The ATR is incorrectly confused by many with the tax return. Although the goal of both of these processes is essentially the same (to balance taxes for the past year), we must distinguish between the two concepts. This is mainly due to the fact that the ATR must not be made to the person who is filing the tax return, whether the filing is voluntary or mandatory.
So what is the fundamental difference? An employee can (but doesn’t have to) request his / her employer for ATR. Based on such a request and the provided documents, the employer will then process the ATR and pay the employee a possible tax refund in March’s wage at the latest. Given the legal conditions that an employee must meet in order to apply for ATR, it is not possible for the result of the ATR to be negative, i.e., the final tax balance can’t be negative.
The tax return is processed by the employee himself; the employer does not figure in any way, does not process the tax return, nor does he help the employee with the preparation. Of course, an employee can use the services of a tax advisor, who will process employee’s tax return. Employee must file the tax return with the tax office, from which he will then receive a tax refund or to whom he will pay the tax arrears.
In the ATR and tax return, the employee can apply for additional relives and non-taxable parts of tax base. The relives include a relieve for husband/wife and for paid kinder garden fees. Non-taxable parts of tax base are donations, interest on mortgage for housing needs, contributions for private pension insurance, contributions for private life insurance, membership fees of a member to a trade union and fees for exams and payments for tests certifying results of further education. Furthermore, it is possible to apply all other tax relieves (and tax benefits), which can be applied within the monthly wage by employer. If they have already been applied monthly, the tax refund will certainly not increase.
Tax relieves reduce the tax liability in full, while the non-taxable parts of tax base, as the name suggests, reduce the tax base and the real savings for them therefore represent 15% of the amount applied. Let’s look at an example. If an employee paid CZK 50,000 in tax advances for 2020 and claims a gift of CZK 3,000 and a relieve for his wife of CZK 24,840, he will be refunded CZK 25,290 (24,840 + 15% of 3,000).
As last year, we point out the problems of applying life insurance. In practice, it often happens that the employee applies for life insurance (LI), but at the same time this applied LI does not bring him any tax refund (the entire advance tax is covered by a taxpayer tax relief, the employee had no income, etc.). However, if s/he terminated his life insurance contract, which happens relatively often based on our experience, s/he would be obliged to file a tax return and tax all LI premiums applied from previous years, even though it did not bring her/him any extra money in previous years. We therefore recommend everyone, who wishes to apply for LI, first to think about whether it will or will not increase their tax refund. Of course, it is also possible to ask your employer in advance to check the effect of life insurance.
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