Tax return and tax discounts in the Czech Republic

The tax season is here again and we have prepared a brief overview of its most pleasant part - tax discounts.

As an expat, you need to be careful since some discount categories apply only to Czech residents. There are two tax discounts that can be claimed by anyone regardless of residentship, student discount and taxpayer discount:

Student discount

Students who are studying at a secondary or higher education institution can claim a deduction of CZK 335 for each month up to the age of 26, or age 28 for full-time doctoral studies.

Taxpayer discount

The taxpayer discount is a basic tax credit that can be claimed by anyone with taxable income, i.e. any income taxpayer. It is available to all employees and self-employed workers, but also to working students, pensioners and women on maternity leave. The tax discount is CZK 30,840, i.e. CZK 2,570 per month.

The rest of the tax discounts can only be claimed by 2 groups of expats: Expat who is a EU-citizen having 90% of your world income coming from the Czech Republic or an expat who is a resident of the Czech Republic. For these two groups of expat taxpayer, the list of tax discounts is much longer:

Home mortgage/loan

If you are repaying a mortgage or loan, you can deduct the interest paid from the tax base up to a maximum of CZK 150,000 per year (for properties acquired before 1 January 2022) / CZK 300,000 per year (for properties acquired after 1 January 2022).

It is important that the borrowed money is used only for permanent housing purposes. It must not be a property that you are renting out, a holiday home, etc.

The amount that can be deducted from the tax base can be found in the interest paid certificate that banks send to their clients every year. Attach this certificate to your tax return as an attachment.

Pension insurance, supplementary insurance, savings

If you pay more than CZK 1,000 per month (you can find the amount on the certificate from the pension institution), you probably qualify for the discount.

These insurance contributions can be deducted from the tax base up to a maximum of CZK 24,000 per year. The actual amount of the deduction is based on the actual premium paid, which is reduced by the state contribution. The reason for this is to avoid duplication of state support. From 2018, the fixed amount of CZK 12,000 is not deducted from the contributions paid, but the contributions are reduced by CZK 1,000 for each month of saving.

Life insurance

If your life insurance contract meets the following three rules, you can deduct from your tax base the amount of premiums paid up to a maximum of CZK 24,000: The minimum period for which life insurance is taken out is 60 months. The minimum age of the insured up to which the contract must be taken out is 60. The contract does not allow for continuous withdrawal of funds. The actual amount of the deductible is based on the premium actually paid, which is stated in the certificate from the insurance company.

Nursery fees

One parent can deduct the nursery fees paid from their taxes up to a maximum of CZK 16,200 per child. The actual amount of the discount is then based on the actual fee paid.

Child tax deduction

You are entitled to tax relief for each dependent child living in the same household as you, but only one parent per child can claim the tax credit at a time. A dependent child can be your own child, an adopted child, a child in foster care or the child of the other spouse. The tax credit can be claimed not only for minor children up to the age of 18, but also for adult children up to the age of 26 who are studying. In the case of full-time doctoral studies, the age limit moves to 28.

The amount of the tax credit is graduated according to the number of dependent children (CZK 15,204 per year for one child, CZK 22,320 per year for the second child and CZK 27,840 per year for the third and each additional child).

If the child has a Disabled Person's Permit (ZTP/P), the tax benefit is doubled.

Spouse discount

This is available to a spouse if the other spouse has no or little income of their own. The limit of CZK 68,000 includes all income from employment, business, rents, but also occasional income, maternity, sickness benefits, disability and old-age pensions and unemployment benefits. On the other hand, the limit does not include parental allowance, childbirth or alimony and other benefits from the state. If the spouse has a disabled person's ZTP/P card, the discount is doubled.

Registered partners are also entitled to a discount, unlike unmarried partners or partners not living in the same household.

Blood/plasma donation

Donors of blood, plasma and other blood components are entitled to a tax deduction of CZK 3,000 per donation. The only condition is that the donation must always be free of charge and without financial remuneration. There is no limit to the number of donations. The maximum amount that can be deducted from the tax base is 15% of the tax base.

Gift / Donation

You are entitled to a tax deduction if you make a gift of more than CZK 1,000 and the recipient falls within the list of persons listed in the law. These include municipalities, cities and regions, schools, shelters or health organisations. The maximum amount that can be deducted from the tax base is 30% of the tax base.

Organ and bone marrow donation is considered a specific form of donation. In this case, the donor is entitled to a deduction of up to CZK 20,000.

Trade union contributions

Membership fees paid to trade unions can be deducted from the tax base. However, the maximum amount of the deduction may not exceed CZK 3,000 and 1.5% of employment income.

Examinations to verify the results of your further education

You can deduct from your tax base the fees you pay for examinations that improve your professional qualifications. These are only exams published in the National Qualifications Framework (you can check your exam here). A maximum of CZK 10,000 can be deducted from the tax base.

How do I know the status of my residency?

The issue of an expat's residency can be complicated. A tax resident is someone who is domiciled in the Czech Republic for tax purposes. This can be affected by your permanent home address, your income and the time you spent in a given country. Consulting an expert is the easiest and safest way to deal with your situation.

Example 1:

I moved here last year with my family from Ukraine. I am working here from February 2022, what discounts am I entitled to?

Answear:

You are required to be a resident of the Czech Republic, you will be entitled to all discounts.

Example 2:

I have been working in the Czech Republic since February 2022, but my family still lives in Ukraine. What discounts am I entitled to?

Answear:

Your centre of interest is in Ukraine, you cannot claim the children and spouse discount on your taxes in the Czech Republic.

Example 3:

I'm a freelancer in the Czech Republic, working in IT here from February 2022. What credits am I entitled to? I live here alone.

Answear:

You are a resident in the Czech Republic, therefore eligible for all tax credits.