Flat-rate tax for self-employed: 5 situations where you need to file a tax return

Under the flat-rate scheme, you pay one amount each month, which includes social security, health insurance and income tax. The flat-rate tax gives you relief from administration so you don't have to worry about filing your tax return. But beware, it doesn't always apply! Find out which exemptions to look out for.

FLAT-RATE TAX AND TAX RETURN - WHEN TO FILE IT?

If you are self-employed and use a flat tax, don't rely on getting rid of tax issues forever. In the following situations, you must still file a tax return even though you paid a flat tax:

  • Apart from your business, you have other income of more than CZK 15 000 per year. For example, you rent an apartment or sell securities or cryptocurrencies. The limit applies to income from capital assets, rental income and other income (according to Sections 8 to 10 of the Income Tax Act).
  • You have income from employment that has not been subject to withholding tax. Withholding tax is only deducted from your wages if you work under a work arrangement, you have not signed a taxpayer's declaration and your remuneration was less than CZK 10,000 per month. You will not have to pay tax if you are self-employed and work under another type of employment contract where the income is taxed in advance.
  • Your business income exceeded CZK 1 000 000 per year. The flat-rate tax can only be used by sole traders whose income from self-employment does not exceed this amount according to Section 7. Once this happens, they must file a regular tax return in the following year.
  • You become a VAT payer when your income exceeds CZK 1,000,000 in 12 consecutive months. You may not achieve such a high income in one calendar year and therefore meet the previous condition. However, as a VAT payer, you cannot continue to benefit from the flat-rate tax.
  • You have become a partner in a publicly traded company or a general partner in a limited partnership.

None of the points apply to you? Great, then you really benefit from the flat-rate scheme and you don't have to deal with the tax return.

HOW TO FILE A FLAT-RATE TAX RETURN?

If you do not meet the conditions of the flat-rate tax, you are obliged to file a tax return. How to do it?

  1. You will calculate your tax according to the general rules as if you were not in the flat-rate scheme. You list all your income, including business income.
  2. Line 86 of the tax return is for advances paid under the flat-rate tax. In 2021 and 2022, the amount of the flat-rate tax includes CZK 100 per month for income tax, for a total of CZK 1 200 per year.
  3. If you were employed, you should also enter your advance payments of employment tax on line 84.
  4. The tax authority will refund any overpayment or you will pay the underpayment.

You do the same for social security and health insurance - you send the statements to the Social Security and Health Insurance Institutions, with the premiums paid in the amount of the flat-rate tax serving as a deposit.

AND WHAT NEXT - CAN YOU STAY IN THE FLAT-RATE SCHEME AFTER FILING YOUR RETURN?

If you breach certain conditions, you must opt out of the flat-rate scheme and pay the normal social security and health insurance contributions and submit a tax return in the following year. This will be the case if:

  • Your business income was more than CZK 1 000 000.
  • You have become a VAT payer.
  • You have become a partner in a publicly traded company or a general partner in a limited partnership.

In the following cases, there is no reason to end the flat-rate scheme:

  • Other income exceeded CZK 15 000.
  • You had income from employment not subject to withholding tax.

You submit your return to the tax office and continue to pay the flat-rate tax. However, if you continue to have this income, consider whether it makes sense to stay in the flat-rate scheme - you will have to file your tax return again next year.

DON'T WORRY ABOUT TAXES AND LEAVE IT TO US

Have you found out that you are required to file a tax return this year but don't know how to do it? Contact us and we'll get your income tax return sorted.


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