Tax news 2023: changes will affect VAT and flat-rate tax
On 1 December 2022, Act No. 366/2022 Coll., also known as the "2023 Tax Package", was promulgated in the Collection of Laws, which comes into force on 1 January 2023. It contains a number of amendments to existing legislation in the area of VAT or personal and corporate income tax. Read on to find out what is changing.
VAT changes: higher threshold for compulsory registration
In addition to minor changes in the case of penalties and deadlines for failure to submit a control report in selected cases (modification of the wording of the provisions of § 101j), the main novelty is the increase in the limit for compulsory VAT registration from CZK 1 million to CZK 2 million.
In this context, several transitional provisions have also been issued, which apply from 1 December 2022 and address the (de)registration of taxpayers with turnover between the original and the new value.
These are in particular the following situations:
- A taxable person does not automatically become a VAT payer and does not incur any obligations if he exceeds a turnover of EUR 1 million between December 2021 and November 2022 or January 2022 and December 2022. CZK, but not CZK 2 million. CZK.
- If the VAT payer is considering cancelling the existing VAT registration, e.g. due to the contemplated transition to a flat-rate income tax from the new year 2023 (assuming that it does not reach a turnover of CZK 2 million), the application for deregistration must be submitted to the tax administrator no later than 8 December 2022, i.e. within 5 calendar days of the moment when the transitional provisions came into force.
Do you want to cancel your VAT registration? Apply electronically using the online form available on Mojedane.cz under Registration → Application for deregistration. In the case of deregistration, VAT deductions must be adjusted for supplies received that the taxpayer has claimed in the past (e.g. acquired fixed assets or inventories).
For more details on the VAT changes, consult your accountant or tax advisor or read the full information document from the General Tax Directorate.
Changes to corporation tax: not just windfall tax
What's in store for companies and other legal entities in 2023?
- The biggest novelty in the field of VAT is the introduction of the so-called windfall tax, i.e. tax on extraordinary profits. It mainly affects the banking and energy sectors.
- There has also been an extension of the so-called extraordinary depreciation. These will be applicable to selected types of assets until 31 December 2023.
- The amendment introduces the provision §30d, which is aimed at specific situations in the case of immovable cultural monuments.
- In addition, a more precise wording of the law was approved regarding the tax exemption of gratuitous income in the situation where immovable property is acquired from a municipality (it applies in particular to housing cooperatives).
Note: The complete abolition of electronic sales registration (EET) is also expected. This amendment has already been approved by the Chamber of Deputies and will now be discussed by the Senate.
Changes to personal income tax: three new flat-rate tax bands
The news will also affect sole traders and employees:
- A modification of the flat-rate tax that can be used by entrepreneurial individuals has been approved. There are now three income bands, which will determine the different amounts of the flat-rate tax and the social and health insurance contributions included in it.
- The flat-rate tax also reflects the increased limit for compulsory registration for VAT. The flat-rate tax (in the highest band) can now be used by self-employed persons who do not pay VAT with a turnover of up to CZK 2 million. It was originally intended only for entrepreneurs with a turnover of up to CZK 1 million. CZK.
- Furthermore, the general income threshold for individuals, from which they are obliged to file a tax return, has been increased from CZK 15,000 to CZK 50,000 per year.
- The annual limit for the obligation to file a tax return for income earned outside employment has also changed, and is now set at CZK 20,000 instead of the previous CZK 6,000.
- Minor changes have also been made to exempt income, whereby the tax exemption may now also apply to income earned from the acquisition of immovable property from the municipality (under certain conditions) or in the case of remuneration for the performance of the duties of a member of the election commission.
TIP: Like every year, self-employed persons will not be able to avoid an increase in minimum levies. Read more about how social security and health insurance contributions are changing for 2023.