As we informed you in one of our newsletters, the obligation to file a PIT return is the result of a new measure adopted for personal income taxation – the solidarity tax. It is estimated that, as a result of the new tax, more than one hundred thousand employees will be required to file a tax return for 2013 that, so far, have not had to worry about any tax form. Are you also one of those affected? What happens if you fail to file the tax return?
Up to this point, the duty to file a PIT return has usually applied to employees with other income (such as from business and leases) or with parallel income. However, the introduction of the solidarity tax has put an end to this. The duty may now apply to ordinary employees with monthly income exceeding four times the average wage in a calendar month for any reason (such as due to severance pay or an extra bonus). The threshold for 2013 is CZK 103,536 per month. The employee’s monthly income includes the gross monthly salary as well as any bonuses, 13th salaries, severance pay, holiday pay, cars for business or private use, and other in-kind income that is not tax-exempt. The amount exceeding the limit is subject to a 7 per cent solidarity tax. In fact, the solidarity (millionaire) tax is calculated from annual income, that is, from the sum of income from employment (Section 6) and the partial tax base from business (Section 7). This means that in the end, the solidarity tax will only be paid by employees with gross annual income exceeding CZK 1,242,432 (48 times the average wage).
Other employees who paid an advance on solidarity tax in one or more months and who have income not exceeding 48 times the average wage will have a tax overpayment. The overpayment will be repaid by the tax authorities provided that the employee files a tax return (within 3 months of the end of the tax period, i.e. by 1 April 2014, or within 6 months through a tax adviser authorised by a power of attorney, i.e. by 1 July 2014). The employee may not choose whether or not to request the repayment or whether or not to file the tax return. Employees required to pay the solidarity tax, even if only for a single month, must file the tax return after the end of the tax period. This means that their employers cannot provide them with an annual withholding statement for 2013 as they might have done in the past for many years. Moreover, anyone who fails to file the tax return will face severe penalties even if they have a solidarity tax overpayment. The level of the penalty will depend on the period of default and the total assessed amount of annual tax that also includes tax calculated from ordinary employment which is otherwise deducted in advance. The maximum penalty is CZK 300,000. The lower limit for the penalty for a failure to file the tax return is CZK 500.
All employees should be careful. Failure to file the tax return may have serious consequences. However, some employers have already started dealing with this issue in order to help them ease their administrative burden with the help of tax advisers.
If you are also dealing with this problem, refer to your employer or contact us directly.