The Czech tax system is characterized by stability, predictability, and relatively straightforward administrative rules, making the country attractive to both local entrepreneurs and foreign investors. It combines a unified personal income tax rate, a clear corporate taxation structure, and a transparent system of social contributions. As an EU member state, the Czech Republic adheres to European financial reporting standards while maintaining its own specific regulations that should be taken into account when planning operations or considering business relocation.
Taxes and Reporting for Companies in the Czech Republic
In the Czech Republic, the vast majority of entrepreneurs and foreign investors register an s.r.o. (společnost s ručením omezeným) , the local equivalent of a classic LLC or a British LTD. However, all companies (s.r.o., a.s., etc.) operate under similar tax rules.
The corporate income tax rate in the Czech Republic is 21% and applies to all business profits, including capital gains from the sale of shares. Investment funds benefit from a reduced 5% rate. Profit is defined as the difference between revenues received and expenses incurred, as confirmed by accounting records.
All Czech companies must file their tax return by 1 April of the year following the reporting period, or by 1 May if submitted electronically. If the company is subject to a mandatory audit, the filing deadline is extended to 1 July.
If a Czech company employs staff under an employment contract, it is required to withhold 6.5% from the employee’s salary for social insurance and 4.5% for health insurance. The employer additionally contributes 24.8% for social insurance and 9% for health insurance. As a result, the total burden on the payroll amounts to 44.8%.
We’ve gathered everything that matters in one guide: jurisdictions, taxes, payment systems, and the most common mistakes entrepreneurs face when entering new markets.
VAT calculation rules in the Czech Republic
VAT in the Czech Republic is generally charged at the standard rate of 21% on the supply of goods and services within the country. Certain categories of goods and services, including food products, medicines, drinking water, construction services related to social housing, hotel accommodation, admission to cultural, sports, theatrical, or similar venues, as well as catering services are taxed at a reduced rate of 12%. VAT is not charged on printed or electronic books, nor on medical, educational, financial, insurance, social, and postal services.
Companies with an annual turnover exceeding 2 million Czech crowns (CZK) are required to register as VAT payers starting from the following year. If turnover exceeds 2,536,500 CZK (104 700 €), VAT registration must be completed immediately.
A VAT return must be filed and the tax paid within 25 days after the end of the tax period, a calendar month (or a calendar quarter, if the company is eligible for quarterly reporting).
Dividend Tax in the Czech Republic
Czech companies are required to withhold tax on payments of dividends, interest, and royalties. The dividend tax rate for Czech residents is 15%. The rates applicable to residents of other countries are determined by the relevant international double taxation treaties. Residents of other states may pay dividend taxes in their country of residence, in accordance with the applicable bilateral convention.
Taxes in the Czech Republic for Individuals
Individuals may register as OSVČ (Osoba samostatně výdělečně činná), a self-employed person equivalent to the status of a private entrepreneur.
The Czech Republic applies a progressive personal income tax system:
- gross annual income up to 1,676,052 CZK (approximately €69,200) is taxed at 15%;
- income exceeding this threshold is taxed at 23%.
Self-employed individuals also pay social contributions (minimum in 2025 is 4,759 CZK, roughly €196) and health insurance (minimum in 2026 is 3,144 CZK, around €130).
Entrepreneurs earning up to 2 million CZK annually (about €82,600) can opt for the simplified tax regime (paušální daň). This system bundles income tax and both contributions into one fixed monthly payment, helping reduce the overall tax load, streamline paperwork, and make monthly expenses more predictable.
Czech entrepreneurs are taxed under three groups with a comparative table provided below.
Group | Monthly payment | Payment structure | Annual turnover limit |
1 | 8 716 Kč (360 €) |
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2 | 16 745 Kč (692 €) |
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3 | 27 139 Kč (1 121 €) |
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The Czech Republic’s tax system remains one of the most transparent and stable in Central Europe. Taxes in the Czech Republic have a clearly defined structure for both companies and individuals, and straightforward administrative rules make business planning and financial forecasting easier. For entrepreneurs and investors, the Czech Republic offers competitive corporate income tax rates, flexible reporting regimes, and favourable conditions for self-employed individuals (OSVČ) thanks to the simplified taxation system.
With accessible tax rates, predictable regulation, and opportunities for cost optimization, the Czech tax system makes the country an attractive choice for establishing a company, relocating a business, or working as a self-employed professional. A proper understanding of the relevant rules and obligations helps ensure effective operation in the market and prevents unnecessary expenses. If you are considering the Czech Republic as a jurisdiction for your business, it is important to assess the expected tax burden in advance and choose an optimal structure that aligns with your goals.
Frequently asked questions about taxation in the Czech Republic
Penalty for late submission of a tax return
- If the tax return is submitted more than five working days after the deadline, a penalty of 0.05 percent of the tax due is charged for each day of delay.
- If the tax return reports a tax loss, the rate is 0.01 percent per day.
- The maximum penalty is 5 percent of the tax due, but no more than 300,000 CZK, which is about 12,390 euros.
- If the calculated penalty is 1,000 CZK or less, the tax authority may decide not to collect it.
- If the tax return is not filed at all, the minimum penalty is 500 CZK, which is about 20.6 euros.
Penalty for additional tax assessment after an audit
- If a tax audit determines that the tax was underpaid, a penalty of 20 percent of the additionally assessed tax is imposed.
- If the audit reduces the declared tax loss, the penalty is 1 percent of the amount by which the loss is reduced.
Interest for late tax payment
If a tax payment is made after the required deadline, the tax authority charges interest for each day of delay. Interest begins to accrue on the fourth day after the due date; the first three days of delay are not counted. The interest rate is calculated as the key rate of the Czech National Bank, increased by 8 percent. For example, if the base rate is 6 percent, the interest rate will be 14 percent per year. In cases of intentional tax evasion, criminal proceedings may be initiated.
A foreign individual is considered a tax resident of the Czech Republic if they have established a permanent place of residence in the country or if they actually stay in the country for at least 183 days within a year. A place of residence refers to accommodation, either owned or rented, that is continuously available for use. “If a person qualifies as a tax resident in two countries, their status is determined by the international agreement between those countries.
A resident is entitled to standard tax credits and deductions, such as the basic personal allowance, child-related deductions, spousal support deductions, and other applicable benefits. This also applies to foreigners, if they meet the residency criteria, they are eligible for the same benefits as Czech citizens.
All companies and large individual entrepreneurs are required to prepare and submit annual financial statements.
The reporting must include:
- Balance Sheet (Rozvaha) reflects the company’s assets and liabilities.
- Profit and Loss Statement (Výkaz zisku a ztráty) presents income, expenses, and financial results.
- Explanatory Notes (Příloha k účetní závěrce) provides information on accounting methods used.
If a company meets at least two of the following three conditions in two consecutive tax periods (current and previous), two out of three it is required to undergo an audit:
- Annual turnover exceeds 80 million CZK (€3,304,000)
- Total assets exceed 40 million CZK (€1,652,000)
- Number of employees exceeds 50
Companies undergoing an audit must also include the following in their financial statements:
- Cash Flow Statement (Přehled o peněžních tocích / Cash flow) shows cash inflows and outflows.
- Statement of Changes in Equity (Přehled o změnách vlastního kapitálu) explains how the company’s equity changed over the year.
All companies are also required to file a corporate income tax return and a VAT return. If the company employs staff, it must submit reports on social and health insurance contributions.
Yes. If you work for a Czech company (or receive other income from Czech sources), you may be subject to Czech taxation even if you spend less than 183 days in the country.
If you require detailed tax consultation in the Czech Republic or assistance with company registration, our team will be glad to help. We operate Monday to Friday, from 9:00 to 19:00. To book a consultation, please contact us via the form on our website, by phone, or through any convenient messaging platform.
