Local taxes are a tool for municipalities to increase their revenue. However, their very important function is mainly to regulate certain undesirable or less desirable activities (car passage through the centre) or to contribute to the services provided by the municipality in connection with certain activities (cleaning up after dogs). What is the framework within which municipalities operate and what does the Local Tax Act allow them to do?
The Local Fees Act came into force shortly after the revolution and is still in force, with some modifications. The latest amendment concerning the administration of local fees came into force in January this year. The law allows (but does not mandate) municipalities to introduce specific types of local charges. Along with this, it sets out what is subject to the charge, who is the administrator and recipient of the charge, and under what circumstances the charge can be exempted. For further specification, the Ministry of the Interior issues its methodological guidelines in order to reduce the administrative and legal burden for municipalities associated with the issuance of a legal regulation. The guidance forms for issuing the ordinance also reduce the risk of the legislation (or part of it) being overturned by the Constitutional Court.
The law sets out an exhaustive list of local charges that municipalities may introduce. These are:
(a) dog tax,
b) residence tax,
c) a fee for the use of public spaces,
d) admission fee,
(e) a fee for a permit to enter with a motor vehicle in selected places and parts of towns,
(f) a fee for the assessment of a building lot for the possibility of connecting it to a water or sewer line,
(g) municipal waste fees.
The municipality is strictly bound by law in setting the fees. Thus, it cannot choose to impose, for example, a local tax on hats or windows.
Tip: We have of course mentioned the hat and window taxes in great exaggeration, but we have taken inspiration from real taxes that have been introduced in the UK throughout history. Specifically, the hat tax was introduced here at the turn of the eighteenth and nineteenth centuries. And the window tax in the seventeenth century. It targeted residents with more than seven windows. Many people at that time had some of the windows on their houses bricked up.
We have not examined in detail all of the more than six thousand Czech municipalities, but we dare say that the vast majority of them have at least one of the fees in place. The most common ones include municipal waste fees, residence fees and building land appreciation fees. A fee for a motor vehicle entry permit is also slowly making its way into Czech towns. This is a thorny issue in our capital city, where the various districts have become rivals. Let’s take a closer look at the selected fees.
We’ve encountered their equivalent before in the form of resort and spa fees. This is a fee addressed to guests over the age of 18 who are staying for less than 60 nights. It is therefore typically targeted at tourists.
Each municipality may set the amount differently, but has a maximum legal limit of CZK 50 per person per night.
The Local Tax Act states that the fee is not applicable to
A person who is not registered in the municipality, i.e. not permanently residing here, is the payer of the residence fee. This also applies to foreigners residing in the Czech Republic for more than 3 months. There is also a registration obligation associated with the fee.
However, the fee is not primarily collected by the municipality itself, but by the accommodation provider. The obligation should theoretically apply not only to hotels and guesthouses, but also to accommodation in the form of airbnb or other similar services. Rather, however, this is a grey area in which municipalities lose their fees.
Tip: Airbnb. On the one hand, a great opportunity for (not only) young people to stay anywhere they want for affordable money, on the other hand, a nightmare for hoteliers, residents of the houses where Airbnb is operated, but also local politicians and financial authorities. We took a closer look at the topic of Airbnb and the sharing economy in our article.
The year 2022 marked a small revolution regarding waste legislation. In this context, a new system of local charges for municipal waste was introduced. According to the law, the charges are of two types, namely
A municipality cannot introduce both fees at the same time. It must choose only one fee to be introduced throughout the municipality and for the entire fee period, which is the calendar year.
For the first fee mentioned, the fee for the municipal waste management system, it does not matter whether you generate waste or how much. You pay for the fact that you can deposit your waste in the system operated by the municipality. It is assumed that you use the system in some way if you have a registered residence or property in the municipality. It is therefore paid for by individuals (including foreigners) who are resident in the municipality or by the owners of immovable property (flats, houses and buildings for family recreation) where no individual is registered as resident and which is located within the municipality. In the latter case, the taxpayer may also be a legal entity. The maximum amount of the fee is CZK 1 200.
You may be exempted from the fee on condition that you have to pay a fee for the disposal of municipal waste from immovable property in another municipality where you also actually live.
Themunicipal waste disposal fee for immovable property is a realistic response to the amount of waste that has been generated and had to be treated by the municipality. The municipality may set a minimum fee.
It is therefore intended for individuals who actually live in the municipality. However, it is necessary to distinguish the payer, who is the owner of the immovable property or the community of unit owners, from the payer of the fee . The payer is obliged to collect the levy from the taxpayers (persons residing in the property) and hand it over to the levy administrator.
The fee is set according to the amount of waste in kg or litres, with a maximum rate of CZK 6 per kg or CZK 1 per litre.
It is typically calculated based on the volume of bins your home uses and is calculated as:
rate X CZK x bin volume in litres x number of bins x number of collections in a given period.
Tip: In Prague, the rate is set at CZK 0.50 per litre of ordered capacity of mixed municipal waste collection containers and is paid twice a year.
Example:
Both the municipalities of Horní Planá and Dolní Planá have introduced a fee for the municipal waste management system. Mr. Alois has so far registered his permanent residence in his family home, with his parents in Horní Planá. In reality, however, he and his wife live in Dolní Plané. He is only liable for the charge in Horní Plané, i.e. in his place of permanent residence.
The municipality of Nebeská Lhota has introduced a fee of CZK 1 200 for the municipal waste management system. This did not please Mrs Květuša, who decided to put all her waste in bags and take it to the nearby regional town, where she left it in containers. She wrote to the mayor of her municipality saying that she had not produced any waste in the municipality for three months and did not intend to pay the fee. In this case, however, it is crucial that Ms Květuše is a permanent (and real) resident of the municipality. It is irrelevant whether she actually generates waste. A cunning approach would therefore not help Ms Květuša.
However, it may be the case that you are resident in one municipality and own a rental apartment in another municipality. Depending on which type of fee the municipality imposes, you may fall into both categories and pay the fee twice. In other words, you may only be liable once on the basis of your permanent residence, but you may be liable more than once on the basis of ownership of immovable property, including for legal persons.
One charge that is not primarily responsive to the provision of a service (such as a waste management system) is the motor vehicle entry permit charge. Its main purpose is to regulate the number of motor vehicles in selected places and parts of the municipality.
Typically, municipalities protect their historic town centres or conservation areas in this way. The practice then issues permits for cars to enter these selected areas for a set fee. In this context, the Constitutional Court even stated that “It cannot be inferred from the wording of the above provision that municipalities are entitled to designate any place as a ‘selected place’, including a section of a local road and a mere link between two municipal areas.” Thus, a municipality cannot impose this fee on a random roadway that all drivers pass through without demonstrating that it is doing so in order to protect the part of the municipality just mentioned.
The fee is paid by the individual or entity to whom said motor vehicle entry permit has been issued.
If your municipality is planning to introduce this fee and you live in the heart of the historic square, you need not despair of airing your wallet several times a day. You will no doubt be covered by a personal exemption from the local tax.
At a minimum:
The municipality’s ordinance may extend this circle of persons. In most cases, the fee is not payable by persons providing supplies at certain times.
The amount of the fee is set by the municipality itself; according to the law, the upper limit is up to CZK 200 for each day. However, it can be set at a flat rate in agreement with the taxpayer, if the ordinance allows this option.
Tip: Probably the first city to start collecting the fee in the post-revolutionary era was Velké Meziříčí, where the fee was maintained for almost thirty years. From time to time, other towns that feel the need to regulate traffic in the centre have joined in. Our capital city is scheduled to start tolling in 2024. However, individual districts have very different views on it. In particular, they are concerned that charging for access to the city centre will have a major (negative) impact on traffic in their area. The ordinance has thus become the subject of a political battle.
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