Taxes

The basic income tax rate is 15 percent of the tax base Income Tax Law Articles 16 and 34. It should be noted that since 2010, there has been a solidarity increase on income tax of an additional 7 percent off of personal incomes that exceed 48 times the minimum wage as valid for the given year (Income Tax Law Article 16a).

In 2014, the VAT rate was set to 21 percent for most goods and services, with a lesser 15 percent rate for certain food products and some health care-related goods and services. In 2015, a third VAT rate of 10 percent was added for products consumed by families with small children (VAT Law Article 47 and Appendices 1, 2, 3, and 3a).

In general, corporate income tax is calculated as 19 percent of the reduced tax base (income minus related expenses reduced by deductible portions and after applying the 30 percent reduction discussed above rounded down to thousands). The amended Income Tax Law also retains the main tax benefits and taxation conditions for NPOs, such as a possibility to reduce the base for income tax calculation to all NPOs, if they are considered publicly beneficial taxpayers. Amendments to the Income Tax Law in 2017 modified the definition of a foundation or a fund by introducing a family foundation or family fund into the existing category of charitable foundations and funds.

### Tax Exemptions

The Income Tax Law introduces a notion of a “publicly beneficial taxpayer:” an entity, which, in accordance with its incorporation documents, statute, by-laws, or upon decision of a public authority, carries out its statutory (main) activities exclusively in a not-for-profit manner.

Taxes for Non-Profit Organizations

According to Council on Foundations Overview of Czech Republic by Mai El-Sadany, Article V.A Tax Exemptions mentions following https://www.cof.org/sites/default/files/Czech_Republic-201709.pdf:

Under the Income Tax Law, NPOs are exempt from tax on income from non-commercial activities that during the entire taxation period do not generate a surplus of revenue over related expenses (provided that certain other conditions are met, as well as income from state subsidies and similar forms of support from public budgets (Income Tax Law Article 18a(1)).

Foundations, funds, registered institutes, and PBCs are generally exempt from the tax on donations or other forms of income received free of charge for certain purposes. This exemption also applies to other public benefit NPOs, assuming that the exempted donation will be used for the organization’s public benefit activities (Income Tax Law Articles 15(1) and 20(8)). Accordingly, NPOs as defined above generally do not have to pay income tax on foreign grants. The exemption applies to all NPOs with a seat in European Union and European Economic Area member states (Income Tax Law Article 19b(2)(b)).

Economic activities and statutory activities that generate a surplus of revenue over related expenses are taxed at a reduced rate, up to a certain limit. Foundations considered as NPOs are exempt from tax on income generated from their registered endowments if this income is used exclusively for the purpose for which the foundation has been established, and if the use of such income is not used in violation of the Income Tax Law.

The above exemptions from income tax are applicable only if the NPO submits a request to receive the exemptions (Income Tax Law Article 19b(3)).

NPOs are not generally exempt from output VAT on supplies provided to others in pursuit of statutory activities. However, activities of NPOs related to accredited educational activities, the provision of medical and social services, and certain other activities remain exempt from output VAT. NPOs are also eligible for certain Real Property Tax exemptions. Both legal entities and natural persons may deduct donations to NPOs pursuing certain enumerated public benefit purposes and to organizations that filed and organized “public collections” under the Public Collections Law.

Auditing

Mandatory Audit. As of January 1, 2016, the Czech Accounting Act distinguishes 4 categories of entities subject to accounting duty:

(i) micro entity - as of the balance sheet date it has not fulfilled any two of the three below stated criteria:

(a) total amount of assets exceeding CZK 9,000,000; (b) one-year net turnover exceeding CZK 18,000,000; (c) average amount of employees during the accounting period exceeding 10;

(ii) small entity – entity which is not a micro entity and as of the balance sheet date it has not fulfilled any two of the three below stated criteria:

(a) total amount of assets exceeding CZK 100,000,000; (b) one-year net turnover exceeding CZK 200,000,000; (c) average amount of employees during the accounting period exceeding 50;

(iii) medium entity – entity which is neither a micro entity nor a small entity and as of the balance sheet date it has not fulfilled any two of the three below stated criteria:

(a) total amount of assets exceeding CZK 500,000,000; (b) one-year net turnover exceeding CZK 1,000,000,000; (c) average amount of employees during the accounting period exceeding 250; and

(iv) large entity - as of the balance sheet date at least two of the three below stated criteria have been met:

(a) total amount of assets exceeding CZK 500,000,000; (b) one-year net turnover exceeding CZK 1,000,000,000; (c) average amount of employees during the accounting period exceeding 250.

In reference to the aforesaid, the following entities are required to have a statutory audit (subject to the exceptions set by law):

(a) large entities; (b) medium entities; (c) joint-stock companies which are small entities if, as of the balance sheet date of the relevant accounting period and of the previous accounting period, at least one of the three below stated criteria has been met;

(i) total amount of assets is equal to or exceeds CZK 40,000,000; (ii) one-year net turnover is equal to or exceeds CZK 80,000,000; and (iii) average amount of employees during the accounting period is equal to or exceeds 50; and

(d) other small entities if, as of the balance sheet date of the relevant accounting period and of the previous accounting period, at least two of the three following criteria have been met:

(i) total amount of assets is equal to or exceeds CZK 40,000,000; (ii) one-year net turnover is equal to or exceeds CZK 80,000,000; (iii) average amount of employees during the accounting period is equal to or exceeds 50.

Sources:

• Czech Tax Authority

• Income Tax Law

• Council on Foundations. Czech Republic Overview by Mai El-Sadany. Article V. A Tax Exemptions

• PWC Memo

• McKenzie Memo