Entrepreneurs Personal Income Tax

Entrepreneurs' Personal Income Tax (CIT)

A sole proprietor who opts for the statutory entrepreneurial income tax regime determines the income from his entrepreneurial activity by deducting from the entrepreneurial income the recognized and certified expenses and then realizes this final result in the form of dividends.

Determination of entrepreneurial income and dividend base:

Income of self-employed persons:

Annex 10 to the Income Tax Act lists the income that is included in the calculation of entrepreneurial income:

revenue from the sale of materials, goods and services,
the amount received as an advance (excluding advances received on the sale of tangible fixed assets)
proceeds from the sale of tangible fixed assets,
other revenue, grants,
interest received, penalties, interest for late payment,

Typical costs of a self-employed person:

Annex 11 of the Income Tax Act lists at length the costs typically incurred and deductible in the calculation of entrepreneurial income:

the cost
of purchasing materials, goods and rolls,
depreciation of tangible and intangible fixed assets,
wages and public charges (social contribution tax, vocational training contributions),
tax, social contribution tax, health service contributions,
membership fees related to entrepreneurial activity, chamber membership fees,
the premiums paid for the property, liability and risk insurance related to the activity,
interest on business loans, bank charges,
taxes, duties, official fees, customs duties, customs clearance charges, legal costs, penalties, interest on late payments, surcharges for self-monitoring, paid to the central budget, local authorities and related to the activity only

A self-employed person may charge expenses without a certificate by applying the provisions on expenses that may be charged without a certificate in Annex 3 to the Act.

Entrepreneurship remuneration:

Remuneration for the personal work of a self-employed person, the amount of which is determined by the self-employed person, but at least the minimum wage / guaranteed minimum wage for the activity, is subject to the following taxes:

15% personal income tax
18,5% social security contribution
13% social contribution tax (minimum wage 112.5% / guaranteed minimum wage 112.5%)

Entrepreneurial income tax:

The self-employed person cannot set up a profit reserve, so he/she deducts his/her profits at the end of the year according to the rules on dividend taxation. The difference between income and expenses at the end of the year is taxed as a separate taxable income. Taxes on the results of the enterprise:

entrepreneurial income tax 9% VAT (difference between income and expenses, i.e. after considering items increasing and decreasing profit)
dividend tax 15% personal income tax on the dividend base (considering items increasing and decreasing the dividend base)
social contribution tax 13% on the dividend base (up to the social contribution tax payment ceiling!)

If your entrepreneurial income has reached 24 times the minimum wage in a tax year, and you have already paid the social contribution tax (tax ceiling), no social contribution tax will be due on the dividend base.

Registers:

It is not sufficient for a self-employed person to keep income records if he or she opts for the entrepreneurial income tax rules. The basic register of a sole proprietor who opts for the entrepreneurial income tax regime using itemized cost accounting is as set out in Annex 5 to the Act:

diary
Cashbook
revenue and expenditure account
detailed records (required if income calculation needs to be supported)

Returns and payment deadlines:

The self-employed person must file a monthly tax and contribution return in which he/she must declare and pay the amount of the tax and contribution minima according to the law, based on the "entrepreneur's tax", but at least the amount of the tax and contribution minima according to the law, by the 12th day of the month following the month in question.
You must pay the advance VAT calculated on the basis of the entrepreneur's tax by the 12th day of the month following the quarter. This does not have to be declared separately.
On the basis of the basic registers, the self-employed person reports the annual result in the personal income tax return by 20 May of the year following the tax year.