How not to pay taxes or pay less

Chapters of the article

• What is a personal income tax return and what does it contain
• How not to pay taxes or pay less
• Refunding overpaid tax and incurring underpayments

What is a personal income tax return and what does it contain

A tax return is filed by an individual with the tax office and declares his or her income, expenses and other circumstances (e.g. tax credits) that affect the amount of tax. This return is then used to determine how much tax the individual should pay to the state.

You must therefore include all your income in your tax return, except for income that is exempt from taxation and on which tax is deducted at a special rate. If you are self-employed, you also declare your expenses and the tax is calculated on the difference between your income and expenses. The exception is if you pay a monthly flat rate.

How not to pay tax or pay less

Who doesn’t pay tax

Filing a tax return or paying tax is not always compulsory. In these cases, you are not obliged to do so:

• If your taxable income did not exceed CZK 50 000 last year. This does not include tax-exempt income such as various allowances, benefits or occasional income up to CZK 30,000 per year. Similarly, income from an agreement to perform work up to CZK 10,000 per month or from an employment agreement up to CZK 4,000 per month is not included. In addition, royalties up to CZK 10 000 per month are also included.
• If you were employed by only one employer. This applies even if you had more than one employer, but never at the same time. However, you need to sign a tax declaration for each of your employers.
• If you are employed abroad from where you derive you only income.

But in some cases, filing a tax return can be worthwhile. These include situations where you haven’t documented your employee’s reasons for taking a tax deduction, such as pension payments or blood or plasma donations. Similarly, if you haven’t claimed tax credits to which you are entitled. These include, for example, the student allowance, spouse’s allowance etc. Similarly, filing a tax return will be worthwhile if you have worked under a work arrangement and withholding tax has been deducted from your income. In addition, it is also a good idea to file a tax return if you have not worked all year and have not used up the taxpayer’s allowance of CZK 30,840 per year.

How to pay less in taxes

You can save quite significantly on taxes. There are many different discounts and write-offs:

• Lump sum: If you’re self-employed, you can save significantly on tax by taking a lump sum. This means that you don’t have to make any real expenses, but your expenses are automatically determined based on which bracket you fall into. Therefore, if your expenses are low, the flat rate is likely to be quite worthwhile.
• Raise your expenses: if you don’t pay a flat rate but have your traditional expenses deducted from your profits, then logically it pays to keep your expenses as high as possible. So remember to keep careful records of all your expenses and include everything that is related to your business, even if only marginally.
• Mortgage and building society: If you are paying off a mortgage or building society, you can deduct the interest from your tax base. The limit is set at CZK 300,000 per year for loans taken out before 2021 and CZK 150,000 for interest taken out after 2021.
• Spouse discount: If the spouse did not exceed 68,000 crowns in their income last year, then a tax rebate of 24,840 crowns can be applied to them. It should be borne in mind that this limit does not include parental allowance, childbirth allowance, child benefit, social assistance, housing benefit, material hardship allowance, state pension savings allowance or building society allowance and study grant.

However, for the 2024 tax return, the conditions are changing. The new spouse’s allowance will only be available if the spouse is caring for a child under the age of three.

• Gifts: you can deduct gifts, i.e. things you give to someone for free, from your taxes. However, such a gift must be worth at least CZK 1,000 or be worth more than 2% of your tax base.
• Pensions and life insurance: if you pay for any of these, you can deduct the payments from your tax up to CZK 24,000 a year. However, you need to send at least CZK 1,000 of your own money to the insurance.
• Blood and plasma donation: If you donate blood or plasma, you can take a deduction of CZK 3,000 for each donation. However, it must be a donation for which you are not paid, i.e. a non-contributory donation. You can deduct a maximum of 15% of your tax base per year.

Refund of overpaid tax and creation of underpayment

It is only possible to claim an overpayment if the amount exceeds CZK 200. The overpayment must be requested electronically, either using the tax office’s application or as an electronic submission to the Tax Administration or via a data box. Another option is to send an e-mail, which you must confirm e.g. in paper form with your signature. The overpayment will then be refunded to you within 30 days, either to your account or physically to your address.

On the other hand, if you incur an underpayment of tax, you must pay it by 3 April if you file a written tax return, by 2 May if you file an electronic tax return and by 3 July if your tax return is filed by a tax adviser or lawyer. You can pay at the cash desk of any tax office, by postal order or by bank transfer to the account of the tax office you are under (see Where to pay income tax).