Flat Tax for Entrepreneurs

From 1 January 2021, a flat tax will be introduced which could bring savings to selected entrepreneurs and reduce their administrative burden. However, the transition to a flat tax must be reported to the tax office by 10 January 2021 at the latest.

The flat tax can be used only by an entrepreneur who meets the following conditions:

• revenues of up to CZK 1 million per year,
• not a VAT payer,
• no income from dependent activity, with the exception of income taxed by withholding tax,
• not a partner of a public trading company or a limited partnership,
• applies for the flat tax for the year 2021 by January 10, 2021.

Taxpayers applying the flat-rate tax regime will not have to file tax returns or social and health insurance reports after the end of the calendar year. Their obligations will be considered to be fulfilled only by paying the flat tax.

The flat tax will be paid monthly, by the 20th day of the respective calendar month, while for the year 2021, the flat tax amounts CZK 5,469.

This flat tax amounting CZK 5,469 includes a minimum health insurance premium of CZK 2,393, a minimum social insurance premium increased by 15% in the amount of CZK 2,976 and a symbolic CZK 100 in income tax. Entrepreneurs will therefore set up a single monthly payment and will no longer pay any separate advance payments for health and social insurance or, eventually, advance tax payments.

Taxpayers using the flat-rate tax scheme will lose the right to claim tax rebates and bonuses (e.g. for children) and deductions from their tax base. It is therefore always necessary to calculate individually to whom the new flat tax could bring real financial benefits and for whom it is not suitable.

In general, it can be said that the flat tax will be suitable especially for entrepreneurs who do not apply for discounts for children with incomes approaching CZK 1 million, who apply a flat rate for costs of 40%.

Please do not hesitate to contact us if anything is unclear or if you have any further questions.

The WTS Alfery Team