Investor Presentaiton
Employees of foreign companies may fall under
a further possible tax treatment, the "deemed
employer" rule, which is essentially an anti-
avoidance provision.
The rule may apply if employees of a foreign
employer work in the Czech Republic under the
control of a Czech person who pays a fee to the
foreign employer for their services. Here, the
Czech person is regarded as the employer for
tax purposes and has to account for the em-
ployees' income tax.
In practice, this rule is rarely applied to employ
ees of bona fide foreign investors, unless they
choose to use it as an alternative to the perma-
nent establishment described above. Further
special treatment applies to licensed labour
agencies.
Resident and non-resident individuals may
claim a basic personal tax allowance of CZK
24,840 per year. Various other credits are
granted to a resident, such as a tax credit of
CZK 24,840 per year for a spouse living in the
taxpayer's household if the spouse's annual
income does not exceed CZK 68,000 and tax al-
lowances for children (a tax allowance of CZK
13,404 for the first-born, CZK 15,804 for the
second-born and CZK 17,004 for the third-born
and any subsequent child'). Tax allowances up
to the amount of the minimal wage announced
for a given tax year (CZK 9,900 for 2016) can be
claimed for fees paid to child care facilities.
Limitations apply to individuals earning busi-
ness or rental income, who claim flat rate ex-
pense deductions.
Allowances are also granted to residents of the
EU or EEA if at least 90 percent of their income
is derived from sources in the Czech Republic.
The amount of income from foreign sources
should be confirmed by the foreign tax authori
ties in the state of residence.
Social security contributions, where payable,
amount to 45 percent of an employee's salary
(for income up to an annual cap for social secu
rity - see below). This consists of an employee
contribution of 11 percent and an employer
contribution of 34 percent, made up as follows.
Employee (%)
Employer (%)
Pension
21.5
6.5
Sickness insurance
2.3
0.0
Unemployment insurance
1.2
0.0
Health insurance
Total
9.0
4.5
34.0
11.0
1 According to a proposed amendment to the Income Taxes Act
which is expected to be passed during 2016, the allowance for
the second-born child will increase to CZK 17,004 and that for the
third and any subsequent child will increase to CZK 20,604. The
increased allowances should apply for the whole of 2016.
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