The deadline to submit a personal income tax return for the tax period of 2024 is slowly approaching (hereinafter referred to as the “tax return”). So, let’s remind ourselves of the basic information on how to prepare a tax return correctly. We will also look at the most common mistakes taxpayers make when filling out the tax return form and submitting it, and how to avoid them.

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Locally competent tax authority

Local jurisdiction (i.e. to which tax office you have to submit your tax return) is governed by the place of residence of a taxpayer. For tax purposes, this is the address of the permanent residence for a citizen of the Czech Republic, and the address of the reported place of residence for a foreigner.

The problem often arises when moving, living at multiple addresses, etc. If the taxpayer moves between the end of the calendar year and the submission of the tax return, the locally competent tax office will change. The tax return must therefore be submitted to the new tax administrator.

In the event of a change of residence, both addresses must be filled in the form – the address where the taxpayer lived at the end of the tax period (i.e. on 31 December) and the current address.

Foreign income and double tax avoidance

Taxpayers, Czech tax residents, often forget to declare income from abroad that have already been taxed by a withholding tax there (interest, dividends…). Although these were already abroad, it is necessary to state them in the tax return.

In order to avoid double taxation, double tax avoidance agreements are usually concluded between countries. These agreements may vary slightly from country to country. To avoid double taxation, various methods of avoiding double taxation are used – in particular, the exemption of income from taxation in the Czech Republic or the crediting of foreign tax. For income from employment, the exemption method subject to progression is most often used, where the average tax rate before the exemption is determined and this rate is applied to the tax base.

From 2021, income from abroad is reported in the new Attachment no. 3 of the tax return, according to the relevant method of avoiding double taxation.

When crediting, it is necessary to prove the amount of tax paid abroad – either by confirmation from a foreign tax administrator or by a statement from a financial institution on which the tax is stated.

Taxpayers often incorrectly report foreign tax on row 33 of the tax return. However, it is mentioned here only in exceptional cases, when no double taxation agreement has been concluded with the given country and thus double taxation of income occurs.

Application of 23% tax rate

From 2024, this rate is applied to the part of the tax base that exceeds 36 times the average wage (for 2024, the amount of CZK 1,582,812). This rate is applied to the entire tax base.

Tax allowance on children

Tax benefits for children can only be claimed if the conditions set by law are met i.e. especially:

• The taxpayer provides a confirmation that the tax allowance is not applied by the other partner. If the other partner is employed, a confirmation issued by the employer of the other parent must be provided. But an affidavit may also suffice.
• The tax allowance can be applied to a minor child or an adult child who is preparing for a future profession. In the case of a studying child, a confirmation of study that covers the entire tax period (for university students, it may be necessary to provide several certificates at the same time) must be provided. If the parents are not married, the child’s birth certificate should be provided.
• If the child is studying at a foreign university, in order to apply for a tax allowance, it is also necessary to provide the decision of the Ministry of Education on the recognition of studies at a foreign university (it is also used, for example, for health and social purposes).
• In the event of a tax bonus, it is necessary to report employment income of at least 6 times the minimum wage (CZK 113,400 for 2024). For the purposes of this limit, taxable income is taken into account, i.e. in the event that a large part of the income is excluded due to its taxation abroad, this condition may not be met.

The tax allowance on children is the only tax benefit applied on a monthly basis, which can be applied already in the month when the given conditions were met (e.g. the birth of a child). Other discounts applied monthly can only be applied from the following month.

Foreigners make mistakes very often. A taxpayer is entitled to a tax allowance for a supported child living with them in a joint household in the territory of an EU member state or a state forming the European Economic Area (EEA). If the child of a foreigner does not live in the territory of the EU or the EEA, the tax allowance cannot be applied. If the child moves to the Czech Republic during the tax period (households in the EU/EEA), the tax benefit can be applied from the month following the month of arrival. In practice, the tax administrator may require documents proving the child’s residence in the Czech Republic, e.g. residence permit, arrival stamp in passport, etc.

Tax relief on spouse

From 2024, it is possible to apply a tax relief on spouse under the following conditions:

• The taxpayer provides an affidavit from the wife/husband/registered partner that he/she did not receive an income exceeding CZK 68,000 during the tax period and lives in a joint household with a child under the age of 3.
• This discount cannot be claimed by unmarried partners. It is bound to the condition of marriage / registered partnership. In addition to the affidavit, it is also necessary to provide a marriage certificate or proof of registered partnership.

The tax relief on spouse is often incorrectly applied due to the inclusion or exclusion of some income in the partner’s own income.

In addition to the gross salary, the partner’s income also includes monetary assistance for maternity, sick leave, compensation in case of incapacity for work, all types of pensions, income from business, from rent, care for a family member, unemployment support.

On the other hand, the partner’s income does not include various types of social benefits, e.g. state social support benefit, foster care benefits with the exception of the foster parent’s remuneration, social care benefits, assistance in material need benefits, also allowance for care and social services, state contributions for supplementary pension insurance with state contribution, state contributions for supplementary pension savings, state contributions according to of the Building Savings Act, a scholarship provided to students who are preparing for a future profession, or income arising from caring for a relative or another person who is entitled to a care allowance according to the law on social services, which is exempt from tax, etc. The law enumerates these incomes in § 35bb of the Income Tax Act.

Mortgage interests

Interest from a building savings loan, a bridging loan provided by a building society, a mortgage provided by a bank (reduced by the state contribution), pre-mortgage and additional mortgage loan interest can be deducted from the tax base. In practice, it can also be a consumer loan, if it is a consumer loan for financing housing needs. When applying interest, it is necessary to understand the concepts of housing need, permanent residence and use of the property.

The housing need is defined by the Income Tax Act. Simply put, this is the construction, purchase or reconstruction of immovable property, which the taxpayer uses for his own housing or the housing of family members. Until now, the financial administration made decisions on the basis of the property’s formal data in the real estate cadaster. However, it is now required to take into account the actual state of use. The taxpayer is therefore obliged to prove that he actually permanently resides in the property, if he does not have a registered permanent residence there. The law does not specify how housing need is demonstrated. In practice, the use of real estate for one’s own residence can be proven by e.g. contracts concluded with the electricity supplier or payment of fees for waste. In the first year of application, it is necessary to provide the tax administrator with a loan agreement and an extract from the real estate register.

If the property is sold during the year, the taxpayer cannot deduct the interest paid. The condition that the property was used for the entire tax period is not fulfilled.

Signing the tax return form

The tax return must be signed by the taxpayer or his authorized representative on page no. 4 of the tax return form (or page no. 1 of the form only for income from dependent activity). A signature is not required if the tax return is submitted via a data box.

In the event of a tax overpayment, it is necessary to sign the request for refund of the overpayment on page no. 4 of the tax return form (or on page no. 1 of the form for income from dependent activity only). Although it is not the duty of the taxpayer to apply for a refund of the overpayment through the tax return form (it is possible to submit an individual application), failure to sign the request may lead to a request from the tax administrator to eliminate the deficiencies of the submission.

The Financial Administration returns overpayments only to a registered account. That is, the account that is reported to the tax administrator. Registration of a bank account occurs mainly in the case of business. If the taxpayer then changes his bank account, he must notify the tax administrator.

For the sake of completeness, we state that the tax administrator will return the overpayment within 30 days of the expiration of the legal filing deadline. Earlier filing of the tax return may therefore not lead to an earlier refund of the tax overpayment.

Deadlines for submitting a tax return and paying tax

The basis is to file a tax return and pay any underpayments on time, i.e. within the deadline for submitting a tax return. If the taxpayer submits his tax return by himself, it is necessary to submit it and pay the underpayments within 3 or 4 months after the end of the tax period. The deadline is given by the form of submission:

• 1 April – submission in paper form.
• 2 May – submission in electronic form via a data box, EPO application (Electronic Submissions for Financial Administration) or DIS+ application (Online Financial Office). Please note that for electronic submission made before 1 April, the tax is due by 1 April, not 2 May. The solution is to file the return after 1 April.

If the taxpayer uses the services of a tax advisor based on a power of attorney, the deadline for filing the tax return is 1 July.

It is possible to file a return and pay the underpayments without penalties within a grace period of 5 working days. The tax administrator will not charge interest on late payment if it does not exceed CZK 1,000.

Filing of the tax return in paper form

If the taxpayer does not have a data box set up, he can submit his tax return in person at the filing office of the local tax office or send the tax return by post (ideally recommended with a delivery note). When submitting, do not forget to attach the originals of the required attachments.

Filing of the tax return in electronic form

If the taxpayer has an active data box, he is obliged to submit the tax return electronically through it.

Do not forget that in the form, which is submitted in xml format, it is necessary to upload all required attachments. Before submitting, we recommend checking the form for errors on the Moje Daně portal. Through it, you can subsequently submit a tax return by entering login data into the data box.

We are happy to help you with your tax return. If you are interested, please do not hesitate to contact our tax experts.