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Withholding tax in the tax return

Czech Republic: Optional reporting and set-off of tax withheld on income from "agreements to perform a job"

Income derived from "agreements to perform a job" (i.e., a special form of small-scale employment contract) are subject to withholding tax up to a certain income threshold. As of 1 January 2014, this threshold has been raised from CZK 5,000 to CZK 10,000 per month, i.e., tax is being withheld if the remuneration under such an agreement does not exceed CZK 10,000 per month, unless the employee has signed a "taxpayer's affidavit" for the employer. Previously, this taxation was final, in the sense that taxpayers could not deduct the tax withheld on the above-mentioned income in their annual tax return. Newly, however, this has become possible for income from a dohoda o provedení práce.

The withholding tax from income under such small-scale employment (and from income in the form of royalties) can only be invoked in the tax return for the assessment period 2014. Taxpayers who decide to do so will be able to set off the withheld tax against their overall tax liability. Filing a tax return may bring advantages to low-income taxpayers, e.g. those whose overall tax liability will be zero so that they can claim a "refund of tax withheld". Conversely, including income that has already been subject to withholding tax may be counter-productive for persons with higher incomes, in that their income is subject to a special levy known as the "solidarity surcharge".

Source: Income Tax Act (Act No. 586/1992 Coll.)