Expense allowances for self-employed persons higher again from 2019?

If the tax package is approved and its wording is kept after the Senate debate, then self-employed persons and persons with income from renting real estate with income above CZK 1,000,000 can look forward to claiming higher expense allowances. The amendment to the Income Tax Act should increase expense allowances to the original maximum amounts used up to 2017, and thanks to the amendment, it should become effective from the 2019 tax period.

• Maximum of CZK 1,600,000 for expenses claimed in the amount of 80% of income (Income from agricultural production, forestry and water management, and craft trades)

• Maximum of CZK 1,200,000 for expenses claimed in the amount of 60% of income (Income from craft trades)

• Maximum of CZK 800,000 for expenses claimed in the amount of 40% of income (Income from other self-employed activities, e.g. doctors, lawyers, liberal professions, interpreters)

• Maximum of CZK 600,000 for expenses claimed in the amount of 30% of income (Income from renting real estate)

The proposed change will positively influence persons with income above CZK 1,000,000. For example, a self-employed person who claims 60% of expense allowances and has an annual income of CZK 2,000,000 can claim in 2018 only expenses amounting to CZK 600,000. In 2019, it should be a maximum of double this amount, i.e. CZK 1,200,000, which is a tax savings of CZK 90,000.

Basically, the above mentioned amounts were valid until 2017, but if self-employed persons did not use them, then they could not claim tax relief for a spouse and tax advantages for children.

For the 2018 tax period, i.e. for tax returns submitted for last year, expense allowances are reduced to half, but the tax relief and advantages can be claimed in full.

When the amendment is approved, the increased expense allowances should be valid together with the possibility of claiming tax relief in the 2019 tax period.