Personal income tax

We have prepared a comprehensive guide explaining who the taxpayer is, what is taxable, when income is exempt, how the tax base is composed, what are the non-taxable parts of the tax base, what are the rates and what are the tax credits.

Who is the taxpayer: what is tax residence

A taxpayer is any natural person who has income that is subject to tax. It is essential for the scope of taxation whether you are a tax resident of the Czech Republic (you are taxed on worldwide income) or a non-resident (you are taxed only on income from sources in the Czech Republic).

A resident is typically someone who has a domicile (permanent apartment) or stays in the Czech Republic for at least 183 days in a calendar year.

Subject of the tax

The subject of the tax is (simplified) income from five statutory categories:

• income from employment,
• income from self-employment (self-employed),
• income from capital assets,
• rental income,
• other income .

These categories determine the tax base, the possibility and amount of deductible expenses (including flat-rate expenses for self-employed persons), the applicable exemptions, the method of withholding or advance payments, and finally whether and how you file your tax return. The law is clear that income includes both monetary and non-monetary benefits – and even exchange income. Therefore, this includes “benefits” from your employer, free services, etc. (always valued according to the rules of the law). Let’s look at each category in more detail:

Employment income tax

This includes wages/salaries, remuneration and other benefits arising from employment (main employment and agreements), as well as, for example, remuneration of directors, emoluments and other similar benefits arising from employment relationships. It is always income where you are economically dependent on the payer and work under his instructions. The taxable amount is generally the gross salary plus valued non-cash income; you do not claim expenses. The tax is usually withheld and paid by the employer in the form of an advance payment or withholding tax.

Payroll taxation in practice

Payroll taxation is done on a monthly basis. If you sign a taxpayer’s declaration (pink declaration) with your employer, they deduct advance tax and an annual reckoning can be made. It’s different for agreements – if you don’t sign the declaration and the income from the FTE doesn’t exceed CZK 11,500 per month (or CZK 4,500 for the FTE), a 15% withholding tax applies – and this income is usually no longer included in the return (with exceptions where it’s worth voluntarily adding it for discounts).

Benefits and non-cash income in 2025

The law specifically says that income can be non-cash , for example in the form of work benefits – i.e. meal vouchers, company season tickets, recreation, culture, health programmes etc. From 1 January 2025, two separate annual exemption limits apply to non-cash benefits:

1. Health benefits (care, prevention, medical services and prescription drugs): up to the average wage (for 2025: CZK 46,557),
2. other enumerated leisure benefits (sports, culture, education, etc.): up to half of the average wage (for 2025: CZK 23,278.50).

Above the limits, a portion is taxed as income of the employee.

For meal allowances, an exemption of up to CZK 123.90 per shift applies (this is 70% of the upper limit of the meal allowance for a 5-12 hour working trip). The meal allowance and the value of the meals in the company canteen are subject to the same limit.

Income tax on self-employment (self-employed)

This category includes income from business and other self-employment: trades, agriculture, freelance professions(lawyer, doctor, tax advisor, artist) or income from copyright and industrial property. It also includes the profit share of a partner in a limited liability company and a general partner in a limited liability company.

Expenses: actual or flat-rate

The taxable amount is the difference between income and expenditure. The self-employed person chooses whether to claim actual expenses (documented) or flat-rate expenses as a percentage of income.

Overview of flat rates for 2025:

• 80% for craft trades and agriculture (max. CZK 1,600,000 in expenses),
• 60% for other trades (max. CZK 1 200 000),
• 40 % for liberal professions and other activities under special regulations (max. CZK 800 000),
• 30 % for the rental of property classified as business property (max. CZK 600 000).

A lump sum is worthwhile when you have low real costs and high turnover. On the other hand, when you have higher input costs (materials, subcontracting, rent, car), real expenses work out better.

Royalties – a small but important digression

Royalties from authors for contributions to newspapers, magazines, radio or television have a special regime: up to CZK 10,000 per month from the same payer are subject to a 15% withholding tax and the author does not have to include them in his/her tax return. Above the limit, you have to tax them yourself as a self-employed person.

Flat-rate tax for self-employed persons (not the same as flat-rate expenses)

Self-employed persons can opt for a flat tax – a monthly “package” of tax and insurance premiums without a return if they meet the conditions(income up to CZK 2 million). It is then paid monthly in three bands depending on the amount of income (CZK 8,716, CZK 16,745 and CZK 27,139).

The flat-rate tax is administratively simple, but it does not allow for discounts and deductible items beyond the rules of the scheme. In addition, it is not suitable for those with high actual costs or large tax allowances.

Income tax on capital assets

These are passive returns on capital: dividends and other profit shares, interest on bank accounts and deposits, bond yields, insurance benefits, etc. Much of this income is taxed at source (typically 15%) and is no longer included in the taxpayer’s return. Others (e.g. interest on a loan) are taxed on the return.

In practice:

• Dividends from sources in the Czech Republic are usually taxed at 15% withholding at the time of payment; you don’t write it in anywhere else (residents).
• Interest on a current/non-business bank account in the Czech Republic is also usually taxed at withholding; you don’t report it on your return.
• Interest on loans granted “privately” (not through a bank) or income from bills of exchange, etc. is usually included in the return.

Income tax on rental income

Typically a long-term lease of an apartment, house, garage or commercial premises. The taxable amount is income less expenses. Expenses can be claimed in two ways:

• actual expenses (e.g. depreciation, insurance, repairs, services paid by the landlord), or
• flat-rate expenses of 30% of income (max. CZK 600,000).

When it is no longer a “rent” but a business

If you provide short-term accommodation with “above and beyond” services (regular cleaning, laundry change, reception, check-in/out, breakfast, additional services…), it is already a separate business – and this involves insurance contributions and usually higher flat-rate expenses.

Income tax – other revenue

This category includes everything else, i.e. mainly casual income, sale of goods and property rights, capital gains from sale of securities and shares, sale of immovable property, winnings and prizes, gratuitous income (gifts), income from crypto-assets, etc.

The sub-basis is income less provable expenses. If expenses exceed income, no loss can be made (the negative difference is ignored).

Occasional income – exemption limit

Occasional (non-business) income is exempt up to a total of CZK 50,000 per year (typically one-off help, small sales of products without consistency, occasional rental of movable property). Above the limit you are already taxed. (Not to be confused with the rules for sales of securities or real estate – these have their own tests and limits).

Sales of securities and shares

There are two routes to exemption for securities:

1. 100,000 CZK limit – if the aggregate income from the sale of securities (and cancellation of mutual funds) does not exceed 100,000 CZK per year, the income is exempt.
2. Time test of 3 years – if you hold the security for more than 3 years, the income from the sale is exempt.

Note: as of 1 January 2025, a cap on the exemption is introduced – the aggregate income from sales after the time test ( 3 years for securities, 5 years for business shares) is only exempt up to 40 million. CZK 40 per year.

Sale of real estate

Income tax on the sale of real estate is calculated on the gain, i.e. the difference between the sale price and the purchase price of the property. Expenses related to the sale (commission to the real estate agency, preparation of the sale and purchase contract, expert opinions) or reconstruction of the property (however, only such modifications that are directly related to the property’s appreciation, e.g. replacement of windows or insulation, are counted) are deducted from the sale price.

In many cases, however, you are exempt from tax – if you have resided there for at least 2 years immediately before the sale (or for a shorter period if you use the money for your own housing needs). If you don’t meet the residence requirement, the time of ownership test comes into play: for properties acquired after 1 January 2021, it’s 10 years ofpossession (5 years for older properties). However, the exemption does not apply to property classified as business propertyand has other exceptions.

Example: you own a condo since 2018 and have never resided in it; you sell in 2025. Because the test is 10 years for new acquisitions after 1/1/2021, but still 5 years for older acquisitions (before 12/31/2020), the sale will be exempt (5-year test met). Conversely, a home purchased in 2022 will not be exempt until after 10 years of possession unless you meet the “residence” or use the money for your own housing needs.

Cryptoassets

As of 15 February 2025, a new exemption for selected income from the transfer of cryptoassets for consideration by individuals applies , subject to certain conditions. Specifically, there are two exemptions:

1. an annual exemptionlimit for smaller amounts,
2. and a time test (analogous to securities) linked to the 40 million euro ceiling. A threshold of CZK 40 million in aggregate exempt income.

Gifts, prizes, other income

Among other income, you will also find gratuitous income (gifts). These are exempt between direct relatives and selected collateral relatives. Lottery winnings up to CZK 50,000 are exempt. Above the limit, it is usually taxed by withholding already at the time of payment.

Personal income tax rate

The personal income tax is a two-rate tax:

1. 15% for the part of the tax base up to 36 times the average wage,
2. 23% for the part of the tax base exceeding 36 times the average wage.

For 2025, the average wage is CZK 46,557, so 36 times is CZK 1,676,052 per year (3 times is tracked monthly for wage advances, i.e. CZK 139,671). The part of the tax base up to this threshold is taxed at 15%, the part above it at 23%.

Tax exemption: when you don’t pay tax

The law contains a number of exemptions – typically for selected sales of real estate (if you meet the time test or use the money for your own housing needs), for gifts between loved ones, or for winnings up to certain limits. There is a new stricter limit for gambling: only up to CZK 50,000 is exempt (the difference between winnings and deposits per year is assessed according to the type of game).

Beware also of the reporting obligation – if you receive exempt income above CZK 5 million, you must report it to the tax authorities. You must report it to the tax authorities by the end of the filing deadline.

Tax base and tax loss

To determine the tax base, subtract expenses (actual or flat-rate) from taxable income and then add up the sub-bases for each type of income. The law also deals with tax loss. This is a negative tax base and occurs when tax deductible expenses exceed taxable income. However, it can only arise for self-employment and rent.

It can be deducted in 5 subsequent tax periods or retroactively in 2 previous periods. There is a limit of max. 30 million for retrospective application. CZK 30 in the aggregate for the two previous periods and is usually dealt with by a supplementary return after the loss has been finally determined.

Non-taxable parts of the tax base (deductible items)

You can reduce the tax base by the so-called non-taxable parts before you calculate the tax. These include:

• Donations (gratuitous benefits): you can deduct the value of a donation made for public benefit. The value must be at least CZK 1,000 or more than 2% of the tax base. You can deduct a maximum of 30% of the tax base for donations.
• Interest on housing loans: not more than CZK 300,000/year for housing acquired before 31 December 2020, not more than CZK 150,000/year for housing acquired after 1 January 2021.
• Old-age products with state contribution: the total ceiling is CZK 48 000/year.

Tax rebates

The basic tax deduction is made up of discounts. These include:

• Taxpayer discount: CZK 30,840/year (can also be claimed by non-residents with employment income).
• Spouse’s discount: CZK 24 840/year, but only if you live in a common household with a child under 3 years of age and your spouse’s income for the year does not exceed CZK 68 000.
• Disability allowance: CZK 2 520 (Grade I-II) / CZK 5 040 ( Grade III).
• Discount for holders of a disabled person’s card: CZK 16 140.

Currently, the student discount and the child placement discount (nursery fees), which have been completely abolished, are no longer available.

Child tax credit and tax bonus

The tax credit for dependent children remains the same for 2025: CZK 15,204/year for the first child, CZK 22,320 for the second and CZK 27,840 for the third and each subsequent child. The amounts are doubled for children with disabilities. If your tax comes out negative after applying the rebates, you may qualify for a tax bonus (popularly known as the child rebate) if you meet the minimum own income condition. To qualify for the monthly bonus in 2025, you must have an annual income of at least CZK 124,800.

Income tax calculation – examples

Employee without children (payroll tax)

You have a gross annual salary of CZK 540,000 (CZK 45,000 per month) and a signed declaration.

• Taxable amount: CZK 540 000 (rounded down to the nearest hundred crowns).
• Tax rate: 15% of CZK 540 000 = CZK 81 000.
• Tax rebates: tax rebate per taxpayer CZK 30 840.

Resulting tax: 81 000 – 30 840 = 50 160 CZK.

Employee with two children (payroll taxation with tax benefit)

Annual salary CZK 900 000, two children.

• Tax before rebates: 15% of 900 000 = 135 000 CZK.
• Discounts: taxpayer CZK 30 840 + children CZK 15 204 (1st child) + CZK 22 320 (2nd child) = CZK 68 364.

Resulting tax: 135 000 – 68 364 = 66 636 CZK.

High-income employee (crossing the 23% threshold)

Annual salary CZK 2 100 000.

• Up to CZK 1,676,052 15% = CZK 251,407.80.
• Of the amount of CZK 423,948 above the 23% limit = CZK 97,508.04.
• Tax before discounts: CZK 348 916 (rounded up to the nearest whole crown).
• – Discount per taxpayer CZK 30 840

Resulting tax: CZK 318 076.

Income tax for self-employed persons (actual expenses) + pension insurance

A self-employed person has income of CZK 1,200,000, provable expenses of CZK 600,000. She contributed CZK 48 000 to the pension scheme.

• Partial basis: CZK 1 200 000 – 600 000 = CZK 600 000.
• Non-taxable parts: – CZK 48,000 (supplementary pension) → tax base CZK 552,000.
• Tax 15% = CZK 82 800.
• – Discount per taxpayer CZK 30,840

Resulting tax: 51 960 CZK.

Income tax for self-employed persons (flat-rate expenses 60%) + donation

A self-employed person has an income of CZK 900,000 and applies a flat-rate expenditure of 60% (i.e. CZK 540,000). In the year she paid CZK 10,000 in donations (meets the minimum of 2% of the base or CZK 1,000; counted towards the limit of max. 30% of the base).

• Partial basis: CZK 900 000 – 540 000 = CZK 360 000.
• Non-taxable parts: – CZK 10 000 (gifts) → CZK 350 000.
• Tax 15% = CZK 52 500.
• – Discount per taxpayer CZK 30,840

Resulting tax: 21 660 CZK.

Rental income (flat-rate expenses 30%)

You rent an apartment, income CZK 360,000/year. You apply a flat-rate expense of 30%(CZK 108 000).

• Fractional basis: CZK 252 000.
• Tax 15% = CZK 37 800.
• – Taxpayer discount CZK 30,840

Resulting tax: CZK 6 960.

Combination: salary + rental profit + tax loss of self-employed

You have a salary of CZK 480,000, rental profit of CZK 200,000, but you have incurred a tax loss of CZK -120,000 from your business.

• Salary: CZK 480 000 – you cannot reduce it by the loss.
• Rental profit: 200 000 – 120 000 = 80 000 CZK.
• Tax base: 480 000 + 80 000 = 560 000 CZK.
• Tax 15% = CZK 84 000.
• – Taxpayer discount CZK 30,840

Resulting tax: CZK 53 160.

FTT: when withholding tax and when advance tax

DPP CZK 11,000/month, no signed declaration → withholding tax 15% = CZK 1,650, income does not normally enter the return (if voluntary).

DPP CZK 15,000/month, no declaration → limit of CZK 11,500 is exceeded, it is advance tax (monthly advance rules apply; everything is offset in the return).

Sale of securities after 3 years – partially taxed (new rule from 1/1/2025)

You sell the stock after 4 years for 45,000,000, cost basis of 20,000,000. From 2025, the annual limit of CZK 40,000,000 applies. Income above the limit is taxable; you apply the expense (purchase price) pro rata.

• Exempt: CZK 40 000 000.
• Taxed income: CZK 5 000 000.
• Recognised expense: 20 000 000 × (5 000 000 / 45 000 000) = CZK 2 222 222.
• Fractional basis: ≈ CZK 2 777 778.

Tax (15 % up to CZK 1 676 052, 23 % above) ≈ CZK 504 787 before allowances; after taxpayer allowance ≈ CZK 473 947.

Sale of the flat after at least 2 years of residence – fully exempt

You sell in 2025 a flat in which you have been resident for at least 2 years immediately before the sale. The purchase price is now CZK 6 500 000.

The income is exempt, income tax on the sale of the apartment is 0 CZK.

Sale of an investment apartment (time test not met)

You bought the apartment in 2022 for CZK 4 000 000 (outside the business). In the years 2023-2024, you carried out a technical improvement for CZK 300 000. The commission for the sale in 2025 is CZK 177 000, legal service CZK 20 000. The apartment was not your residence and you do not use the funds for your own housing needs. You will sell for 5 900 000 CZK.

For properties acquired after 1 January 2021, a time test of 10 years applies (previously 5 years for acquisitions up to 31 December 2020). You do not meet the test.

• Taxable income: CZK 5,900,000
• Tax deductible expenses: purchase price 4,000,000 + technical improvement 300,000 + commission 177,000 + legal service 20,000 = CZK 4,497,000
• Sub-basis: 5 900 000 – 4 497 000 = 1 403 000 CZK

Resulting tax (15%): 1 403 000 × 0.15 = 210 450 CZK

Tax rebates (e.g. taxpayer’s rebate of CZK 30,840) can reduce the resulting tax; if you have no other income, after deducting the rebate it comes out to CZK 179,610.

Summary

Personal income tax is based on five types of income (employment, self-employment, capital, rent, other) and how you determine the tax base for them. For employment, you deal with monthly advances and possibly withholding tax without a pink declaration (DPP/DPP). As of 1 January 2025, there are limits for non-monetary benefits – health benefits up to the average wage (CZK 46,557), other leisure benefits up to half of the average wage (CZK 23,278.50) and meals up to CZK 123.90 per shift. As a self-employed person, you can choose actual vs. flat-rate expenses or flat-rate tax in 3 bands.

There are two rates: 15% up to 36x average wages (2025: CZK 1,676,052 per year; wages are tracked at CZK 139,671 per month) and 23% above the limit. Key exemptions: securities up to CZK 100,000/year or after 3 years of holding (ceiling CZK 40 million/year), for real estate 2 years of residence or 5/10 years time tests, and from 15 February 2025 relief for selected income from crypto-assets.

Don’t forget the non-taxable parts (gifts, interest on housing, saving for old age up to 48k) and discounts (taxpayer CZK 30,840, spouse CZK 24,840, disability, PWD/P) as well as tax benefits for children.