• Pension reform
  • Health reform
  • Social reform
  • Tax reform
  • Anti-corruption measures

Tax reform

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The current system of collecting direct taxes is very demanding and complex and, in addition, its administration is very expensive not only for the state, but also for the taxpayers themselves. It has therefore been necessary to create a new simple and clear system that will also be stable over the long term and friendlier towards people.

The government places particular emphasis on fairness and equal conditions for all taxpayers. In order to keep the income tax rate at a relatively low level, it is important to remove in particular the exceptions for which all others have to basically pay more.

The tax reform also represents a significant reduction in the taxation of work in favour of taxing consumption, which brings many positive effects. At first glance this shift might not be clear, but it will help the whole of the economy. In addition, in the Czech Republic the taxation of work was one of the highest in terms of the group of the most mature countries.

The main changes

2012

  • The tax break for a child will be increased by CZK 150 a month. All those who support children will thus be able to apply a tax deduction for a child of CZK 1,117 a month to their advance tax payments. This means that the total annual amount of this tax break will rise by CZK 1,800 to CZK 13,404.
  • The tax bonus will increase. Currently this bonus for parents with higher tax deductions than their actual tax was applied within the band from CZK 100 to CZK 52,200. The annual bonus ceiling will newly be shifted to CZK 60,300.
  • Gambling will be taxed. Lottery companies will no longer be exempt from income tax. A special levy, which will be an income for state and municipal budgets, will also be introduced. Lottery companies will no longer be able to decide on the beneficiaries of their levies.
  • The reduced VAT rate will rise from 10 per cent to 14 per cent. The basic VAT rate will remain at 20 per cent.

2013

  • The value added tax rates will be harmonised. There will only be a single tax rate of 17.5 per cent.

Over the next years

  • The income tax base will be the gross salary. The tax rate will be harmonised at 19 per cent. This means that people will save up to hundreds of crowns a month.
  • It will be possible to deduct more money for charitable purposes. Natural persons will be able to deduct 15 per cent from their tax base, legal entities 10 per cent. This will mean increased support for voluntary solidarity.
  • The gift tax and inheritance tax rates will be harmonised. The gift tax rate is set at 19 per cent, the inheritance tax rate at 9.5 per cent. Complicated tables will no longer be necessary for the calculation of these taxes.
  • Interest deductions from mortgages and building savings loans will be reduced. It will now be possible to deduct a maximum of CZK 80,000 a year or CZK 160,000 when both partners work. The vast majority of mortgages will fall within this limit.
  • The double taxation of dividends will be cancelled. Profit shares will be exempt from withholding tax.
  • Some non-systemic tax exemptions will be cancelled. Employees will be reimbursed for the cancelled exceptions through an income tax break of CZK 3,000 a year.
  • The single collection point (SCP) will be established. The payment of income tax and premiums will be simplified thanks to the submission of a single form and a personal tax account. Tax subjects will no longer have to communicate separately with tax offices, social security administration bodies, and health and accident insurers.
  • Employee levies for health insurance will be increased by 2 per cent. Employees will thus newly pay health insurance premiums of 6.5 per cent.
  • Employer levies will be reduced by over 1.6 per cent. Company levies for employees will be joined into a unified levy from the summary of salaries for public insurance. For employers, these levies will in addition be reduced from the current 34 per cent (25 per cent for social security and 9 per cent for health insurance) to 32.4 per cent. This will result in support for employment, in particular in terms of low-income groups.
  • Self-employed persons will pay premiums the same as employees, at the rate of 6.5 per cent. Entrepreneurs and self-employed persons will, however, also have the option to increase this rate, which will result in increased benefit payments, such as old-age pension.

Reform targets

  1. a shift of focus from labour taxation to consumption taxation
  2. reduction of indirect labour costs
  3. unification of the tax base and the basis of assessment for insurance payments, and simplification of the entire system
  4. unification of the tax and insurance administration system
  5. abolition of dozens of tax exemptions

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