There’s still time before filing your tax return, but not before reviewing what it will look like. The end of the year is an ideal time not only to evaluate the company’s performance but also to take a look at your upcoming tax obligations. If the company has performed well, it’s worth exploring options to optimize the tax base. There are several legal ways to do this.
Dress for the company
As a managing director or partner of a company, you can justify claiming expenses for items like a suit and dress shoes. Due to your position, you operate in circles where business often involves various social events. Therefore, the suit can be considered work attire, and in the event of an audit, it can be defended just as well as a welder’s protective gear.
Cash payment and benefits in kind
It’s also worth considering the remuneration you pay yourself as a director. Due to tax and contribution burdens, it’s more advantageous to pay yourself 2,499 CZK per month, which is only subject to health insurance and possibly income tax. Cash dividends from profits are less advantageous because the state taxes the profit and then additional percentages reduce the amount paid to you. Therefore, it’s better to replace cash profit shares with non-cash benefits. As an employee of a limited liability company, you can use employee benefits to cover non-deductible costs, such as contributions to cultural events, vacations, or language courses. This approach can also apply to family members.
However, it is important that as a director, you have a contract with the company specifying these benefits. In such a case, additional legitimate claims may apply, such as travel allowances, meal contributions, pension contributions, etc.
Don’t give anything for free
Another way to lower your tax base is to avoid giving away goods completely “for free.” While marketing-wise “free” may sound better, giving the second item “for one crown” is more acceptable according to tax advisors. For promotional campaigns, it’s safer to price items at one crown, because the cost is tax-deductible without affecting VAT. The same applies to “buy one, get one” promotions – it’s safer to present the second product as discounted rather than free.
Employ family members, use Work Agreements
One of the most effective ways to employ people while keeping contribution costs low is through agreements on work performance (Dohoda o provedení práce). This form is usually best for seasonal, short-term, or occasional work. You can even employ your child if they are over 15 and have signed the necessary declaration.
The only limit is a monthly wage of 10,000 CZK. With applicable tax credits, income tax can effectively be zero, and no contributions are due. A cooperating person, usually a spouse, can also receive part of annual income and expenses. They don’t need a trade license, but the cooperation must be reported to the relevant authorities. If the total income from secondary self-employment does not exceed the statutory limit, no social security contributions are required. This significantly reduces your tax base.
Be philanthropic and a generous employer
You can also claim tax-deductible expenses through charitable activities. You can provide interest-free loans to employees or donate to those in need. Year-end is particularly suitable for supporting charitable projects. Even as a legal entity, you can make financial contributions to reduce taxable income. The minimum donation per legal entity is 2,000 CZK, up to 5% of the tax base. Legal rules specify who or what can be supported — primarily charitable projects, but also political parties, animal shelters, or educational institutions.
MBA studies as an employee benefit
Despite all the ways to optimize the tax base, the most beneficial investment is in education that profits the company in the long term. Educating yourself or employees increases skills and opens new opportunities. Qualified employees are essential in management positions, which require both language and professional expertise. MBA programs can provide this, especially in attractive and prospective fields.
For companies and managers, economics, finance, executive management, HR management are particularly interesting. Companies with international reach prefer fields related to international trade and policy. MBA as an employee benefit targets experienced employees, expanding their professional horizons, networking, and keeping up with modern trends. Lecturers are mostly seasoned professionals with excellent credentials.
MBA programs can be recognized as a tax-deductible expense for the company, making them an effective tool for upskilling employees. Classes are mostly online, convenient for time-strapped managers. The program usually lasts one year, but can be extended over a longer period. The academic year starts in October or March and ends with the awarding of the diploma.
How much does it cost?
MBA tuition varies depending on the chosen format, ranging from approximately 80,000 CZK to 120,000 CZK. According to Section 24 of Act No. 586/1992 Coll. on Income Taxes, this can be claimed as a tax-deductible expense for employee training. If the study is related to company business, it is also tax-exempt for the employee.
Finally, note that in the Czech Republic, the MBA title is not considered an academic degree under the Higher Education Act, and MBA programs cannot be accredited by the Ministry of Education. Therefore, it is essential to choose a legitimate and reputable institution with recognized international accreditation, such as the British ASIC (Accreditation Service for International Schools, Colleges and Universities).
