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October 8th, 2008
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Income tax deadline looming

Find out if you need to file by March 31

By Michael Heitmann
Staff Writer, The Prague Post
March 5th, 2008 issue

Personal income taxes are not due until March 31, but waiting till the last minute to file your returns could lead to serious headaches at your local financial office. While watching lines of procrastinators may give spectators a sense of schadenfreude, if you want to avoid joining these queues, here are some tips for filing your annual paperwork.
Not everyone has to file a tax return: Under the Czech Republic’s pay-as-you-earn (PAYE) system, employers deduct taxes on behalf of the taxation office, and employees aren’t required to file returns. This applies to legal employees who work for one company.
However, if you are self-employed or have any additional income that is not covered by your employer’s PAYE system, you must file. Filing is also necessary for claiming benefits, as long as you have the correct documents, said Petr Frisch, who heads PricewaterhouseCoopers’ personal income tax department in Prague.
“If, for example, someone pays taxes via payroll throughout the year but wants to claim mortgage and dependent spouse allowances in their tax return, missing mortgage documents or spouse declarations will delay the refund of taxes for a number of weeks,” he said.
Foreigners juggling multiple jobs must sum up their gross salaries, social taxes and tax advances on one unified form. (English translation can be found on the Finance Ministry’s Web site, mfcr.cz.) Make sure that each job provides certification of this income. Also, be aware that the standard monthly deduction for tax residents can be obtained only through one employer, Frisch said.
It becomes more complicated for people working multiple jobs with Czech and foreign employers who should obtain detailed income confirmation, social taxes and taxes withheld by their foreign employers.
Also, residents who are concurrently self-employed and working for a company need to ask their employers for special social security confirmation forms.
In general, taxpayers from European Union member states and non-EU taxpayers are treated on equal footing, though it may pay to look into relevant double-taxation treaties, which aim to free citizens of the burden of paying taxes twice.
For people able to prove their residency in low-tax countries, these treaties could allow part-time residents to pay nothing to the Czech system, according to Frisch.
The EU has not yet thrust itself into the realm of personal taxes.
“The only relevant measure I can recall is the savings directive,” Frisch said. A French bank, for example, will inform the Czech tax authorities about interest paid to Czech residents. While non-EU countries like the United States or Australia do not yet participate, “tax havens,” like the Channel Islands, are getting into this system via bilateral agreements, Frisch said.
Foreigners have a tendency not to mention their foreign bank account interest on their Czech tax returns. However, this information is legally required, even if it’s only declaring the interest on a bank deposit worth 50 euros, Frisch said.
If all this isn’t enough, for U.S. residents of the Czech Republic, tax season doesn’t end March 31. All Americans are required to file U.S. tax returns as well, said Weston Stacey, executive director of the American Chamber of Commerce.

Michael Heitmann can be reached at mheitmann@praguepost.com


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