Another Tax Package for Smaller Businesses

The Czech government has decided on the next tax package aimed at smaller enterprises. The respective government bill deals, inter alia, with the obligatory registration for VAT and the so-called lump-sum tax. The proposed changes shall lead to simplification of tax obligations and reduction of the volume of administrative obligations.

As regards the VAT registration limit, any person that exceeds the prescribed limit of the turnover becomes VAT payer and is obliged to register itself thereto. As of January 1, 2023, the limit shall be increased to CZK 2 M turnover within last 12 months instead of the current CZK 1 M. This limit shall be general and applies also to legal entities.

Further, self-employed entrepreneurs have the right to an easier way how to tax their incomes and pay health insurance and social security contributions. They may opt for the so called lump-sum tax regime in case that their income does not exceed CZK 1 M. The advantage is that the entrepreneur pays only regular monthly lump-sum payments and is not obliged to file a related tax return and insurance summaries. Due to the increase of the limit, the government expects a significant increase of registrations to the lump-sum tax regime. Based on the government bill, there shall be newly three zones connected with different amounts of the lump-sum taxes. The zones shall be structured with respect to the amount of income and type of business. The goal of this new structure is not to discriminate entrepreneurs with lower income. The new limit for the application for the lump-sum tax regime shall also be CZK 2 M. The above government bill is still in the legislative process. Therefore, it is uncertain when it will become effective.

Mgr. Ing. Jan Valíček