Income Tax in 2026: What It Is and the Different Types

Quick Overview

• Individuals pay 15% on the portion of the tax base up to 1,762,812 CZK.
• The portion of the tax base above this threshold is taxed at 23%, not 23% of total income.
• Corporations have a basic tax rate of 21%.
• For individuals, a distinction is made between income from employment, business activities, capital assets, rent, and other sources.
• The resulting tax liability may be reduced by non-taxable portions of the tax base, tax credits, and child tax benefits.

Not sure which types of income you need to report or what tax credits you can claim? Discuss your situation with an attorney specializing in tax law.

What Is Income Tax and Who Is Subject to It

Income tax is a mandatory payment on earned income. Under Czech law, there are two main categories: personal income tax and corporate income tax. The rules are governed by the Income Tax Act.

This Act specifies which types of income are taxable, what constitutes the tax base, what the tax rates and reliefs (credits, deductions) are, when advance payments are due, and when the tax is withheld by the payer (e.g., an employer or a corporation when paying dividends).

For individuals, the Act distinguishes five types of income from which partial tax bases are calculated: income from employment, income from self-employment, income from capital assets, rental income, and other income. The sum of the partial tax bases, adjusted for statutory deductions, forms the tax base from which the tax is calculated and deductions are applied.

Basic Terms You Need to Know

• A taxpayer is someone who pays tax (e.g., an employee, a self-employed person, a homeowner, an investor).
• A tax withholder is a person who withholds and remits tax “on behalf of the taxpayer” to the tax authority (typically an employer).
• The tax base is the amount on which the tax is calculated; for an individual, it is the sum of the individual tax bases for each type of income.
• Advance tax is tax withheld on an ongoing basis (e.g., from wages);
• Withholding tax is a special regime in which the withholding at the source often definitively settles the tax liability (it is not necessary to file a tax return; however, if it is disadvantageous for the taxpayer, the income may be voluntarily included in the return).
• A tax bonus is an amount paid by the state when claiming a tax credit for children, provided it exceeds the calculated tax.

From our experience: Taxpayers often confuse income, the tax base, and the tax itself. For example, a business owner generally does not pay 15% of all the money that has been deposited into their account, but rather on the tax base after taking into account tax-deductible expenses and any other adjustments. Incorrect determination of the tax base is a common cause of errors in tax returns.

The Income Tax Act: What It Actually Says

The Income Tax Act is the “constitution” of this tax. In the section on individuals, it lists five types of income and describes how the tax base and tax loss are calculated, what non-taxable portions of the tax base and tax credits can be claimed, who is a tax resident, when income is taxed through advance payments and when through withholding, and what flat-rate expense allowances are available for self-employed individuals. In the section on legal entities, the Act establishes, among other things, a 21% tax rate, rules for rounding the tax base, and defines special tax rates.

Income Tax Rate, or How Much Is the Income Tax?

Income tax is divided into two categories:

Personal Income Tax

This applies to employees, self-employed individuals, landlords, and investors. The tax base is the sum of the individual tax bases according to the categories listed above. Some income is subject to advance tax (typically wages), other income is subject to withholding tax, and certain income may be exempt (e.g., certain sales of securities or real estate upon meeting specific conditions). Each year, the Financial Administration specifies when withholding tax is final and what limits apply—for example, starting in 2025, the thresholds for work performance agreements and work activity agreements have changed.

In 2026, the tax base for individuals will be taxed at two rates. The 15% rate applies to the portion of the tax base up to CZK 1,762,812. Only the portion of the tax base that exceeds this threshold will be taxed at a rate of 23%. The threshold corresponds to 36 times the average wage and changes every year.

For employees, the threshold of 146,901 CZK—which corresponds to three times the average wage—is used when calculating monthly advance payments.

The Financial Administration has confirmed the annual threshold of 1,762,812 CZK and the monthly threshold of 146,901 CZK for 2026.

For work performance agreements without a signed Taxpayer Declaration, withholding tax will apply in 2026 only if the monthly income from the same employer does not exceed 11,999 CZK. Starting at CZK 12,000, the employee becomes subject to health insurance contributions, and the income is subject to withholding tax. For other types of minor employment, the threshold for withholding tax is CZK 4,499.

The Financial Administration specifies a threshold amount of 12,000 CZK for DPP contracts in 2026, meaning that withholding tax will apply only to income up to 11,999 CZK.

Corporate Income Tax

Corporate income tax applies to most legal entities—typically limited liability companies and joint-stock companies, but also associations and foundations—if they generate taxable income.

The basic tax rate in 2025 is 21%. The law also provides for special rates: 5% for investment funds and 0% for pension companies and pension insurance institutions (if they meet the statutory conditions).

Tax-Exempt Portions of the Tax Base and Tax Credits

The basic tax credit per taxpayer in 2025 is 30,840 CZK per year. In addition, taxpayers may claim, for example, a deduction for a spouse (subject to conditions regarding shared household, income limits, and care for a child under 3 years of age), as well as deductions for disability and for holders of a ZTP/P card. The tax credit for children remains in effect for 2025 at CZK 15,204 for the first child, CZK 22,320 for the second, and CZK 27,840 for the third and each additional child (CZK 1,267 / CZK 1,860 / CZK 2,320 per month).

For non-taxable portions of the tax base (e.g., donations, interest on a home loan, supplemental pension insurance, donations to public benefit causes), it is always necessary to monitor the current limits for the given year and type of deduction. For mortgages, for example, the deduction is 150,000 Kč per year (for mortgages taken out by the end of 2020). For pension products, the deduction is up to 48,000 Kč per year.

Income Tax Registration

As of January 1, 2024, income tax registration has been significantly simplified. Newly established self-employed individuals are no longer required to register for individual income tax (this registration requirement has been abolished), and the registration requirement for certain payers of special withholding tax has also been abolished.

However, registration remains mandatory for corporate income tax payers (e.g., newly established limited liability companies) and for employers acting as withholding agents for employment income tax.

Taxes Online: When Do You Have to File a Tax Return?

The general rule for filing an income tax return for the previous year is: on paper by the end of the third month following the end of the tax period, electronically by the end of the fourth month, and with an advisor (or for audited accounting entities) by the end of the sixth month.

The tax return for 2025 had to be filed in paper form no later than April 1, 2026. For electronic filing, the deadline was May 4, 2026. If the return was prepared by a tax advisor or attorney, or if the taxpayer was subject to a mandatory audit, the deadline was July 1, 2026. The calculated tax was generally due by the same deadline.

Employees may opt to have their employer perform an annual tax settlement instead of filing a return (upon request and provided certain conditions are met, particularly the absence of concurrent employment and other taxable income).

If you have a data box established by law (which applies to all business owners), you are required to file your tax return electronically. However, this does not mean you must file through the data box itself—you can easily submit your return via the Moje daně portal, where you log in using your bank ID or citizen ID and electronically sign the filing.

Summary

In the Czech Republic, income tax is divided into tax on individuals and tax on legal entities. In 2026, individuals pay a rate of 15% on the portion of the tax base up to 1,762,812 CZK and 23% only on the portion above that threshold; legal entities have a basic rate of 21%. For individuals, a distinction is made between income from employment, business activities, capital assets, rent, and other sources. The resulting tax liability may be reduced by non-taxable portions of the tax base, tax credits, and child tax benefits. For DPPs without a signed Taxpayer Declaration, income up to 11,999 CZK may be subject to withholding tax in 2026. However, the obligation to file a tax return and the method of taxation must always be assessed based on the taxpayer’s total income and specific circumstances.