Personal Income Tax

Quick Overview

• Who Pays Personal Income Tax: Individuals with taxable income from employment, business, capital, rent, or other sources.
• Personal income tax rate for 2025: 15% on taxable income up to 1,676,052 CZK and 23% on the portion of taxable income above that threshold.
• How to calculate personal income tax: First, determine the tax base; then subtract non-taxable amounts; calculate the tax using the applicable rate; and finally, apply any tax credits and deductions.
• 2025 tax return: Paper returns were due by April 1, 2026; electronic returns by May 4, 2026; and returns filed through a tax advisor or as part of a mandatory audit by July 1, 2026.
• Self-Employed Individuals: They may claim actual or flat-rate expenses; if certain conditions are met, they may also use the flat-rate regime.

We’ve prepared a comprehensive guide for you in which we explain who is a taxpayer, what constitutes taxable income, when income is exempt, how the tax base is calculated, what non-taxable portions of the tax base exist, what the tax rates are, and what tax credits are available.

Are you unsure which types of income you must report for tax purposes or how to correctly determine your tax base? Our attorneys will help you assess your specific tax situation and alert you to your obligations and potential risks.

Who Pays Personal Income Tax and What Is Tax Residency

Any individual who has taxable income is subject to income tax. Whether you are a tax resident of the Czech Republic (and therefore tax your worldwide income) or a non-resident (and therefore tax only income from sources in the Czech Republic) is crucial for determining the scope of taxation.

A resident is typically someone who has a place of residence (permanent home) in the Czech Republic or who stays there for at least 183 days in a calendar year.

Tax Base

The subject of taxation is (in simple terms) income from five statutory categories:

• income fromemployment,
• income from self-employment,
• income from capital assets,
• income from rent,
• other income.

These categories determine the tax base, the eligibility and amount of deductible expenses (including flat-rate expenses for self-employed individuals), applicable tax exemptions, the method of withholding or paying estimated taxes, and ultimately whether and how you file a tax return. The Income Tax Act stipulates that income includes both monetary and non-monetary payments—and even income obtained through barter. Therefore, this also includes “benefits” from an employer, services provided free of charge, etc. (always valued according to the rules of the law). Let’s take a closer look at the individual categories:

Income Tax on Employment

This includes wages/salaries, bonuses, and other payments arising from employment (both primary employment and contract work), as well as, for example, compensation for members of corporate bodies, position-related benefits, and other similar payments arising from employment relationships. This always refers to income where you are economically dependent on the payer and work according to their instructions. The tax base is generally the gross wage plus valued non-monetary income; you do not claim any deductions. The tax is usually withheld and remitted by the employer in the form of advance payments or withholding tax.

Taxation of Wages in Practice

Wage taxation occurs on a monthly basis. If you sign a taxpayer declaration (the “pink form”) with your employer, they will withhold advance tax payments, and an annual tax settlement can be performed. The process is different for other types of agreements.

If you do not sign a taxpayer declaration with your employer, withholding tax applies to DPP income of up to 11,499 CZK per month. For DPČ contracts, withholding tax applies to income of up to 4,499 CZK per month.

Benefits and Non-Monetary Income in 2025

The law explicitly states that income may also be non-monetary, for example in the form of employee benefits —such as meal vouchers, company season tickets, recreational activities, cultural events, health programs, etc. Effective January 1, 2025, two separate annual exemption limits apply to non-monetary benefits:

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

Amounts exceeding these limits are partially taxed as employee income.

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

Income Tax on Self-Employment (OSVČ)

This category includes income from business and other self-employment activities: trades, agriculture, liberal professions (attorney, physician, tax advisor, artist), or income from copyrights and industrial property rights. This also includes the share of profits received by a partner in a v.o.s. (general partnership) and a general partner in a k.s. (limited partnership).

Expenses: Actual or Flat-Rate

The partial tax base is the difference between income and expenses. Self-employed individuals may choose whether to claim actual (documented) expenses or flat-rate expenses as a percentage of income.

Overview of flat-rate deductions for 2025:

• 80% for skilled trades and agriculture (max. 1,600,000 CZK in expenses),
• 60% for other trades (max. 1,200,000 CZK),
• 40% for independent professions and other activities governed by special regulations (max. 800,000 CZK),
• 30% for the lease of property classified as business assets (max. 600,000 CZK).

A flat-rate system is worthwhile when you have low actual costs and high revenue. Conversely, when input costs are higher (materials, subcontractors, rent, vehicle), tracking actual expenses works out better.

Royalties – A Small but Important Digression

Royalties paid to authors for contributions to newspapers, magazines, radio, or television are subject to a special tax regime: amounts up to 10,000 CZK per month from the same payer are subject to a 15% withholding tax, and the author does not need to include them in their tax return. Amounts above this limit must be taxed by you as a self-employed individual.

Flat-Rate Tax for Self-Employed Individuals (Not the Same as Flat-Rate Expenses)

Self-employed individuals may opt for a flat-rate tax —a monthly “package” of tax and insurance premiums without filing a tax return—provided they meet the conditions (income up to 2 million CZK). For 2025, the monthly flat-rate advance payment was divided into three brackets: CZK 8,716, CZK 16,745, and CZK 27,139.

The flat-rate tax is administratively simple, but it does not allow for tax credits or deductions beyond the scope of the regime’s rules. Furthermore, it is not suitable for those with high actual expenses or significant tax credits.

In practice, the difference between flat-rate expenses and the flat-rate tax regime is often a source of confusion. These are two distinct concepts: with flat-rate expenses, you simply determine the amount of expenses as a percentage of income, whereas under the flat-rate regime for self-employed individuals, provided the conditions are met, you make a single monthly payment that includes both tax and insurance premiums. Confusing these two systems can lead to an incorrect calculation of your tax liability.

Income Tax on Capital Assets

This refers to passive income from capital: dividends and other profit shares, interest on bank accounts and deposits, bond yields, insurance payouts, etc. Much of this income is taxed at the source (typically 15%), and the taxpayer does not need to report it on their tax return. Other income (e.g., interest on loans provided) is taxed on the tax return.

In practice:

• Dividends from sources in the Czech Republic are usually subject to a 15% withholding tax at the time of payment; you do not need to report them anywhere (residents).
• Interest on a checking/non-business bank account in the Czech Republic is also typically taxed at the source; you do not need to report it on your tax return.
• Interest on loans provided “privately” (not through a bank) or proceeds from promissory notes, etc., generally must be reported on your tax return.

Income Tax on Rent

Typically, this involves long-term rentals of an apartment, house, garage, or non-residential space. The taxable income is calculated as income minus expenses. Expenses can be claimed in two ways:

• actual expenses (e.g., depreciation, insurance, repairs, services paid for by the landlord), or
• flat-rate expenses of30% of income (up to 600,000 CZK).

When It’s No Longer “Renting” but a Business

If you provide short-term lodging with “above-and-beyond” services (regular cleaning, linen changes, front desk, check-in/out, breakfast, additional services…), this is considered a separate business activity —and as such, it entails insurance contributions and typically higher flat-rate expenses.

Income Tax – Other Income

This category includes everything else, specifically occasional income, the sale of goods and property rights, capital gains from the sale of securities and shares, the sale of real estate, winnings and prizes, income received free of charge (gifts), income from cryptoassets, etc.

The taxable income is calculated as income minus verifiable expenses. If expenses exceed income, no loss can be claimed (the negative difference is ignored).

Occasional Income – Exemption Limit

Occasional (non-business) income is exempt up to a total of 50,000 CZK per year (typically one-time assistance, small-scale sales of goods on a non-recurring basis, or occasional rental of personal property). Income above this limit is taxable. (Do not confuse this with the rules for the sale of securities or real estate—those have their own tests and limits.)

Sale of Securities and Equity Interests

For securities, there are two paths to exemption:

1. CZK 100,000 limit —if your total income from the sale of securities (and the redemption of mutual fund shares) does not exceed CZK 100,000 per year, the income is exempt.
2. 3-Year Holding Period – If you hold a security for more than 3 years, the income from its sale is exempt.

Pleasenote: Starting January 1, 2025, a cap on the exemption will be introduced—total income from sales after meeting the holding period requirement ( 3 years for securities, 5 years for business interests) is exempt only up to 40 million CZK per year.

Sale of Real Estate

Income tax on the sale of real estate is calculated based on the profit, i.e., the difference between the sale price and the acquisition cost of the property. Expenses related to the sale ( real estate agency commissions, preparation of the sales and purchase agreements, appraisal reports) or property renovations ( however, only those improvements directly related to increasing the property’s value are counted, such as replacing windows or adding insulation).

In many cases, however, you are exempt from the tax—provided you resided in the property for at least 2 years immediately prior to the sale (or a shorter period if you use the proceeds for your own housing needs). If you do not meet the residency requirement, the ownership duration test applies: for properties acquired after January 1, 2021, the requirement is 10 yearsof ownership (5 years for older properties). However, the exemption does not apply to property classified as business assetsand has other exceptions.

Example: You have owned an apartment since 2018 and have never lived there; you sell it in 2025. Because the holding period requirement is 10 years for properties acquired after January 1, 2021, but remains 5 years for older acquisitions (up to December 31, 2020), the sale will be exempt (the 5-year requirement is met). Conversely, an apartment purchased in 2022 will be exempt only after 10 years of ownership, unless you meet the “residence” requirement or use the proceeds for your own housing needs.

Cryptoassets

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

1. anannual exemptionlimit for smaller amounts,
2. and a holding period requirement (similar to that for securities) linked to a cap of 40 million CZK on the total amount of exempt income.

Gifts, winnings, and other income

Other income also includes non-monetary income (gifts). These are exempt when given between direct lineal relatives and certain collateral relatives. Lottery winnings up to 50,000 CZK are exempt. Amounts exceeding this limit are typically subject to withholding tax at the time of payment.

Personal Income Tax Rate

Personal income tax has two rates:

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

For 2025, the average wage is 46,557 CZK, so 36 times that amount is 1,676,052 CZK per year (for monthly wage advances, 3 times the average wage is used, i.e., 139,671 CZK). The portion of the taxable income up to this limit is taxed at 15%, and the portion above the limit is taxed at 23%.

When must individuals file their tax returns?

The deadlines for filing tax returns are set by the Tax Code. An individual’s tax return is typically filed after the end of the tax period, which is generally after the end of the calendar year. This requirement applies, for example, to many self-employed individuals, employees with certain other taxable income, or people who simultaneously received income from multiple employers subject to withholding tax.

For income earned in 2025, the standard deadline for paper tax returns was April 1, 2026. For electronic filing, the deadline was May 4, 2026. If the return was filed by a tax advisor or attorney, or if the taxpayer was subject to a mandatory audit of their financial statements, the deadline was July 1, 2026. The calculated tax was generally also due by the same applicable deadline.

Tax Exemptions: When You Don’t Pay Taxes

The law provides for a number of exemptions —typically for certain real estate sales (if the time test is met or you use the proceeds for your own housing needs), for gifts between close relatives, or for winnings up to certain limits. A stricter limit now applies to gambling: the exemption is limited to 50,000 CZK (based on the difference between winnings and stakes for the year, by type of game).

Also be aware of the reporting requirement —if you receive exempt income exceeding 5 million CZK, you must report it to the tax authority by the deadline for filing your tax return.

It is precisely this tax-exempt income that can be tricky: the fact that you do not have to pay tax on the income does not automatically mean that you have no obligations to the tax authority. Therefore, for larger amounts, it is always advisable to separately verify whether a reporting obligation applies.

Tax Base and Tax Loss

You determine the tax base by subtracting expenses ( actual or flat-rate) from taxable income and then adding up the partial tax bases for each type of income. The law also addresses tax losses. This refers to a negative tax base and occurs when tax-deductible expenses exceed taxable income. However, it can only arise from self-employment and rental income.

It can be carried forward over the next 5 tax periods or carried back over the 2 preceding periods. For retroactive application, there is a limit of a maximum of 30 million CZK in total for the two preceding periods, and this is typically handled through an amended tax return after the loss has been definitively determined.

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

Before calculating your tax, you can reduce your tax base by so-called non-taxable portions. These include, in particular:

• Donations (gratuitous transfers): You may deduct the value of a donation made for public benefit purposes. The value must be at least 1,000 CZK or more than 2% of the tax base. You may deduct up to 30% of your tax base for donations.
• Interest on housing loans: for housing needs acquired by December 31, 2020, up to 300,000 CZK per year; for housing needs acquired on or after January 1, 2021, up to 150,000 CZK per year.
• Retirement products with a government contribution: the total cap is 48,000 CZK per year.

Tax Deductions

Tax credits form the basis of tax deductions. These include, in particular:

• Taxpayer deduction: 30,840 CZK per year (also available to non-residents with income from employment).
• Spouse deduction: 24,840 CZK per year, but only if you live in the same household with a child under 3 years of age and your spouse’s annual income does not exceed 68,000 CZK.
• Disability deduction: 2,520 CZK (Levels I–II) / 5,040 CZK (Level III).
• Discount for ZTP/P cardholders: 16,140 CZK.

It is no longer possible to claim the student discount or the child placement discount (preschool tuition), as these have been completely eliminated.

Tax Credits for Children and the Tax Bonus

The tax credit for a dependent child remains the same for 2025: 15,204 CZK per year for the first child, 22,320 CZK for the second, and 27,840 CZK for the third and each additional child. For children with severe disabilities (ZTP/P), these amounts are doubled. If your tax liability is negative after applying these deductions, you may be eligible for a tax bonus (commonly referred to as a “child tax credit”) provided you meet the minimum income requirement. To qualify for the annual tax bonus for 2025, you must earn at least 124,800 CZK from employment or self-employment. For the monthly bonus paid by an employer, the minimum monthly income in 2025 was 10,400 CZK.

How to Calculate Personal Income Tax – Practical Examples

Employee without children (payroll tax)

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

• Tax base: 540,000 CZK (rounded down to the nearest hundred crowns).
• Tax rate: 15% of 540,000 CZK = 81,000 CZK.
• Tax credits: taxpayer credit of 30,840 CZK.

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

Employee with two children (wage taxation with tax benefits)

Annual salary of 900,000 CZK, two children.

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

Final tax: 135,000 − 68,364 = 66,636 CZK.

High-income employee (exceeding the 23% threshold)

Annual salary: 2,100,000 CZK.

• Up to 1,676,052 CZK: 15% = 251,407.80 CZK.
• On the amount of 423,948 CZK above the 23% threshold = 97,508.04 CZK.
• Tax before deductions: 348,916 CZK (rounded up to the nearest whole crown).
• − taxpayer deduction: 30,840 CZK

Final tax: 318,076 CZK.

Self-Employed Income Tax: Calculation Using Actual Expenses and Supplementary Pension Insurance

A self-employed individual has income of 1, 200,000 CZK and verifiable expenses of 600,000 CZK. She contributed 48,000 CZK to a supplemental pension plan.

• Partial tax base: 1,200,000 − 600,000 = 600,000 CZK.
• Tax-exempt amounts: − CZK 48,000 (supplementary pension insurance) → tax base of CZK 552,000.
• Tax at 15% = 82,800 CZK.
• − taxpayer deduction: 30,840 CZK

Final tax: 51,960 CZK.

Self-Employed Income Tax: Calculation Using Flat-Rate Expenses and a Donation

A self-employed individual has income of 900,000 CZK and claims a 60% flat-rate deduction (i.e., 540,000 CZK). During the year, they made donations totaling 10,000 CZK (meeting the minimum requirement of 2% of the tax base or 1,000 CZK; counted toward the limit of up to 30% of the tax base).

• Partial taxable income: 900,000 − 540,000 = 360,000 CZK.
• Tax-exempt amounts: − 10,000 CZK (charitable donations) → 350,000 CZK.
• Tax at 15% = 52,500 CZK.
• − taxpayer deduction: 30,840 CZK

Final tax: 21,660 CZK.

Rental Income (30% Flat-Rate Deduction)

You rent out an apartment, with income of 360,000 CZK/year. You claim a 30% flat-rate deduction (108,000 CZK).

• Taxable income: 252,000 CZK.
• Tax at 15% = 37,800 CZK.
• − taxpayer deduction: 30,840 CZK

Final tax: 6,960 CZK.

Combination: salary + rental income + tax loss from self-employment

You have a salary of 480,000 CZK, rental income of 200,000 CZK, but incurred a business loss of −120,000 CZK.

• Salary: 480,000 CZK – this cannot be reduced by the loss.
• Rental income: 200,000 − 120,000 = 80,000 CZK.
• Tax base: 480,000 + 80,000 = 560,000 CZK.
• Tax at 15% = 84,000 CZK.
• − taxpayer deduction: 30,840 CZK

Final tax: 53,160 CZK.

DPP: When to Withhold Tax and When to Pay Advance Tax

DPP 11,000 CZK/month, without a signed declaration → withholding tax 15% = 1,650 CZK; the income is not normally included in the tax return (unless voluntarily reported).

DPP: 15,000 CZK/month, without a declaration → the 11,500 CZK limit is exceeded; this is advance tax (monthly advance tax rules apply; everything is settled in the tax return).

Sale of securities after 3 years – partially taxed (new rule effective January 1, 2025)

You sell shares after 4 years for 45,000,000 CZK; acquisition cost is 20,000,000 CZK. Starting in 2025, an annual limit of 40,000,000 CZK applies. Income above the limit is taxed; you can claim the expense (acquisition cost) on a pro-rata basis.

• Exempt: 40,000,000 CZK.
• Taxable income: 5,000,000 CZK.
• Deductible expense: 20,000,000 × (5,000,000 / 45,000,000) = 2,222,222 CZK.
• Partial tax base: ≈ 2,777,778 CZK.

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

Sale of an apartment after at least 2 years of residence — fully exempt

You are selling an apartment in 2025 in which you resided for at least 2 years immediately prior to the sale. The purchase price is now 6,500,000 CZK.

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

Sale of an investment apartment (time test not met)

You purchased the apartment in 2022 for 4,000,000 CZK (not as part of a business). Between 2023 and 2024, you made improvements totaling 300,000 CZK. The real estate agency commission on the sale in 2025 is 177,000 CZK, and legal fees are 20,000 CZK. The apartment was not your primary residence, and you will not use the proceeds for your own housing needs. You sell it for 5,900,000 CZK.

For real estate acquired after January 1, 2021, a 10-year holding period applies (previously 5 years for acquisitions made by December 31, 2020). You do not meet this requirement.

• Taxable income: 5,900,000 CZK
• Tax-deductible expenses: acquisition cost 4,000,000 + capital improvements 300,000 + commission 177,000 + legal services 20,000 = 4,497,000 CZK
• Taxable base: 5,900,000 − 4,497,000 = 1,403,000 CZK

Tax due (15%): 1,403,000 × 0.15 = 210,450 CZK

Tax credits (e.g., a taxpayer credit of 30,840 CZK) can reduce the final tax; if you have no other income, the tax will be 179,610 CZK after the credit is applied.

Summary

Personal income tax applies to income from employment, business activities, capital assets, rent, and other sources. For the year 2025, a 15% tax rate applies to taxable income up to 1,676,052 Kč and a 23% rate applies to income above that threshold. Self-employed individuals may claim actual or flat-rate expenses, or, if conditions are met, utilize the flat-rate regime; the resulting tax is further affected by non-taxable portions, tax credits, and tax benefits for children. Tax returns for 2025 were due by April 1, 2026; electronically by May 4, 2026; and through a tax advisor, attorney, or in the case of a mandatory audit, by July 1, 2026. The law also provides for a number of exemptions, such as for certain income from the sale of real estate, securities, gifts, or cryptoassets.