Withdrawal from the flat tax regime
This year, a flat-rate tax regime for individuals was introduced for the first time, allowing entrepreneurs to pay only one amount instead of three different payments. Over 70,000 entrepreneurs have tried this system, enjoying advantages such as the absence of the need to file tax returns and reports. However, there are also disadvantages associated with this system, such as the inability to apply tax deductions.
If an entrepreneur decides to opt out of this system, they have several options. Opting out of the flat tax is usually voluntary and most entrepreneurs cannot take this step immediately.
How to get out of flat tax
1. Immediate appearance
There are three specific situations where a taxpayer can exit the flat-rate regime at any time during the year:
- Termination or interruption of self-employed activity – If an entrepreneur terminates his activity or temporarily interrupts it.
- Long-term stay abroad – If the taxpayer goes abroad and is no longer obliged to pay health insurance.
- Loss of tax resident status of the Czech Republic – If the taxpayer ceases to be a tax resident of the Czech Republic.
In these cases, the obligation to pay the flat-rate tax ends with the expiry of the month in which the relevant fact occurred. The taxpayer is obliged to notify this change within 15 days of its discovery.
2. Withdrawal at the end of the tax period
If the above situations do not occur, the taxpayer may opt out by January 10 of the year following the year in which he/she registered for the flat-rate tax. For example, if an entrepreneur has a child born in 2021 and wants to take advantage of the tax deduction, he/she may submit a notice of termination of the flat-rate regime by January 10, 2022. However, he/she remains in the flat-rate regime for the entire year 2021 and must pay the specified amount.
If the taxpayer does not meet the conditions for the flat tax during the current tax period (for example, they become a VAT payer), they will have to continue paying the flat tax until the end of the year and will return to the regular system only the following year. In this case, they are obliged to file a tax return and statements of income and expenses.
Opting out of the flat tax regime can be beneficial for some entrepreneurs, especially if they plan to take advantage of tax breaks or have income that exceeds the limits set for the flat tax regime. If you want to learn more about the flat tax, its advantages, disadvantages and the correct procedure for opting out, watch our video on YouTube, where we explain everything in detail.