Czech Republic
Corporate taxes and other direct taxes
The general corporate income tax (CIT) rate is 21%. A CIT rate of 5% applies to basic investment funds and 0% applies to pension funds.
Tax losses may be carried forward for up to 5 taxable periods. Tax losses may also be carried back for 2 taxable periods. The maximum amount that may be carried back from one taxable period is limited to CZK 30 million (approx. EUR 1.2 million).
An R&D tax allowance of up to 110% of eligible R&D costs can be claimed as a tax base deduction.
Thin capitalization rules apply – financial expenses related to credits, loans, and other instruments from related parties that exceed four times the equity (six times for banks and insurance companies) are not tax-deductible.
The EU Anti-Tax Avoidance Directive (ATAD) applies - Limitation of tax deductibility of exceeding borrowing costs; CFC rules; Exit taxation; Hybrid mismatch rules.
Investment incentives in a form of tax relief (tax holiday) are available for up to 10 taxable periods.
A special corporate tax referred to as a windfall tax applies to selected taxpayers in the fossil fuel sector and energy sector and to banks in the calendar years 2023-2025. The windfall tax rate is 60% and is applied on a specifically calculated tax base.
Generally, a withholding tax of 15% applies to dividends, royalties, interest, and to income originating in the Czech Republic. Tax rates may be reduced by double tax treaty (DTT). The Czech Republic has a wide international treaty network with over 90 DTTs concluded. If there is no DTT or agreement for the exchange of information in place, the payments are subject to a 35% withholding tax.
Tax exemption applies to dividend distributions, provided that certain conditions are met. Similar rules apply to tax exemption on capital gains from the sale of shares in subsidiaries.
In line with the EU Interest and Royalty Directive, the tax exemption on interest and royalty payments also applies when approved by the tax authority.
When certain conditions are met, the transactions that are generally subject to withholding tax but are thus exempt from tax must still be reported to the tax authority.
Road tax is imposed on selected heavy trucks and trailers.
A real estate tax applies to land and buildings, with tax rates generally depending on the type of property, while the final amount of tax may also be influenced by local rates (applied by local authorities).
There is no real estate transfer tax.
Level of attention paid by Tax Authority:
VAT and other indirect taxes
For 2024, the standard VAT rate is 21%. The reduced VAT rate of 12% is applicable, for example, on foodstuffs and additives usually intended for food preparation, products used as food supplements or substitutes, tap water, feed for animals, seeds, plants, medicines, medical devices meeting certain conditions, construction works on residential housing, accommodation, catering services except serving beverages other than tap water and specific beverages (such as milk, soya milk, milk- and soya-milk based beverages and similar products), water distribution and wastewater removal, heating and cooling, magazines and newspapers meeting certain conditions, and the mass transport of passengers. The supply of books is VAT-exempt subject to certain conditions. VAT-exempt services include financial and insurance services, the transfer of buildings/apartments/non-residential premises (from 5 years following the building approval), renting of real estate, mail services, radio and TV services, education services, and medical and social care services.
VAT payers are obliged to submit VAT returns, EC Sales Lists and Control Statements (detailed evidence for selected transactions) on a monthly or quarterly basis (depending on the status of the VAT payer).
Other indirect taxes include excise duties (on mineral oils, spirits, beer, wine, and tobacco products) and an energy tax (on natural gas, electricity, and solid fuels).
| VAT options in Czech Republic |
Applicable / limits |
| Distance selling |
EU threshold – EUR 10,000/year OSS system applicable |
| Call-off stock |
 |
| VAT group registration |
Yes - only for Czech legal entities. |
| Cash accounting - yearly amount in EUR (approx.)* |
 |
| Import VAT deferment |
|
| Local reverse charge |
Construction works, waste, gold, selected cereals and industrial crops, cell phones, integrated circuits, notebooks, tablets, videogame consoles, used real estate, supply of natural gas and electricity to traders, provision of telecommunication services to traders, outplacement of construction workers, and immovable property in forced insolvency sales.
|
| Option for taxation |
| - letting of real estate |
Yes – only to Czech VAT payers for the performance of economic activities |
| - supply of used real estate |
Yes (5-year time test) |
| VAT registration threshold* |
Approx. EUR 83,000/ year – only for Czech based legal entities |
Personal income tax / Social security system
Personal income tax is applied at progressive rates of 15% and 23% on all types of income (employment, self-employment, rental incomes, capital gains, interest) with exemptions of certain types to dividends and interest or director fees paid to non-residents, which are taxed at a flat rate of only 15%.
Income from employment and self-employment activities is subject to social security and health insurance contributions. In the case of employment, the employee’s contribution is equal to 7.1% (social security) and 4.5% (health insurance). For the employer, these are equal to 24.8% and 9%, respectively. Social security contributions are not paid on income exceeding the maximum assessment base (CZK 2,110,416). The example below shows the employer’s and employee’s costs in the case of the minimum wage and average wage in the private sector.
Wage related taxes
in Czech Republic |
Minimum wage
|
Average wage
in private sector |
| Exchange rate CZK/EUR |
in EUR |
in CZK |
in EUR |
in CZK |
| 24,716 |
765 |
18,900 |
1,779 |
43,967 |
| Total wage cost |
1,023 |
133,80% |
2,380 |
133.80% |
| Social security contribution - employer |
190 |
24.80% |
411 |
24.80% |
| Health insurance - employer |
69 |
9.00% |
160 |
9.00% |
| Gross salary |
765 |
100.00% |
1.779 |
100.00% |
| Personal income tax before standard tax deduction* |
115 |
15.00% |
267 |
15.00% |
| Personal income tax after standard tax deduction** |
10 |
|
162 |
|
| Employees' contributions |
89 |
11.60% |
185 |
11.60% |
| Net salary |
666 |
87.13% |
1,411 |
79.30% |
* 15% tax rate is applied on gross salary up to annual income of EUR 80,789 (or EUR 6,732 monthly), income above is taxed at 23 %
** Each individual is entitled to deduct a lump sum of CZK 2,570 (app. EUR 105) per month from his tax liability (so called "standard tax deduction")