Czech citizens have until 10 January each year to register for the simplified flat-rate tax regime. What are the benefits of this tax and when should it be avoided? This is the subject of our current article.
Czech citizens have until 10 January each year to register for the simplified flat-rate tax regime. What are the benefits of this tax and when should it be avoided? This is the subject of our current article.
From 2021, the flat tax in the Czech Republic is a simplified tax regime designed for self-employed persons(self-employed workers), which allows them to pay taxes and insurance premiums through a simple lump sum instead of a complex calculation on income and expenses. This system was designed and introduced several years ago to reduce the administrative burden and make it easier to do business, especially for small entrepreneurs and freelancers.
Thanks to the lump sum scheme, you don’t usually file tax returns or annual reports to the Social Security and Health Insurance Companies. The administration will thus be considerably simplified.
The activity of self-employed persons is associated with a certain degree of administrative burden in the form of levies, payments and tax returns. What does all this entail? We have focused on this in our separate article.
Any self-employed person(self-employed) in the Czech Republic who meets specific conditions can apply for the flat-rate tax. In addition to the fact that they must not be VAT payers, partners in a v.o.s. or general partners in a k.s. and must not be in insolvency proceedings, it is important that their annual income does not exceed a specified limit. This limit depends on the specific income bracket into which the self-employed person falls.
Many of you run a side business (e.g. while working, studying, retiring). Outside of the flat-rate regime, a side business has some relief on advances (e.g. there is no obligation to pay minimum social security advances when profits are low). But in the flat-rate regime, you pay a fixed ‘flat-rate’ advance according to band, regardless of whether it is a main or side business. Therefore, it may be the case that the classical scheme is more advantageous for the secondary self-employed, especially with small profits.
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.
The flat tax is applied according to set income thresholds, which can vary depending on tax laws and economic conditions. There are three bands for the flat tax. Each band has a fixed amount of tax, which includes both income tax and compulsory social security and health insurance contributions in one payment. This system is particularly advantageous for those seeking simplicity and predictability in their tax and insurance liabilities.
For 2025, the amount of the flat rate tax varies according to 3 bands depending on the taxpayer’s income and expenditure:
| Pásmo | Celková platba | Daň z příjmů | Důchodové pojistné | Zdravotní pojistné |
|---|---|---|---|---|
|
I. pásmo |
8 716 Kč |
100 Kč |
5 473 Kč |
3 143 Kč |
|
II. pásmo |
16 745 Kč |
4 963 Kč |
8 191 Kč |
3 591 Kč |
|
III. pásmo |
27 139 Kč |
9 320 Kč |
12 527 Kč |
5 292 Kč |
If the entrepreneur expected to receive income in a particular band and then found out after the end of the tax year that he did not fit into it, he must pay the tax in addition. However, the reverse is also true, so that if the income falls into a lower band, part of the tax and premium paid in this way will be refunded to the entrepreneur.
You do not enter the scheme automatically. You must submit a Notice of Entry into the Flat Rate Scheme. The deadline for entry for the whole year is 10 January at the latest. When you start your business, you can join straight away and send your first deposit up to the 20th of the following month.
Registration for the flat tax was again possible this year only until 10 January. Further registration is possible from October until 10 January of the following year. You don’t have to go to the tax offices, just download the electronic form on the MY Taxes portal and send it in via your mailbox.
If you’re already in the flat-rate scheme, you can change your band by 10 January each year (or you have to if your income no longer matches your chosen band). If you don’t notify, you’ll keep the previous year’s band.
You send your payments to the account of your local tax office with the prefix 2866 and the CNB bank code 0710. The list of accounts and account numbers is published by the Tax Administration. There you will find the account matrix sections for each regional tax office.
Example of an account entry in practice: 2866-XXXXXX/0710, where “2866” stands for the flat-rate tax and the flat-rate public insurance premium, “XXXXXXXX” is the matrix account number of your tax office and 0710 is the CNB bank code.
For taxes, the variable symbol is the stem part of your VAT number (without the “CZ”); if you do not have a VAT number, the birth number is used.
Lump-sum advances are payable by the 20th of the month. If you start a business and enter the flat-rate scheme at the same time, you will not send your first payment until the 20th of the following month – and you will also pay the advance for that following month.
The tax is usually paid monthly, but it is possible to subscribe, for example, for a quarter or a whole year in advance.
The flat-rate scheme does not relieve you of all obligations. You have to keep an eye on your income and your band so you don’t exceed the limits. Typically, you keep simple records of income to prove the amount (and, for mixed activities, the nature of the income to qualify for the band). However, you can only move between bands until 10 January. If you break the conditions (e.g. become a VAT payer), you must inform the Revenue within 15 days and for the year you will generally be treated as if you were not in the flat rate band (you will file a tax return and reports).
You do not file returns and statements only if your actual tax is equal to the flat-rate tax (you meet the thresholds and other conditions). Once you break the conditions (or other income triggers the obligation to file a return), you file returns and statements just as you would under the regular regime.
You can find handy calculators on several trusted portals. They allow you to compare the flat-rate scheme with the traditional scheme (lump-sum expenses, actual costs, etc.) and recalculate which band you should or could choose, depending on the composition of your income.
What about sickness and sick pay for self-employed workers? The next article will tell you.
The biggest practical relief comes from the fact that you pay income tax, pension (social security) and health insurance in one monthly payment. At the same time, if you meet the conditions of the scheme, you don’t have to file a tax return or annual statements – eliminating the need to communicate with three authorities, meet deadlines and the risk of errors in statements.
A fixed monthly amount gives you certainty about how much will leave your account. Those with seasonal incomes will appreciate that even in higher earning months, they don’t suddenly withdraw significantly more than at other times.
Because you don’t fill out returns and schedules, there’s less risk of mistakes when reporting expenses, tax credits, deductible items, or incorrectly set up deposits. At the same time, you only need to keep records of income (and, for mixed activities, the structure of the income for banding) rather than full accounting records.
Lump sum payments can be paid in advance (for example, for the whole year) and everything runs through the tax office account. This eliminates three separate bank orders.
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.
Under the flat-rate scheme , you do not claim the usual tax credits(the taxpayer discount is in practice “consumed” in the flat-rate scheme by the construction of the minimum tax within the flat-rate amount), child tax credits, mortgage interest deductions, gifts, etc. For some, this can be a major financial downside.
Unlike the traditional scheme, you pay the same lump sum as everyone else in the band, even if you have a side business or low profits. In the classical scheme you would pay much lower social security contributions for your side business, whereas in the flat rate you are on a “fix” and can therefore pay a lot more than in the classical scheme.
A VAT payer does not fit into the flat-rate regime (only an identified person is tolerated). So for fast-growing trades, you may hit a limit – you enter, the structure of your business becomes more complicated, compulsory VAT registration arises and the flat-rate scheme for the year ceases to make sense.
In the case of mixed activities (the “80%/60% expenditure flat rate” combination) , you have to prove the proportion of each activity; the Revenue specifically requires records of income to prove that you meet the conditions of your chosen band. Without clear records, you risk retrospectively falling outside the flat rate and facing traditional returns and reports. This is a hidden administrative duty that many self-employed people forget.
Because you pay a fixed amount, there can be a false sense that the scheme is cheap even when the real tax would have been lower under the classic scheme (for example, due to discounts, deductions and low profits). In particular, families with children often save more in the conventional scheme because of child tax credits and other reliefs that cannot be taken into account in the flat rate. It is therefore a good idea to calculate this in a calculator beforehand and consider it realistically.
The advantages of a flat tax are mainly simplification of administration and predictability of costs. This system allows self-employed persons to pay a fixed monthly amount that covers both income tax and compulsory social and health insurance contributions. The flat-rate tax is particularly worthwhile for those entrepreneurs who have a stable but not very high income and want to avoid complicated bookkeeping and tax returns. It is suitable, for example, for start-up entrepreneurs who want to focus on developing their business or for sole traders who are looking for simplicity and efficiency in tax administration.
Example: Typically, a flat rate tax may be beneficial for a small businessman whose income is close to one million crowns and who applies, for example, a 40% flat rate of expenditure. Moreover, if he is a single, childless individual with no mortgage and other potential tax deductibles, then the situation is ideal for him. Under the normal tax regime, he would pay income tax, social security and health insurance based on his actual income and expenses. Under a flat tax, he pays a fixed monthly amount that is significantly lower than the potential total tax and levies under the conventional regime. This can save up to tens of thousands a year.
Conversely, the flat rate tends to be disadvantageous for the low-income self-employed – outside the flat rate they often do not pay the minimum social security contributions, whereas in the flat rate they pay a fixed amount equal to everyone in the bracket, so they pay relatively more. Families with children and those claiming higher allowances or deductions (e.g. mortgage, gifts) will also usually come out better off under the classic regime, as the flat rate does not allow for allowances.
The flat-rate scheme is also risky for businesses close to paying VAT. This is because the payer is not included in the flat-rate scheme (only an identified person is tolerated) and if you become a payer during the year, you are treated as outside the flat-rate scheme for the whole year and file returns and reports.
Also beware of mixed occupations without a clear 60%/80% activity predominance – without careful records of income structure you can easily fall into the higher band and pay more. Finally, if you have frequent changes (other taxable income, switching to VAT, etc.), you are likely to break the conditions during the year and the flat rate will not last anyway.
The flat-rate tax is a simplified scheme for self-employed workers that combines income tax and social security and health insurance contributions into one monthly payment; if the conditions are met, no tax return or annual statements are filed. For 2025, there are three bands with fixed amounts: band I, CZK 8,716; band II, CZK 16,745; and band III, CZK 27,139; classification depends on the amount of income and the applicable flat-rate expenditure. Entry into the scheme (or to change bands) is by notification by 10 January; newly started businesses can enter immediately. Payment is due by the 20th of the month, and can be prepaid; payment is sent to the FÚ account with the prefix 2866 and the variable symbol TIN/family number. If the actual income does not match the chosen band, the difference is paid or refunded. Simple income registration is compulsory (for mixed activities and their structure) and in case of violation of the conditions, the self-employed return to the classic regime, including returns and reports.
Advantages: minimum administration (one payment instead of three), predictability of cash flow, less errors and the possibility of payment in advance. Disadvantages: most allowances and deductions cannot be claimed (children, mortgage, etc.), the fixed amount is disadvantageous for secondary self-employed workers with low profits and the scheme is incompatible with VAT (except for the identified person). Thus, the lump sum typically pays off for stable self-employed workers without significant deductible items; on the other hand, families with children, secondary self-employed workers with small profits or entrepreneurs close to compulsory VAT registration are worse off. Before inclusion, a comparison in a calculator and a realistic assessment of the risks of a change of band or status is advisable.
No, it is sufficient to keep records of income and, in the case of mixed activities, records of structure (so that the classification in the band can be demonstrated).
Typically, if you break the terms of the lump sum or have other income over CZK 50,000. The lump sum itself does not have to end, but you must file a return.
Then you file your returns and reports (CSSA, medical). You will also include the lump-sum advance payments in the return.
It is necessary to keep an ongoing record of the composition of income and to archive supporting documents (contracts, invoices, breakdowns). The tax administration explicitly requires the possibility of proving the share of activities for inclusion in the band.
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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