Imagine a typical situation: a company has had a good year, it files its return, the tax comes out and you pay it. But the state doesn’t want to wait. That’s why the advance payment system works – so that income tax is collected on a continuous basis and you are not surprised by a one-off large surcharge at the end of the tax year.
In this article, we explain when you become liable to pay advance payments of corporate income tax, how much it typically is, how the advance payment calculation looks in practice, and what to look out for in the financial year.
Corporation tax advances are payments made during the advance period. It is only after the end of this period that you file your return and calculate the actual tax against which the advances paid are included. The result is usually either a top-up (if you have not sent enough) or an overpayment (if you have sent more).
It is also important to know one practical thing: if you are late with your advance payment, the law provides that only those advances you have made by the filing deadline will be credited against your actual tax. In practice, this means that late payment can be a problem, not only because of the need to pay the arrears but also because of possible interest on late payment.
The key concept is the last known tax liability. In layman’s terms: it is the last known amount of tax that the tax authorities take as the basis for determining the advances. It is typically based on the last tax return filed.
The law also says that some specific parts of the tax (for example, tax on certain separate tax bases or windfall profits tax) are not included in this last known tax liability. This usually won’t be an everyday issue for the average business, but it’s good to know that the basis for backups may not always be exactly the same as what you automatically present under total tax.
Importantly, advances are not payable unless the last known tax liability exceeded £30,000. However, once you exceed the £30,000 threshold, one of two schemes will kick in, depending on how much tax you have to pay:
Not sure how to do your taxes correctly so you don’t get it wrong? We can help you navigate the law, whether it’s dealing with a specific tax situation, preparing for an audit by the tax authority or defending yourself in court.
Let’s take a concrete example:
Imagine that your company (for example, an LLC) filed its last tax return and its last known tax liability came out to be CZK 120,580. It is this amount that determines whether you will pay advance payments of DPPO and in what amount.
So first you take the last known tax liability – in our example, CZK 120,580. Then you determine the band you fall into:
If it was up to CZK 30,000, you would not pay corporation tax at all. However, once you get above CZK 30,000, the scheme is automatic. The amount of CZK 120,580 falls into the band 30,001 to 150,000, so the company will pay half-yearly advances: that is, twice a year, always 40% of the last known tax liability.
Now comes the actual calculation:
And here you have to pay attention to a detail that people often overlook: the advance is rounded up to the nearest hundredth of a cent.
The result for our example is clear: your company will pay two advances of CZK 48 300 each.
The maturity of these advances is calculated according to the months of your tax year (for most companies this is the calendar year). They are due by the 15th day of the 6th month and the 15th day of the 12th month of the tax year. If you have a calendar year, this typically works out to June 15 and December 15.
A lot of companies go with the classic January-December pattern, but some companies have a business year. This is where most of the confusion arises because people try to fit the dates to the calendar months.
Example: you have a financial year from 1 April 2025 to 31 March 2026. Then:
In practice, the advance payment of the DPPO itself is most often paid by ordinary bank transfer. The Tax Code foresees that you pay the tax (and therefore the advance) to the relevant tax authority, typically by cashless transfer from your account to the tax authority’s account. At the same time, the tax administration also allows cash methods (post office, cash desks of selected offices, etc.).
For tax payments, the account number consists of three parts:
For you it is important that the corporate income tax (DPPO) has the prefix 7704. So when you send a corporate tax advance, you always deal with the combination:
7704 – (your tax office register) / 0710.
You can find the matrix (i.e. the middle part of the account) most safely in the official lists of the Tax Administration.
The variable symbol identifies the tax entity. This is how you know that you have sent the payment. If you have a VAT number, the variable symbol should be the numeric part of the VAT number (the numbers “for CZ”). If you do not have a VAT number, you should enter the VAT number as the variable symbol.
The constant symbol is then optional for tax payments (so typically you do not need to fill it in at all).
If you do not want to copy the account and symbols manually, the Financial Administration also refers to the possibility of paying taxes by QR code via the MY Taxes portal.
If you make a payment without sufficiently marking the tax, the tax authority will accept the payment in an unclear payments account and ask you to tell them which tax the payment was for within a specified time limit.
Therefore, until the payment is correctly identified, it may appear on the records that the advance payment of the DPPO has not been made (even though the money has already left your account). This then makes you liable to the consequences of default.
If you respond to the notice within the time limit, the tax authority will register the payment to the tax you have designated with effect from the date on which it was made. In other words, even if it is administratively tracked, it is treated as if it was already paid when the office received the payment on account of the unclear payments. However, if you don’t respond in time, the tax authority will allocate the payment itself – in which case it may be that the date of payment will be taken as the date of registration (not the date the payment actually arrived). This may result in a delay and interest on late payment.
For DPPO advances, most businesses fit into a common scenario: the last known tax liability came from a 12-month return and you simply pay half-yearly or quarterly advances of corporation tax depending on the amount. However, in practice, there are often situations where this simple model starts to get complicated – perhaps because your tax year didn’t last the whole year, because you file a supplementary return, because you are downsizing your business or because you are growing rapidly.
It’s at these times that it’s important to know how the law and the tax office view DPPO advances in these specific cases – when advances are recalculated, when they are not backdated, and when it makes sense to consider an individual adjustment so that the system doesn’t unnecessarily create an overpayment or underpayment.
Sometimes a business files a return for a period shorter or longer than 12 months (typically when changing tax years, in conversions or in the first “run-up” period). If the last known tax liability relates to a period of a different length, it is recalculated as if it were 12 months for advance payment purposes (i.e. to make it comparable to a standard year).
Practically: the point is not to penalise anyone, but to make the comparison of tax liability make sense even between periods of different length.
A common question is: “If I file a supplemental return, will my backups change right away?”
Generally, if the last known tax liability changes during the tax year, the advances due do not change retroactively. The new amount of advances will typically be applied prospectively – usually from the day after the due date for filing the relevant (additional) return (if filed late, from the day after the date of filing).
In practice, this means that “old” advances that should have already been paid will not be backdated. However, it also makes sense to address the future impact early on, especially if you know that you are otherwise at risk of a larger underpayment in the annual settlement.
If the last known tax liability is changed by a decision of the tax authority (e.g. after an audit), the rules of effectiveness are governed by the regime of the Tax Code and typically only apply from the next period after the decision becomes final.
The law also provides for the situation when it no longer makes sense to pay advances because the company has actually ceased operations or its source of taxable income has ceased. In such a case, advances are not payable from the instalment following the date on which the change occurred, but at the same time it is necessary to notify the tax authorities of this fact.
Sometimes a company’s business performance drops significantly (or improves sharply) and the advances calculated from the past no longer correspond to reality. In these cases, there is an important safeguard: the tax authority may, in justified situations, set advances differently or grant an exemption from the obligation to make advances, even for the entire tax year, upon request.
In practice, this is one of the most important compensating mechanisms of the system: advances are set across the board, but the actual development of companies varies. If you can substantiate and justify the situation, a request for an individual adjustment often makes sense.
People sometimes confuse corporation tax and personal income tax and are not sure where to put self-employed workers. So, for the sake of clarity, let’s set the record straight:
And how do minimum advances for self-employed persons fit into all this? In practice, this concept is used for insurance premiums (social and health) where minimums are actually worked with. But for income tax itself, the key principle is different: the last known tax liability is decisive, and the law sets a threshold up to which you do not pay advances, plus percentages for calculation.
Advance payments of corporation tax (APT) are ongoing payments made during the tax year based on the last known tax liability from the most recent return. After the end of the period, the actual tax is calculated in the return and the advances are set off against it (an underpayment or overpayment arises). Advances are not paid up to CZK 30 000; for CZK 30 001-150 000 they are paid semi-annually (2 × 40%, due by the 15th day of the 6th and 12th month of the period) and for over CZK 150 000 quarterly (4 × 25%, due by the 15th day of the 3rd, 6th, 9th and 12th month). In practice, rounding is often overlooked: the advance is rounded up to the nearest hundredth of a cent (e.g. 40% of CZK 120 580 = CZK 48 232 → CZK 48 300). For the financial year, the dates are calculated from the beginning of the year, not from January.
Payment is most often made by transfer to the tax administrator’s account: for the DPPO, the prefix 7704 is important (i.e. 7704-matrix FÚ/0710) and the correct variable symbol (the tax identification number without the ‘CZ’, or the tax identification number). A wrongly marked payment may end up in the unclear payments account and look unpaid until it is clarified, which increases the risk of default; moreover, only advances paid by the deadline for filing the return are usually credited against the tax.
The advance period runs from the 1st day after the last day of the deadline for filing the tax return for the previous tax year until the last day of the deadline for filing the return for the following tax year (and if the deadline is extended, the advance period is extended).
You typically pay advances even if you do less well during the year. The solution is usually to ask for a different way of determining advances or an exception if you can substantiate the decline (cash flow, orders, management plan, etc.).
The amount of the additional return is also taken as the last known tax liability – the effect is linked to the filing deadline (and, in the case of late filing, to the date of filing). At the same time, advances due up to that time are usually not changed.
You can voluntarily send more than the minimum deposit (typically as a payment to your personal tax account) to reduce your future tax bill. The key is to route the payment correctly (correct account and identifier).
Changing the tax year will often result in a return for a “non-standard” length of period and therefore the need to recalculate the last known tax liability to 12 months for advance payments. For such a change, it is worth calculating the impact on cash flow in advance and dealing with any request for an adjustment to advances in good time.
The tax administration has its own forms for applications. In practice, it helps to document in particular: current performance (monthly results), outlook for the rest of the period, loss of key contracts, extraordinary costs, restructuring, etc. The more factual the documentation, the better.
Not sure how to do your taxes correctly so you don’t get it wrong? We can help you navigate the law, whether it’s dealing with a specific tax situation, preparing for an audit by the tax authority or defending yourself in court.
Ondřej is the attorney who came up with the idea of providing legal services online. He's been earning his living through legal services for more than 10 years. He especially likes to help clients who may have given up hope in solving their legal issues at work, for example with real estate transfers or copyright licenses.
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