Are you doing business under an unlimited liability company and receiving above-average earnings? Be careful about taxes.
If you still carry on business as a partner in an unlimited liability company and have an above-average income, you are probably very well aware of the new tax. The measures brought about by the consolidation amendment to the Income Taxes Act No. 500/2012 Sb. also include the introduction of a ‘solidarity’ or millionaire tax. This tax applies to individuals and is levied on the difference between the income from employment and the partial base of the tax on employment and 48 times the average salary. If your earnings exceed CZK 103,536 per month, then the difference between your income and this amount will be subject to a special tax of 7%. The tax is supposed to be effective for an interim period and is only to be levied from 2013 to 2015. But we all know that it will not suffice for a balanced budget, and that the ‘solidarity’ may quite likely be extended.
How to avoid a tax increase
Another measure introduced by the amendment is the abrogation of the maximum assessment base (ceiling) for health insurance. The government seems to be trying to raise funds to plug holes in the state budget in every possible way. However, there is a solution to avoiding this additional burden. The key is to change the legal form from an unlimited liability company to a limited liability company. What does it entail? Instead of having unlimited liability with all your property (including personal), as a partner of a limited liability company, you will only be liable up to the level of your unpaid contribution and will only make decisions regarding business in your capacity as executive director. Profit will be taxed at 19% ‘only’. If other proposed changes are carried through in the future, shares in profit distributed to individuals from limited liability companies will be exempt from the 15% withholding tax. And that’s worth considering.
We would be happy to introduce you to all the details of this change and to propose a solution that suits your needs. A change of legal form is nothing complicated, and we are prepared to arrange it for you.