be introduced, which will be calculated from the gross wage.
  • Unified tax collection point, i.e. a large tax office which should, among other things, reduce tax evasion.
  • Income tax of legal persons is kept at the same level of 19%.
  • Allowance rates for social security and health insurance will be unified to 6.5% for self-employed persons and employees. This way, the employees’ insurance rate will be increased by 2%.
  • Allowances by employers to employees’ social and health insurance will be replaced by a tax on wages amounting to 32.5%, which means reduction by 1.5% for employers, compared to the present rate. The 32.5% rate will be unified, i.e. the health and social insurance paid by the employer for the employee will not be separated.
  • Lower support to mortgages and loans from savings for building purposes. From now on, up to CZK 80,000 can be deduced from the tax base (instead of the current CZK 300,000).
  • The VAT limit for the self-employed lowers to CZK 750,000. Until now, VAT payers were limited by a turnover exceeding 1 million crowns.
  • Tax on dividends is cancelled.
  • Gambling industry subjected to taxation. Companies operating in the gambling industry will newly pay income tax amounting to 20%. The change becomes effective from the year 2012.
  • Unified inheritance tax amounting to 9.5%.
  • Unified gift tax amounting 19%.
  • Tax on real estate transfer kept at the level of 3%.
Author: Ivana Jenerálová
Added: 30.12.2011

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