Every bank has a legal obligation to thoroughly assess the creditworthiness of a prospective mortgage applicant. One of the parameters monitored is the amount of income of the loan applicant and possibly other co-applicants. “In the case of employees, proving the amount of income is easy. The employer confirms the income on a special form of the bank. This document is not required by some banks if the loan is arranged with the same bank where the applicant has a current account and the employer regularly sends salary to it, says Veronika Hegrová from the fintech startup hyponamiru. Self-employed persons who are obliged to file tax returns must submit at least one tax return for the last tax period to the bank. This document is crucial when assessing the income of a mortgage applicant.
Flat tax and mortgages
Domestic banks will meet for the first time this year with entrepreneurs who signed up for the so-called flat tax last year. “The self-employed with a flat tax pay social and health insurance and income tax in one monthly payment. This year, these entrepreneurs no longer fill out social and health insurance statements and do not file tax returns for the past tax year. In these cases, banks are therefore unable to assess the amount of income according to the tax return. Therefore, since January this year, for the first time, banks are assessing the creditworthiness of these entrepreneurs according to the new rules,” confirms Veronika Hegrová.
Can you get a mortgage with a flat tax?
The mere fact that the self-employed person uses the flat-rate scheme is not a barrier to obtaining a mortgage. For these applicants, banks have prepared a new methodology for assessing their creditworthiness. The procedure for determining creditworthiness and the scope of documents to be submitted vary slightly from bank to bank. It is therefore worth using the services of independent mortgage specialists to compare the offers of several banks.
All banks will always try to obtain information on the amount of income of self-employed persons with a flat tax. Veronika Hegrová adds: “For example, Hypoteční banka allows several ways of proving the amount of income. The easiest way to prove their income is for entrepreneurs in the flat-rate scheme who have complete business account statements for the last six months. If they do not have such statements, they can provide a record of income certified by an accountant for the last six months (note: unless the business-related transactions are made by the self-employed through a current account) or cash deposits into the account for the last six months, supported by appropriate invoicing or EET.”
MONETA Money Bank requires flat-rate tax payers to submit their last three bank statements. The last statement must record the payment of the lump sum tax. Raiffeisenbank also requires the three most recent account statements.
Payers of the flat-rate tax must be careful with the Hypoteční banka to ensure that their resulting turnover for six months does not exceed CZK 500,000. The bank cannot accept such income. The reason is the fear of exceeding the maximum limit of one million crowns up to which it is possible to remain in the flat-rate regime.
Determining the amount of expenses of self-employed persons in the flat-rate scheme
“In the application for the preparation of a draft contract with the Hypoteční banka, entrepreneurs must also indicate the type of business from which they derive their main income. This may be a craft trade, agricultural production, forestry and water management, a free, bound or licensed trade and a liberal profession,” says Veronika Hegrová.
Expenses will then be determined as a percentage of income depending on the type of main trade. For self-employed persons in the flat-rate scheme, the same mechanism is used as for entrepreneurs who apply flat-rate expenses in their tax return. In addition, the amount of flat-rate tax paid in the year in question is taken into account in the expenditure.
|Percentage of lump sum||Type of trade|
|80 %||Craft trades, income from agricultural production and forestry and water management carried out as independent activities, other income from agricultural activities.|
|60 %||Free, bound and licensed trade.|
|40 %||Independent activity without a trade – business according to special regulations (tax advisors, lawyers, bailiffs, experts, interpreters, psychotherapists, etc.), independent professions (writer, musician, actor, etc.), income from the use or provision of industrial or other intellectual property rights, copyrights, including rights related to copyright, including publishing, reproduction and distribution of literary and other works.|
|30 %||Rental income and, in the case of rental income, income from the lease of property classified as commercial property.|