New Tax Limitations for Payers Employing Method of Covering Expenses in the Form of Lump Sum

29. 3. 2017

In the first half of March, the Senate debated Document of Chamber no 873 which, among others, contains a change regarding tax payers who have adopted the method of covering their business expenses in the form of a lump sum and generate their income from independent business activities and rents. The change ought to become effective next month.

The current law stipulates that a tax payer may neither claim a tax relief on their spouse nor their offspring should the sum of the partial tax bases, of which the expenses are claimed in the form of a lump sum, exceed one half of the whole tax base, i.e. the sum of all partial tax bases. The amendment introduces the threshold (from CZK 2 mil to CZK 1 mil) of the income of which the expenses will be possible to claim in the form of a lump sum and the above condition for the claim of the tax relief on a spouse and offspring is to be withdrawn.

Two options will be available for the taxable period of 2017:

  • Claiming the expenses in the form of a lump sum in the current amount with a limited possibility of claiming the tax relief on the spouse and children, or
  • Claiming all the above reliefs on condition that the maximum amount will not exceed one half for the respective group.

Starting from 2018, such choice will not be possible to exercise, and the threshold for all tax payers who claim their expenses in the form of a lump sum is to be set in the amount of one half with the possible option to claim a tax relief on the spouse and children.

The tax payers who have a right to claim the above tax reliefs will, then, have to count which of the aforementioned options is more advantageous for them.

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