Flat-rate tax for the self-employed 2024 - Bands and conditions
Fulfilling tax obligations in the form of a monthly flat-rate tax payment is very attractive for some self-employed persons due to its administrative simplicity and tax savings. However, for the next year, the monthly flat tax payments are increasing again. How does the flat rate tax work in 2024? When will it pay off?
Payments on all direct taxes – personal income tax, social insurance and health insurance – are included in the monthly flat tax. Self-employed persons in the lump-sum regime therefore have their tax obligations resolved with one monthly payment and no longer submit tax returns or summaries.
Flat rate tax conditions
Only self-employed persons who meet the legal conditions specified in § 2a) and § 7a) of the Income Tax Act No. 586/1992 can fulfill tax obligations by paying a monthly flat tax. The main ones are that the self-employed may not simultaneously pay tax on income from dependent activities from employment, may not be a VAT payer and may not have income from capital assets, rental income or other taxable income higher than 50,000 crowns.
Higher limit for VAT from 2023
For self-employed persons considering voluntary entry into the flat tax, a favorable legislative innovation was the increase in turnover for mandatory VAT registration from 2023 to 2 million crowns from the previous 1 million crowns. This legislative change was the reason for the introduction of three flat-rate tax regimes from 2023. The attached table shows the monthly payment of the flat-rate tax this year and next year. For the amounts for 2024, we expect that all proposed changes (e.g. the calculation of the minimum social insurance) will successfully pass through the legislative process.
When is the flat tax paid?
Entry into the voluntary flat-rate tax regime is beneficial for self-employed persons whose actual tax liability would be higher than the aggregate annual flat-rate tax payment. Due to the ease of planning and clarity, it is an interesting solution even for some self-employed persons who prefer minimal administration, even if they do not save on taxes and pay slightly more in taxes.
Application for entry into flat-rate mode and form
Self-employed persons announce their entry into the flat-rate regime on the relevant form of the Ministry of Finance. The deadline for submitting the relevant notification is the tenth day of the given tax period. Where to pay? The flat-rate tax is due by the 20th day of the relevant month and is paid to the account of the locally competent tax authority, while each tax authority has its own special bank account and the variable symbol for self-employed persons is usually the social security number.
Secondary activity and flat tax
In practice, secondary self-employment is most often carried out during employment, retirement or during studies. However, self-employed employees cannot enter the flat-rate regime, as they deduct advance income tax from employment to the employment contract. A flat tax is not financially advantageous for entrepreneurial pensioners with a lower profit.
Flat rate tax and DPP
In the flat tax regime, it is possible to have income subject to withholding tax. It is therefore possible to earn extra on an agreement to carry out work, if income tax is deducted from the gross remuneration. The gross remuneration must be within the limit (this year 10,000 crowns and less) and no tax declaration has been signed with the employer.
Mortgage and other deductions
When using the flat tax, you can no longer take advantage of any tax discounts and tax deductions. The monthly flat tax amount is final. Even a mortgage payment is not a reason for receiving a tax overpayment for the whole year.
Business interruption and flat tax
In the event that the self-employed person suspends his activities and at the same time resumes self-employment in the same tax period, he is a taxpayer in the same flat-rate tax band as before the suspension of his activities.
