The tax base of any business is basically incomes minus expenses.

But the Czech Act on income tax allows the self-employed to declare their expenses with percentage, even when their real expenses that year were lower. There are two things to pay attention at: there are some ceiling amounts of tax-deductable expenses, and if you change between percentage and real expenses, it has some impact on tax base of last year.

For artisans and farmers: 80% with ceiling amount of 1.600.000 CZK.
For common self-employed persons: 60% with ceiling amount of 1.200.000 CZK.
For free professions (lawyers, advocates, medics…): 40% with ceiling amount of 800.000 CZK.
For those who rent real estate: 30% with ceiling amount of 600.000 CZK.

If you change the ways of counting tax from real expenses to percentage or contrarily, you should change the last tax base regarding the price of stock, claims and debts. It is done by submitting additional tax return for the last year, which is a normal procedure and doesn’t lead to any sanctions. To make it the right way it is better to let it do by the professionals.

Czech individual businessmen and companies become VAT payers when their sales during any 12 months cross the amount of 1.000.000 CZK.

Another reasons are connected to making business with abroad:
– buying abroad goods for over 326.000 CZK;
– receiving services from foreign business;
– granting services to business from another EU-state.

With the last three reasons, you could chose between to become VAT payer or Identified person to VAT. The sense of Identified person status is, that you are regarded as VAT payer only for abroad transactions, without impact on the balance. Doing business within Czech Republic you are than a non-payer.

The companies want to be VAT-payers voluntarily when they have mainly corporate clients, which tend to place orders by another VAT payers.