Changes in the taxes for the self-employed effective from 2024
What significant adjustments will self-employed individuals need to deal with in the upcoming year? Read now.
With each passing year, the tax system adapts, responding to shifts in tax laws or fluctuations in economic indicators affecting mandatory tax contributions. What significant adjustments will self-employed individuals need to deal with in the upcoming year?
Flat-rate tax
For self-employed professionals, the flat-rate tax offers a simplified taxation option. Meeting the specified conditions allows entrepreneurs to bypass the need for tax return submissions or social and health insurance reports. Instead, a consolidated monthly payment covers taxes, social security, and health insurance. As of 2024, this monthly sum is set as follows:
- 1st Flat-rate tax bracket CZK 7,498
- 2nd Flat-rate tax bracket CZK 16,745
- 3rd Flat-rate tax bracket CZK 27,139
Self-employed individuals have the option to select the flat-rate tax bracket, but this choice is contingent upon meeting specific criteria associated with each bracket. These criteria typically encompass both the income level and the nature of the work undertaken by the individual.
Advance payments for health and social insurance.
In general, the insurance premium amount is established as a percentage of the assessment base. For self-employed individuals, the assessment base for insurance premiums will be 50% of the tax base for 2023, from 2024, for social insurance purposes, it will already be 55% of the tax base.
Nevertheless, it’s crucial to ensure that insurance premiums calculated using this method do not dip below the mandatory minimum premium. The minimum monthly advance payments for insurance premiums in 2024 are detailed as follows:
Social insurance:
- Primary self-employment – CZK 3,852
- Secondary self-employment – CZK 1,413
Health insurance:
- Primary self-employment – CZK 2,968
- Mandatory minimum health insurance contributions do not apply to certain self-employed individuals. This category includes pensioners and students, for whom the state takes on the responsibility of covering insurance premiums. Additionally, self-employed individuals engaged in concurrent employment, where employment serves as their primary source of income, are also exempted.
Tax rate
The income tax rates of natural persons are 15% and 23%. From 2024, there is a change in the tax base to which each rate applies.
- The part of the tax base up to 36 times the average wage is subject to a 15% tax rate.
- The part of the tax base exceeding 36 times the average wage is subject to a 23% tax rate.
In 2024, 36 times the average wage is CZK 1 582 812.
Tax deductions
Taxpayers are entitled to claim deductible items and tax credits on their tax return (subject to certain conditions). However, from 2024, they will be reduced or repealed altogether.
Repealed:
- Child placement allowance (‘nursery fees’)
- Student Discount
- Deduction from the tax base in the form of membership fees paid to a trade union
- Deduction from the tax base in the form of payments for examinations verifying the results of further education
Restricted:
- Spouse’s allowance – in addition to the existing conditions, an additional one has been added, namely the care of a child up to the age of 3
In summary, these adjustments will come into effect on 1 January 2024 and will not impact the 2023 income tax returns due in 2024. The primary deadline for submitting personal income tax returns for 2023 is 2 April 2024. If the return is electronically filed, such as through a data mailbox, the deadline extends to 2 May 2024. If a tax adviser is authorized to file the return, the deadline is further extended to 1 July 2024. These same deadlines apply to the due date of the 2023 tax liability.
Furthermore, the deadlines for filing social security and health insurance statements for self-employed individuals are contingent on the tax return deadline, requiring submission within 1 month of the expected date for filing the income tax return.
Zuzana Přikrylová, BMZ Daně tax consulting
