A tax package was published in the Collection of Laws which, among other things, has extended the dry coupon for self-employed workers since January. Now it can also be used by self-employed people with incomes of up to two million crowns. Anyone who wants to join this unified tax scheme, which will save some groups of self-employed workers tens of thousands of kronor a year, obviously has to watch out for deadlines. One of them is running out right now.
From January 2023, the number of self-employed workers who can enter the so-called flat tax regime will increase. While in 2021 and 2022 only self-employed workers with incomes of up to one million non-VAT tax payers could apply for it, now those with incomes of up to two million crowns can join the flat-rate scheme.
It is a single tax, where the self-employed pay their health insurance premiums, social insurance premiums increased by 15%, and income tax in one monthly amount. Until now, there was only a flat tax. From January, however, due to the increase in the number of taxpayers with higher incomes, three bands of this tax will be created.
In addition to a significant cost savings for some groups of business owners, the advantage of a flat tax is that they don’t have to file a tax return, so they don’t even have to pay an accountant. Additionally, taxpayers will avoid financial tax audits.
However, the deadlines within which entrepreneurs must submit an application for a dry coupon remain fixed. One ends on Thursday 8 December. It doesn’t apply to entrepreneurs with incomes of up to one million, but self-employed people with incomes of one to two million kroner who are considering a flat tax should be smarter.
Until now, they had to be registered for value added tax (VAT). However, it was recently established in the tax package that the obligation to pay VAT applies from January to people with incomes of up to two million crowns.
Therefore, in order for self-employed workers with incomes between one and two million to enter the flat tax regime, they must first request the cancellation of the VAT number. It is not possible to be registered at the same time for VAT and dry coupon purposes. And this is where the problem arises.
Time only five days
They must apply for VAT deregistration within just five calendar days of the tax package coming into force. This term will expire on December 8, 2022.
“The 5-day deadline from the entry into force of the law is absolutely gallows, but at the same time very important for many taxpayers. the tax office will no longer accept this request,” explains Jan Kašpar, tax advisor at KODAP.
It is necessary to cancel the VAT number by sending an electronic request, available on the portal www.mojedane.cz.
As Grant Thorton’s partner Richard Knobloch adds, entrepreneurs can request deregistration at any time, even after 8 December. “But then they have to deal with the fact that they will not be able to apply the flat-rate income tax regime for 2023,” Knobloch warns.
He adds that the cancellation of the VAT number and the transition to the flat tax will pay off above all for taxpayers who do not have too many expenses and who would fall into the first and second tax brackets.
Tax expert Gabriela Ivanco of Mazars agrees on this, according to which the uniform tax will remain advantageous only for some types of entrepreneurs even after the changes. “The new regime will mainly benefit self-employed workers without children with a lump sum expenditure of 60 percent and an income of just under 1.5 million crowns. arrangement,” Ivanco explains. Self-employed workers without children with a flat rate of 40 percent and an income of just under two million crowns will save over 90,000 crowns on the flat rate.
The expert adds that the self-employed cannot receive the flat-rate tax bonus, so this tax system is not economically advantageous for the self-employed with lower incomes who apply tax breaks to children who pay nothing on income tax and receive still a tax bonus.
The next date is January 10th
Otherwise, it will be possible to register for the dry coupon until 10 January 2023. The amount of the monthly fee is then due by the 20th of the calendar month for which the advance is paid.
Flat rates:
| Area | Income | Fixed fee per month |
| 1st band | up to 1 million crowns a year | 6,208 crowns |
| 2nd band | up to 1.5 million crowns | 16 thousand crowns |
| 3rd band | up to 2 million crowns | 26 thousand crowns |
According to estimates by the Ministry of Finance, over 60,000 self-employed workers could join the new extended flat tax scheme. This year it was used by over 80,000 entrepreneurs.
«We recommend that you carefully analyze whether or not the dry coupon is worthwhile. It is also good to consider which band you will enter. These are directly related to the amount of lump sum expenditure that the tax payer would pay if he decided to express the income tax as a percentage”, points out Michal Jelínek, partner of V4 Group.
It adds that the flat tax and its use is also limited by the amount of other income the taxpayer can obtain, such as rental or property income. “Until now the annual limit was 15,000 kroner, but with the amendment it increases to 50,000 kroner,” explains Jelínek.
In which bracket the entrepreneur will be placed depends on the income to be determined:
For the first tier:
- up to 1,000,000 kroner, regardless of the business from which it comes
- up to 1,500,000 kroner, if at least 75% of self-employment income is income to which charges of 80% or 60% of income may be applied
- up to 2,000,000 kroner, if at least 75% of self-employment income is income to which charges equal to 80% of income may be applied
For the second tier:
- up to 1,500,000 kroner, regardless of the business from which it comes
- up to 2,000,000 kroner, if at least 75% of self-employment income is income to which charges of 80% or 60% of income may be applied
For the third tier:
- up to 2,000,000 kroner, regardless of the business from which it comes
Advantages and disadvantages of the VAT number
After 19 years, the VAT registration limit changes. From January, entrepreneurs whose turnover in the last 12 months has exceeded 2 million crowns have become obliged to become VAT payers. Entrepreneurs who have a total turnover of less than 2 million but greater than 1 million have the option of waiving the VAT number.
As Jana Jáčová, founder of UOL Účetnictví, points out, such a step does not apply to everyone. “If an entrepreneur has a turnover close to two million, it is possible that the threshold will be exceeded in a short time, and this would imply the need for non-taxpayers to renew their registration and undergo all that this procedure entails. Similarly, if your customers are VAT payers and beyond the VAT inclusive price it won’t affect your margin, it’s best to stay on the register.”
Conversely, if your customers don’t deduct VAT, you better not be a taxpayer. “In that case, VAT would reduce the margin or customers would buy at a higher price,” Jáčová notes. It must include the rental of real estate, including, for example, a privately owned apartment.
