The draft law of the Ministry of Finance envisages an increase in the annual limit for compulsory VAT registration
Important changes are proposed by Finance Minister Zbyněk Stanjura in order to simplify the business system. The proposal is to increase the annual turnover limit for VAT registration to CZK 2 million. Currently, the threshold is set at CZK 1 million, which was established when the Czech Republic joined the European Union in 2004 and has remained unchanged for the next 18 years, despite a significant increase in prices. The increase in this limit is supported by the EU itself and will allow all member states to implement this amendment from 2025. However, the Czech Republic has asked to be allowed to move up the timetable, and allow access to entrepreneurs before the entry into force of this directive, which is expected to take effect on 1 January 2023. “The proposed changes have a common denominator, which is to simplify tax obligations and reduce or eliminate administration for our entrepreneurs. In the program, we promised business support, less government bureaucracy, and a user-friendly tax administration that would punish intentional tax evasion, not petty crimes. And we are doing that now,” said the finance minister.
Among the amendments to the tax legislation, there is also an amendment to the flat tax system. The Finance Ministry has proposed increasing the limit of the flat tax from CZK 1 million to CZK 2 million, in order to make it easier for an increasing number of entrepreneurs to enter the system. In addition, the amount of the flat tax will be divided into three bands dictated by the amount of the income and the flat rate expenditure. The Finance Minister explains: ‘Lump sums will be divided into three bands based on their annual income, which determines the amount of their monthly lump-sum advances. The first band is for annual income up to one million, the second band up to one and a half million, and the third band up to two million crowns. The higher applied flat rate also plays a role, thanks to which you can enter a lower band of the flat tax with a lower monthly installment’.
By virtue of this amendment, up to 60,000 self-employed persons could meet the conditions for joining the flat tax. However, the estimated negative impact on public budgets amounts to approximately CZK -600 million, whereas the maximum drop in VAT revenue caused by the increase of the annual limit to CZK 2 million is expected to amount to CZK -10 billion for public budgets.
Finally, the Ministry also guarantees an extension of two more years of the rapid depreciation system, introduced in 2020 as a result of the significant economic impact that the pandemic has caused, in order to support and make the business environment increasingly virtuous.
Source: http://www.mfcr.cz; http://www.camic.cz
Source of image: http://www.pixabay.com; http://www.storyset.com
