Tax package 2023

On Friday, 2 December 2022, the so-called Tax Package 2023 was published in the Collection of Laws, amending the Income Tax Act, the Value Added Tax Act and other related laws.

We have already informed you about the introduction of the unexpected profits tax (so called windfall tax) in the NEWS 6/2022. Below is a brief overview of other important changes.

Extraordinary depreciation also for assets acquired in 2022 and 2023

Extraordinary depreciation is a special category of tax depreciation, which is not determined on annual basis, but with accuracy to months. It is applied within 12 months for assets included in the 1st depreciation group, or within 24 months for assets included in the 2nd depreciation group. They cannot be interrupted and their use is voluntary. 

The existing regulation allowed extraordinary tax depreciation only for assets acquired in 2020 and 2021. Thanks to the law amendment, the extraordinary depreciation regime can also be applied to assets acquired in 2022 and 2023.

Change in the limits for mandatory filing of income tax returns

From 2023, the law amendment increases the income limits decisive for the obligation to file personal income tax returns. Newly, taxpayers will not have to file tax returns in the following cases:

• employees with other income up to CZK 20,000 (the current limit of CZK 6,000 still applies to the 2022 return),
• persons with total income not exceeding CZK 50,000 (until 2022, the limit is CZK 15,000).

Changes to the flat-rate scheme for natural persons

The flat-rate tax was introduced for the first time for the 2021 tax year and, due to the strict conditions for its application, very few personal income taxpayers have signed up for it. The amendment in this field should therefore extend the use of the flat-rate tax regime and simplify the administrative obligations of small entrepreneurs overall. It is also connected with an increase in the limit for compulsory VAT registration from CZK 1 million to CZK 2 million. 

The flat-rate tax allows natural persons – entrepreneurs, who are not VAT payers and have no other significant income, to avoid the need to file annual tax returns and reports for the social security administration and the health insurance company and to pay contributions to three different accounts.

From 2023, instead of one lump-sum tax, a three-band taxation is newly introduced, where the amount of the lump-sum tax is graded according to the turnover achieved. For most taxpayers, the following settings will apply:

• turnover up to CZK 1 million – flat tax CZK 6 thousand per month 
• turnover between CZK 1 million and CZK 1,5 million – flat tax CZK 16 thousand per month 
• turnover between CZK 1,5 million and CZK 2  million – flat tax CZK 26 thousand per month.

For 2023, it is possible to enter the flat-rate scheme until 10 January 2023, provided that the statutory conditions are met (among other things, the person must not be a VAT payer on 1 January 2023).

Changes related to the control report

As of January 2023, the length and starting date of the period for responding to the tax administrator’s request to change, supplement or confirm data in the control report will change. Newly, it will be necessary to respond within 17 calendar days of the delivery of the notice to the data box instead of 5 working days from the notice.

For selected VAT payers (natural persons, limited liability companies with a sole shareholder – a natural person and quarterly payers), certain fines for breaches of obligations related to the submission of control reports are halved.

All VAT payers will no longer be subject to the first fine in a calendar year for submitting a control report within a substitute deadline.

If you are affected by the above changes, please do not hesitate to contact us.

Your WTS Alfery team