Amounts of expense allowances for self-employed persons and persons with income from renting real estate in 2017 tax returns

Self-employed persons and persons with income from renting real estate whose total tax base is comprised of such income of more than 50 per cent can choose whether they use in their 2017 tax return:

• a reduced amount of expense allowances (up to one half). By choosing this method, they can claim tax reliefs for a spouse and tax advantages for children; or
• the original amount of expense allowances without the opportunity to claim tax reliefs for a spouse and tax advantages for children.

The mentioned choice is relevant for those self-employed persons and landlords who can (together with fulfilling other conditions) claim tax reliefs for a spouse and tax advantages for children and whose income from business or renting real estate is above CZK 1,000,000. In such cases, the advantage of claiming the tax reliefs and tax advantages should be compared with the disadvantage of using reduced maximum amounts (up to half) of expense allowances (maximum of CZK 800,000 for expenses claimed in the amount of 80 per cent of the income, maximum of CZK 600,000 for expenses claimed in the amount of 60 per cent of the income, maximum of CZK 400,000 for expenses claimed in the amount of 40 per cent of the income and maximum of CZK 300,000 for expenses claimed in the amount of 30 per cent of the income).

Self-employed persons and persons with income from renting real estate whose income is less than CZK 1,000,000 can already claim tax reliefs for a spouse and tax advantages in the 2017 tax period because the original higher amounts of expense allowances are not relevant to them.

Please note that only reduced amounts of expenses allowances will be allowed in the 2018 tax period together with the claim for tax reliefs and tax advantages. Reducing the amount of expense allowances can result in a situation where self-employed persons and persons with income from renting real estate will use the method of recording the actual costs because it will be more efficient for them. In such cases, it is necessary to review the possible impact on the 2017 tax base regarding the mandatory adjustments of the tax base made because of the change to the method of recording expenses (e.g. subsequent taxation of receivables) which can influence the social security assessment base.