Financial support paid to individuals from public sources provided during the pandemic emergency had many forms and was provided for various reasons, making it difficult to determine the corresponding tax treatment.
Compensation scheme for entrepreneurs
Compensation scheme for entrepreneurs represents a tax bonus for dealing with economic consequences of the closing down of businesses and with prohibitions to carry out certain activities. From the tax point of view, the income is exempt from tax based on provisions of Article 4 Paragraph 1 Letter zj) of Income Taxes Act and is not included in the tax return. This applies to both the “spring” as well as the “autumn” compensation schemes.
Nursing aid for self-employed individuals
ilarly to cases above, nursing aid for self-employed individuals is exempt from income tax and is not included in the tax return, on the basis of an Act on Compensations which states that such income represents a subsidy from a financing program of the Ministry of Industry and Trade which is exempt from income tax.
Aid to pensioners
One-off aid to pensioners of CZK 5,000 is exempt from income tax based on the provisions of Article 4 Paragraph 1 Letter i) of Income Taxes Act, and as such is not stated in the tax return.
Aid schemes in connection with COVID-19
COVID-19-related aid schemes such as COVID – BUS, COVID – NÁJEMNÉ, COVID – GASTRO, COVID – UBYTOVÁNÍ, COVID – SPORT, COVID – KULTURA represent operational subsidies. As such they are not exempt from income tax and represent a part of taxable income. However, the relating costs can be deducted as well, leading to zero taxable income in the end, or even to a loss. However, if the taxpayer claims expenses as percentage of income, the corresponding subsidy has to be included in taxable income and taxed, after applying the corresponding deduction percentage.
Antivirus subsidy is exempt from personal income tax based on provisions of Article 4 Paragraph 1 Letter h) of Income Taxes Act and is not included in a tax return. Relating expenses are also exempt based on Article 25 Paragraph 1 Letter i) of Income Taxes Act.
Inclusion of subsidies in spouse’s income when calculating the corresponding tax credit
Questions may arise as to how to determine the tax credit for a spouse without own income. Such tax credit can only be claimed if the spouse’s income for the entire year does not exceed CZK 68,000.
The limit includes all types of income excluding categories specifically stated. Apart from the one-off aid to pensioners, none of the forms of subsidies provided during the pandemic is stated in the Income Taxes Act, which is why they should be included in the spouse’s income. Only the one-off aid to pensioners is excluded from the limit.