Tax Package 2023 - is there more?

As can be seen already from the designation, the 2023 Tax Package amends a significant scope of laws in the area of taxes, namely:

• the VAT Act;
• the Tax Code;
• the Income Tax Act;
• the Act on the organization and implementation of social security;
• the Act on social security contributions and contributions to the state employment policy;
• the Act on public health insurance contributions;
• the Act on public health insurance; and also
• the tax act responding to the Russian invasion of Ukraine.

Changes in the VAT Act were summarized here. Thus, now we are going to look into the most significant changes in other above-mentioned laws.

Data boxes for (almost) everyone

Part of the 2023 Tax Package amending the Tax Code responds to the amendment to the law regulating data boxes, which effective from 1 January 2023, will expand the scope of persons and entities for whom a data box is automatically established by law. Newly, this should apply to all individuals performing business activities as well as those legal entities that do not have one yet (among others associations, foundations, communities of unit owners, and public benefit societies).

If you are not sure whether the above also applies to you, you can simply check it in the list of data mailbox holders (only in Czech) where you can find also such data mailbox that is set up, but is not yet operational or is yet to be established by law.

According to the Tax Code amendment, the obligation to submit tax declaration forms electronically will not apply to those who have the option to set up a data box voluntarily and - at the same time - have the option to opt-out of this service, i.e. individuals not performing business activities.

News in the lump-sum tax regime

The lump-sum tax regime was introduced into the Czech legal system for the first time at the beginning of 2020. The 2023 Tax Package significantly extends the possibility to use this regime, although it also simultaneously complicates its application.

From January 2023, all self-employed individuals who generated income up to a limit of CZK 2,000,000 in 2022 (instead of CZK 1,000,000) are allowed to enter the lump-sum tax regime. Nevertheless, the application of this regime will only be possible for non-VAT payers. This is also one of the reasons why there is an increase in the threshold for obligatory registration for VAT, which we wrote about last time.

The increase in the income limit is accompanied by the division of the lump-sum tax regime into three levels. Therefore, it will be necessary to determine the applicable level of the lump-sum tax regime, depending on the type of activity and the corresponding share of income from all relevant activities.

Taxpayers who meet the following conditions will be covered by the 1^st level, where the total amount of monthly advance payment will amount to CZK 6,208:

• their income from self-employment in the previous tax period has not exceeded CZK 1,000,000, regardless of what self-employment activity this income derives from;
• their income from self-employment in the previous tax period has not exceeded CZK 1,500,000, provided that at least 75% of this is income for which, according to the Income Tax Act, expenses at the lump-sum amount of 80% or 60% can be applied;
• their income from self-employment in the previous tax period has not exceeded CZK 2,000,000, provided that at least 75% of this is income for which, according to the Income Tax Act, expenses at the lump-sum amount of 80% can be applied.

Taxpayers who meet the following conditions will "fall" into the 2^nd level, where the total amount of the monthly advance payment will amount to CZK 16,000:

• their income from self-employment in the previous tax period has not exceeded CZK 1,500,000, regardless of what self-employment activity this income derives from;
• their income from self-employment in the previous tax period has not exceeded CZK 2,000,000, provided that at least 75% of this is income for which, according to the Income Tax Act, expenses at the lump-sum amount of 80% or 60% can be applied.

In the 3^rd level, where when the amount of the monthly advance payment will amount to CZK 26,000, will remain those taxpayers whose income from self-employment in the previous tax period has not exceeded CZK 2,000,000, regardless of what self-employment activity this income derives from, i.e. regardless of what percentage rate of lump-sum expenses can be applied to them in accordance with the Income Tax Act.

New thresholds for submission of income tax returns

In the area of Personal Income Tax, the 2023 Tax Package further increases the income thresholds decisive for the obligation to submit a Personal Income Tax return. Newly, the obligation to submit a return will not apply to individuals with (total) incomes not exceeding CZK 50,000 (so far CZK 15,000) or to employees with another income not exceeding CZK 20,000 (so far CZK 6,000). However, this change will only apply from 2023, so the current thresholds still apply for the calendar year of 2022.

Extraordinary tax depreciation also for the years 2022 and 2023

As we pointed out last time, the 2023 Tax Package also contains retroactive changes applicable already in the 2022 tax period. One of them is the possibility to apply the so-called extraordinary tax depreciation for property acquired (and put into use) during 2022 and 2023.

Windfall tax for energy, petroleum, or mining companies and banks

The 2023 Tax Package also introduces an entirely new tax on extraordinary profits, at the rate of 60% of the tax base exceeding 120% of the average tax base over the previous several tax periods. However, it only applies to selected entities from the energy, banking, and mining industry. You can read more about this tax here.

This new tax should be valid for a period of three years, i.e. from next year up to 2025, and the budget income from it shall be used to cover the extraordinary costs that the state will have in connection with setting maximum energy prices.

As apparent from our article, the 2023 Tax Package presents quite massive changes in various areas of taxes. If you need assistance or have any questions about the 2023 Tax Package, do not hesitate to contact us at any time!