Accounting And Tax Obligations

A new tax system was introduced in the Czech Republic on January 1, 1993. The new tax legislation is ammended and will be further expanded.

Basic Accounting Requirements

1. Maintain all records in the Czech or Slovak language

2. The company's accounts should be classified according to the standard Czech or Slovak chart of accounts (Uctove osnovy) - Uctove osnovy is sold at several bookstores downtown, check the Prague or Bratislava School of Economics if you can't find it elsewhere.

3. All businesses registered in the Commercial Register must use double entry book keeping

4. Depreciate the company's assets for tax purposes according to Income Tax Act No. 586/92 Sb as amended. (The company can use different depriciation for accounting purposes and for tax purposes.)

5. Companies must perform a physical count of inventories and fixed assets at least annually. Petty cash accounts must be checked at least four times a year.

6. Companies must follow specific procedural and reporting requirements during the year in the prescribed reporting format

7. Standard rules for accounting principles apply

8. All companies have the calendar year as their financial reporting period

9. Accrual accounting is followed.

10. There are limits to travel expenses that can be deducted as expenses for tax purposes. The amount of real allowances depends upon the nature of the business trip and location. For example, when traveling in the Czech Republic for more than 18 hours, only 99 Kc meal allowance per day is deductible (on top of hotel and transportation charges). Please consult tax guides for details on other countries.

Tax Obligations

There are, at least, four taxes that must be paid by every company. Corporate tax, and three employee-related costs - personal income tax (payroll tax), social and health insurance. Many companies also have to pay VAT on products and services if the company's turnover exceeds 750,000 turnover over three consecutive months. If the company owns company cars or the employees use their own cars for business purposes, a road tax must be paid. If the cars have catalytic converters, they are exempt from road tax. The entries marked with (*) indicate the policy is not yet firm, and may change.

1. Corporate tax

All firms that are registered in the Commercial Register must also register at their local tax office. Also, some permanent establishments must be registered for tax payments, even if they are not registered in the Commercial Register.

Where to Register

For Praha 1,4 = Financni urad, Stepanska 28, Praha 1, tel. 2404-1111. open: Wed only, 8-11am, noon-4 pm. For other Prague districts, please see end of chapter 2

For Bratislava districts, please see end of chapter 3

When to Register

In CR, within 30 days of registering in the Commercial Register or within 30 days of starting business activity.

There is a penalty up to 2 million Kc which could be charged.
*In SR, need to register before opening day.

Documents Needed to Register at Tax Office

In CR, the Financial Office can require these documents. There is no official position in the law.

1. Copy of co. registration in the Commercial Register
(Some financial offices require a copy of trade license)

2. Documents establishing a bank account

3. Company's founding documents

4. Expected annual profit plan

5. Completed "Prihlaska k registraci pro pravnicke osoby"

"Prihlaska k danove registraci"

6. Power of attorney, (if company uses tax advisor)

*In SR, need registration certificate from Commercial Register

Corporate Tax Rates

In CR, 41% flat rate for 1995, 42% in 1994. In SR, 40% flat rate

Where to find tax forms

Local Financial Office

Tax Forms Needed

1. "Priznani k dani z prijmu pravnickych osob" (Corporate tax forms, form for the Financial Office)

2. "Financni uzaverka" (for 1993) (Financial Statement form for the Financial Office )

3. "Prohlaseni poplatnika dane z prijmu fyzickych osob"

(Proof of right to use standard deductions = 1,800 Kc. Form for use by the employer)

When to file

In CR, by March 31 each year. (By June 30 if co. uses tax advisor or the statuatory audit is required according to accounting act.)

Where to file

Usually, same as place where co. registered for corporate tax. Each co. is assigned one tax officer is responsible for this company. See previous page "Where to Register" for details.

Acceptable forms of Payment

Bank Transfer, Postal payment or pay cash in the Financial Office. Ask local tax office for account no. and bank details.

2. Personal Income Tax (PIT)

All firms that have employees must register and withhold an advance payment on every employee every month, regardless of the number of hours they work for you.

Where to Register

In CR, usually same local financial office where you register for corporate tax though it is usually a different office in the same building. In SR, Vajanskeho 15, Bratislava. tel. (07) 325-577, open Mon: 8-12; 1p.m.- 5 p.m. Wed: 8-12; 1 p.m.-3.30

Registration

The whole company is registered for payment of PIT for dependent employees. Co. is not required to register each employee.

Documents Needed to Register Employees

In CR, Company has to keep track of all the taxes they withhold from each employee every month. InSR, registration office has all necessary documents, bring copy of registration certificate in Commercial Register

Personal Income tax rates, Monthly

In CR, (In SR, please consult local financial office for rates)"

15% if earning under 5,000 Kc

750 Kc + 20% of excess over 5,000 up to 10,000 Kc

1,750 Kc + 25% of exess over 10,000 up to 15,000 Kc

3,000 Kc + 32% of excess over 15,000 up to 45,000 Kc

12,600 Kc + 40% of excess over 45,000 up to 90,000 Kc

30,600 Kc + 43% of excess over 90,000 Kc

Where to find forms

Local financial office

What forms to file

There is form for "Reconciliation of PIT." By March 31 of the following year, employer must detail names of employees, amount of wages and salaries paid and tax advances withheld. By March 31, employer must settle liability with employees. PIT must be settled with Financial office by April 30 or July 31, depending upon when corporate income tax is settled with the Financial office.

When to file

Advance PIT must be paid monthly within 5 days of the pay date or within the first 5 days of the following month at the latest, provided that the salaries are paid in the current month. The final tax liability must be settled within 30 days of the annual corporate income tax report.

Where to file

Local financial office

Acceptable forms of payment

IN CR, Bank transfer or Post Office payment to:

CNB, acct. no. 713-7625-011/0710. v.s. ICO no. c.s. 8148

3. Social Security

Where to Register

Central Social Security Office, Zborovska 11, Praha 5, switchboard: 2455-1111 open: Mon, Wed 8-noon, 2-5:30 pm. For Prague district offices, please see end of Chap. 2. For Bratislava district offices, please see end of Chap. 3

When to Register

IN CR, Register within 8 days of employing new person

*IN SR, Register within 15 days of employing new person

Documents Needed to Register Employees

IN CR, documents needed depends on the size of the organization. The following is commonly needed.

1. "Prihlaska zamestnance k socialnimu pojisteni" (Registers employees)

2. "Evidencni list duchodoveho zabezpecni"

3. "Prehled o vymerovacich zakladech ..." (fill in each month and send to the Social Registration office)

4. "Odhlaseni zamestnance" (cancels employee's registration)

5. "Prihlaska naroku na pridavky na deti."

6. "Zadost o vyplatu statniho vyrovnavaciho prispevku pro deti"

*IN SR, need registration certificate from Company Register, all other forms available at Social Security Office.

Social security tax rates

IN CR, 26,25% of gross salary paid by employer. 8,75% of gross salary paid by employee *In SR, 25% of gross salary paid by employer. 7.3% of gross salary paid by employee

Social security forms

Local social security office.

When to file

The payroll day or the day of the last payment of the month. Maximum 8 days after the end of the month.

Where to file

Local social security office

Acceptable forms of payment

IN CR, Bank transfer or pay through Post Office into Komercni banka, Na prikope 28, Praha 1 acct. no. 10014-83038-011/0100, v.s. 11517098, c.s. 7618

4. Health Insurance

Where to Register

May register at any district office in Prague.

Central Health Insurance Office, Tyrsova 7, Praha 2, tel. 2491-0259. Open: Mon,Tue,Thu 8am-3.30pm, Wed 8am-6pm,Fri: 8-12. For other Prague districts, see end of Chapter 2. For Bratistava districts, see end of Chapter 3

When to Register

IN CR, No later than 8 days after employment begins. Report any changes in job status of employee within 8 days of event (i.e. fired, laid off, etc.) *IN SR, No later than 15 days after employment begins

Documents needed to register employees

IN CR, "Prihlaska zamestnance ke zdravotnimu pojisteni" All employees are registered on the same form *IN SR, need registration certificate from Co. Register

Health tax rates

In CR, 9% of gross salary paid by employer. 4.5% of gross salary paid by employee *In SR, 10% of gross salary paid by employer, 3.7% of gross salary paid by employee

Where to find forms

Local health registration office, branch of insurance company

When to file

In CR, On payroll day, pay for previous month (not in advance) *In SR, Pay by 8th day of every month

Where to file

After initial registration, no need to file forms except to change status of employee - form to file "Hromadne oznameni zamestnavatele - ZMENA"

Acceptable forms of payment

IN CR, Bank transfer to account no. 20001-1922223-504/0600 v.s. ICO + 00 at end or 99 if a sole proprietor. c.s. 558. Postal payment to account no. 10006-1922223-504/0600 v.s. same as above, c.s. 379

5. VAT (Value Added Tax-DPH)

Registration is mandatory for all businesses whose turnover exceeds 750,000 Kc during three consecutive months.. The following are exempt from VAT: mail and broadcasting, education, medical services and products, social care, financial services, insurance, sale or lease of land, lotteries, and sale of businesses

Where to Register

For Praha 1,4 = Financni urad, Stepanska 28, Praha 1, tel. 2404-1111. open: Wed only, 8-11am, noon-4 pm. For other Prague districts, please see end of chapter 2. For Bratislava districts, please see end of chapter 3

VAT rates

Export of goods and some services is exempt from VAT with credit

5% on basic foodstuffs, fuels and oils, minerals, pharmaceutical products, paper products, books, newspapers, certain medical equipment, most services 22% on most products, some services (catering, maintenance and repairs, accomodation, travel, transport), operating leases and agent services.

Where to find forms

Local financial office

When to file

Returns have to be made monthly, or quarterly if turnover is less than 10 million Kc in the previous year. - VAT is payable within 25 days of the end of the tax period (a month or a quarter).

Where to file

Usually, the same place where co. is registered for VAT

Acceptable forms of Payment

Bank Transfer or pay through the Post Office, or payment in cash, at the Financial Office

Withholding Taxes on Residents and Non-residents

- 25% on licenses, copyright

- 25% on dividends

- 15% on interest on deposits of individuals

Withholding tax deducted from income derived from CR

- 25% on business, advisory and consulting services

- 25% on rental payments (operating lease)

- 1% financial lease

- If there is a double tax treaty, the above mentioned rates are reduced based on this treaty.

- The taxpayer is obliged to remit withholding taxes by the end of the following month and report it on the corporate income tax return