Tax system in the Czech Republic
Czech Republic’s tax system is similar to the systems of developed West-European states. Its laws were drawn up at the beginning of 1990s and came into force in 1993. Only value-added tax and excise duties were adjusted in 2004, upon Czech Republic’s EU accession. Tax laws are subject to frequent amendments and as such are not always easy to follow.
Income taxes are regulated by law no. 586/1992 Coll., setting the tax for both natural and legal persons. The government often amends the law through the adoption of various populist measures and some of these changes are in turn annulled again. The law contains a large number of exceptions and concessions to various groups of taxpayers. It is confusing and often criticised. Political parties usually promise to introduce a brand new and simpler law, but this is still to happen. In order to pay income taxes correctly in the CR, we recommend the services of tax advisers.
Real estate tax applies to buildings and land. For buildings, the tax base is represented by the built-up area, for land, the tax base is either the size or the price of the land. The tax is regulated by law no. 338/1992 Coll.
Road tax only applies to vehicles that are used, or intended for, business. Vehicles used exclusively for private needs are exempt. The tax for passenger cars is calculated from the car’s engine capacity, for heavy-goods vehicles it depends on the number of axles and the total weight. The law also sets a toll for the use of highways, applicable to all vehicles – passenger and freight, used for business or private travel. The fee for heavy-goods vehicles is charged per kilometer travelled, using an electronic system; passenger cars pay a fixed sum. Extension of the electronic system to all vehicles and some other types of roads is being considered. Road tax is regulated by law no. 16/1993 Coll.
Inheritance tax, gift tax and real estate transfer tax are all regulated by law no. 340/2013 Coll.
Taxes referred to as environmental are governed by law no. 261/2007 Coll. and are introduced in accordance with EU regulations. They include natural gas tax, solid fuels tax and electricity tax. These taxes only apply to the importers and distributors of the said commodities.
Value-added tax is primarily regulated by law no. 235/2004 Coll., which is a transposition of the European Union directive no. 2006/112/ES. There are two tax rates, standard and reduced. The standard tax rate covers most goods and services, while the reduced rate applies primarily to food-stuffs and pharmaceuticals. In 2012 the standard rate stood at 20 % and the reduced rate at 14 %; with regard to the efforts to reduce the state debt, however, these rates are likely to change.
Goods subject to excise duties are mineral oils, alcohol, alcoholic beverages and tobacco products. Similar to the value-added tax, excise duties are also harmonised with European Union’s regulations. These taxes are administered by customs authorities. Excise duties are regulated by law no. 353/2003 Coll.
Tax administration is regulated by law no. 280/2009 Coll., the tax law. The administration is carried out by the tax authorities and, in some cases, customs authorities under the Ministry of Finance of the Czech Republic (www.mfcr.cz). Tax returns may also be filed electronically via data boxes (datová schránka).
Within Czech law a data box is defined as a special-type electronic repository, established based on law no. 300/2008 Coll., intended for the delivery of electronic documents. The law requires the setting up of data boxes for all public authorities, all natural or legal persons engaged in business activities, as well as for some other types of entities; other natural and legal persons are entitled to have data boxes established free of charge. Communication via data boxes is a full-fledged substitute to the delivery of documents using traditional mail service and is fully respected by the Czech legal system.
Since the Czech Republic is a member of the European Union, customs and import and export rules are regulated by joint EU rules. Some fields are regulated by the customs law no. 13/1993 Coll. Duty rates are set by the joint EU code known as HSCN or Taric.