What should I do if I stop meeting the flat-rate tax conditions during the year? 
What if I breach the flat-rate tax conditions because I become VAT-registered or exceed the CZK 2 million income limit?

In these cases, you automatically drop out of the flat-rate tax scheme during the year. If you want to return in a later year, remember that the income condition relates to the previous year. So, if you exceeded the CZK 2 million income limit in 2023 and wanted to return to the scheme in 2024, you could not. The earliest you could rejoin would be 2025. 

I am already in the flat-rate tax scheme. Do I need to report which band I belong to? 

From 2023, flat-rate tax has bands. If you have been in the scheme since 2022 or 2021, you do not need to report anything to the tax office: you will automatically fall into band 1. In 2023, the flat-rate tax in this band is CZK 6,208 a month.

I would like to join the flat-rate tax scheme, but I also rent out my flat alongside my business. Can I be in the scheme?

Unfortunately not: the flat-rate tax scheme is only for those whose income comes from business. Essentially, you can be in the scheme if your only income is from §7 (business activity). The only exceptions are:

  • employment income subject to withholding tax (DPP up to CZK 10,000, DPČ up to CZK 4,000),
  • income from capital assets (investments, savings, etc.), letting and other income up to a combined total of CZK 50,000 per year. 
What if I choose the wrong flat-rate tax band and mistakenly state band 1 in my application when I should be in band 2? 

In that case, you are treated as not having met the conditions to enter the flat-rate tax scheme and must file a tax return and statements for your social and health insurance authorities for that year. 

I stated band 1 in my application, but my income unexpectedly rose during the year and I now fall into a higher band. What should I do?

You essentially have 2 options. The first option is to do nothing and, as in the previous case, drop out of the scheme and file a tax return and statements for that year. The second option is to notify the tax office that you exceeded band 1 and pay the difference between the bands. This notification must be submitted by 10.1. of the following year, and the difference between band 1 and the new higher band must be paid by 1.4. 

You therefore need to decide whether to file a return and statements or pay the difference between bands 1 and 2. You must calculate everything by 10.1. and act in time! 🙂

I stated band 2 in my flat-rate tax application, but my income ended up lower and band 1 would be sufficient. Will the tax office refund the difference between the bands? 

You must report the band change by 10.1. of the following year, but only the income tax overpayment will be refunded, not the health and social insurance overpayments. 

If you can enter a lower band, take the opportunity. It is always better to enter a lower band and pay any difference after the year ends. There is probably no worse option than being in an unnecessarily high band. Alternatively, you could breach the conditions, for example by taking a job where you sign a taxpayer declaration. That would take you out of the higher band. 

If you are unsure what to do, please get in touch and we can look at it together. 🙂