Taxes are not just an annoying box on the calendar. They are an important system through which the state funds schools, hospitals and roads – and they affect us all directly. But taxes are not a single tax law, but a sophisticated network of regulations. Do you want to be clear about what tax laws apply in the Czech Republic, what exactly they regulate and how they relate to each other? Read our article.
We will guide you from the principles of income tax (both personal and corporate), through the pitfalls of the Value Added Tax Act, to real estate tax, road tax or gambling taxation. Without paragraph jargon, but with respect for details and taking into account that regulations evolve. If you want to keep your tax laws in order and make sure you understand the rules under which you pay money to the state, you’ve come to the right place.
A tax is a compulsory, statutory, non-refundable payment to public budgets (state budget, county, municipality) that has no direct consideration for the payer. It is used to finance state and local government services – from health and education to infrastructure or security.
When we talk about tax law, we are referring to a specific regulation that defines what is taxed, who is the taxpayer or payer, how the base and rate are determined, and when and how the tax is paid. In the Czech Republic, the framework consists of the substantive laws (regulating what and how much) and the procedural tax code (regulating how). Let us now take a closer look at the most important ones.
A tax is a non-refundable payment without direct consideration; a fee is a payment for a specific public administration action (e.g. administrative fees); a duty is a levy on the importation of goods across a border.
Value added tax and excise duties (mineral oil, tobacco, alcohol).
Excise duties are already included in the price of the goods (e.g. fuel), so you don’t see them broken down as VAT.
The most searched tax law is the Income Tax Act. A single piece of legislation deals with individuals and corporations together, so there is no separate Personal Income Tax Act or Corporate Income Tax Act.
The Income Tax Act defines what constitutes income, which income is subject to tax and which income is exempt from tax. It defines the different types of income (employment, business, capital, rent, other), determines how the tax base is compiled and what expenses can be claimed – whether actual in the books or tax records or flat-rate. Non-taxable parts of the tax base, deductible items and tax allowances, including child tax credits, also play an important role.
In the area of property, it regulates tax depreciation, technical appreciation and the tax consequences of the sale of securities or real estate (including time tests). For employees, it addresses advance and withholding taxation of wages, benefits, and employment tax obligations. For entrepreneurs and corporations, it describes advance tax payments, when liability arises, the taxable period, and required forms. It pays particular attention to foreign income and methods of avoiding double taxation, with regard to double taxation treaties.
It is relevant for practice that many of the rules have exceptions and limits which change over time. It is therefore always advisable to seek the most up-to-date wording.
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 Value Added Tax Act (in practice abbreviated as the VAT Act) is the backbone of indirect taxes. It defines what constitutes a taxable supply, when and where it is deemed to have taken place and who is obliged to declare and pay the tax. It explains under what conditions an entrepreneur becomes a VAT payer (and when voluntarily), what the VAT rates are and which supplies are exempt with or without a right to deduct.
Of practical importance are the rules for tax documents, the moment when the obligation to declare the tax arises, corrections to the basis and tax, and the right to deduct, including the coefficient for mixed transactions and subsequent adjustments to the deduction when the purpose of use of the property changes.
The law addresses the domestic reverse charge regime for selected supplies as well as cross-border rules within the EU, determining the place of supply for services, remote supply of goods and OSS/IOSS regimes for e-commerce. Electronic communication with the tax administration, periodic submissions and related control mechanisms are also an integral part of this.
What obligations do VAT payers and non-payers have? Find out in the next article.
The Tax Code is a procedural code that unifies the rules for the administration of all taxes. It determines how returns are filed, how tax is assessed (usually on the basis of the taxpayer’s allegations, but also by means of evidence or assessment by means of aids), how time limits run, when tax is assessed and when the right to assess tax is barred.
It describes the rights and obligations of taxpayers and the tax administrator, the course of local investigations and tax inspections, the details of notices, reports and decisions, and sets out the system of ordinary and extraordinary remedies (appeals, review, retrial). In the area of payment, it defines the order of payment, arrears and overpayments, interest on late payment, fines and instruments of security and recovery, including execution.
In short, the tax code is a map and a compass: it tells how tax administration is carried out from registration to control to enforcement, across all substantive tax laws.
The Real Estate Tax Act (also popularly known as the Real Estate Tax Act) regulates the tax rules for land and buildings/units registered in the Land Registry, with the taxpayer generally being the owner on the relevant date.
The Act determines how the tax base is determined for each type of property, how the coefficients are applied and how municipalities may adjust the tax up or down by local coefficients to take into account local conditions.
It also regulates exemptions – for example, for selected public buildings or temporary structures – and the obligation to file a return upon acquisition, change of ownership or change in parameters affecting the calculation.
Practically, in the case of co-ownership or JVUs, the law also addresses the division of the obligation between individual taxpayers and sets out the rules for payment and advances according to the amount of the tax assessed.
How do I file my property tax return? That’s what our next article will tell you.
The Road Tax Act applies to selected motor vehicles used for business or certain transport purposes. The taxpayer is the operator of the taxable vehicle registered in the vehicle register and the liability is based on actual use for business.
The law describes which vehicles are subject to the tax, how the tax is determined according to technical parameters and what exemptions exist (for example, for certain environmental categories or specific purposes).
The tax has undergone significant changes in recent years, which have limited the range of taxed vehicles and simplified the calculation – N2 and N3 vehicles and their O3 and O4 trailers are now primarily subject to the tax; passenger cars and most vehicles under 12 t are not.
The Gambling Tax Act unified the taxation of lotteries, betting, technical and other games and linked it to the licensing framework regulated by the Special Gambling Act.
The tax is levied on the operation of each type of gaming, with the tax base being determined differently for different categories – typically as the difference between deposits received and prizes paid out, or in other specific ways depending on the nature of the game.
The law differentiates rates for different types of games and also provides for the distribution of the tax revenue between the state budget and municipalities. Operators have recording, reporting and remittance obligations and are subject to the supervision of both the tax administrator and the regulator.
Excise duties are indirect taxes and apply to selected commodities, in particular mineral oils, alcohol and alcoholic beverages, tobacco products and other energy products.
The Excise Duty Act defines precisely when the tax liability arises, how the conditional exemption scheme with tax warehousing works, who can be an authorised warehousekeeper and how the control mechanisms , including stamps or stamps for tobacco products, are applied.
Also important are the arrangements for the movement of suspended goods between Member States under the EMCS system and the rules for proving taxation when sold to final consumers. The arrangements take account of the specificities of individual commodities, including possible concessions for small producers of beer or wine.
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 Real Property Acquisition Tax Act is not a law per se, but a Senate measure that was repealed in 2020. In the past, it applied to the acquisition for consideration of title to real property.
The substantive regulations – the Income Tax Act, the VAT Act, the Real Property Tax Act, the Road Tax Act, the Gambling Tax Act and the Excise Tax Act all say “what and how much”. The Tax Code says “how”.
In practice, you will find that the substantive law refers to the procedures under the Tax Code while requiring electronic filing and certain record keeping.
Because taxes in the country undergo regular amendments, you cannot rely on old rates, limits or wording. For a particular case, it is always necessary to base the taxpayer’s decision on the current wording of the regulations and methodological information of the tax administration.
The tax system of the Czech Republic is based on a network of substantive laws that determine “what and how much” and on procedural tax rules that say “how”. The basis is the Income Tax Act (jointly for individuals and corporations), which defines the types of income, the formation of the tax base, deductions and discounts, and the VAT Act as the backbone of indirect taxes (taxable transactions, rates, deductions, OSS/IOSS). The Tax Code unifies tax administration: filing, assessment and assessment, deadlines, controls, remedies and payment and enforcement.
Other key regulations: the Real Estate Tax Act (bases, coefficients, exemptions), the Road Tax Act (selected business vehicles), the Gaming Tax Act (rates by type of game, distribution of proceeds) and the Excise Tax Act (selected commodities, schemes and control mechanisms). The Real Estate Acquisition Tax measure was repealed in 2020. In practice, the regulations overlap and require electronic filing; rates, limits and exemptions change frequently and it is therefore necessary to base the specific case on the current wording of the laws and the methodology of the tax administration.
Generally, after 5 years of ownership (for properties acquired from 1 January 2021, the test is 10 years), or when living for at least 2 years or using the proceeds for your own housing needs.
Two rates apply: 21% (basic) and 12% (reduced); for books there is a special zero rate (exemption with deductibility).
After the amendments, the N2/N3 (freight) and O3/O4 trailer categories registered in the Czech Republic are subject to the tax; ordinary passenger cars outside business are no longer subject.
No, the Senate measure was repealed in 2020.
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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