To answer this question, we consulted with visa and financial specialists whom we implicitly trust. This is a relevant issue for our subscribers and requires additional explanations that you won’t find in any laws (as there aren’t many precedents yet).
Banks and the Flat-Rate Tax
How will banks view the flat-rate tax if you want to get a mortgage loan? You need to show income, but with a flat-rate tax, the bank can only guess your real income. In such cases, banks will look at the actual turnover on your account and the invoices paid by your clients or partners. Since there is no tax return as such (the flat-rate tax does not require one), the bank will carefully examine the inflow of funds and their relation to your business activities. Cash deposits you make to the account yourself will be excluded from the total turnover, as will transfers from your other personal accounts. It can be assumed that transfers from related persons, such as a spouse, parents, or children, will also be excluded. Most likely, an analysis of issued invoices and actual incoming payments will be conducted.
Visa Matters and the Flat-Rate Tax
When extending a visa, every entrepreneur must prove they can support themselves in the Czech Republic with an income at least equal to the subsistence minimum. If you are a flat-rate taxpayer, proving your real income will be difficult, as the flat payment to the financial authority could signify either the presence of turnover or its complete absence. Since a sole proprietor on the flat-rate tax regime is not required to keep tax records, you also lack an evidence base for the origin and amount of your income. Switching to the flat-rate tax will complicate proving your profit. The ministry may also require you to show your account turnovers, contracts with partners and clients, and compare your actual income with the one declared under the flat-rate tax. An even more in-depth income check will await you when applying for citizenship.
Undoubtedly, the flat-rate tax simplifies tax bureaucracy. But it’s worth considering whether it will simplify your life in the future.