Tax rates in the Czech Republic

Company Tax

19%

Tax Rate For Foreign Companies

Czech resident companies are taxed on their worldwide income, while non-resident companies are required to pay corporate taxes only on income sourced in the Czech Republic.
Foreign and domestic companies are subject to the same tax treatment. However, foreign-sourced dividend income forms a separate tax base and is taxed at a lower rate of 15% and may be conditionally exempt.

Capital Gains Taxation

Capital gains are taxed at the normal corporate income tax rate. Capital gains on the sale of shares and participation in EU/EEA resident companies are exempt from tax if conditions similar to those required to qualify for the dividend exemption are satisfied (10% ownership for 12 uninterrupted months minimum). EU/EEA resident companies that invest in Czech companies can benefit from this exemption if they fulfil the same criteria.

Capital gains obtained by non-resident companies of the EU/EEA or Czech companies investing outside the EU/EEA may be exempt from tax under the following conditions: the non-resident company is a tax resident in a third country with which the Czech Republic has signed a tax treaty; it satisfies the conditions for dividend exemption (10% holding for an uninterrupted period of 12 months) and is subject to a tax in the country of origin comparable to the Czech corporate tax at a minimum rate of 12%.

Main Allowable Deductions and Tax Credits

Expenses incurred to obtain, secure or maintain taxable income are generally deductible, such as amortisation of tangible and intangible assets, equipment and services purchased, business travel expenses, salaries and social security contributions. The start-up costs are fully deductible while the goodwill resulting from the acquisition of a new company can be amortised over 180 months. Goodwill resulting from a merger is not deductible. Taxes paid are generally deductible (except for corporate income tax).

Charitable donations over CZK 2,000 may be deductible up to 10% of the tax base (30% for donations in the tax periods ending from March 2020 up to the end of February 2023). Accrued interest under the generally accepted Czech accounting principles is in most cases tax-deductible, as are contractual fines and remuneration paid to members of the statutory bodies of a company. Payments for travel expenses and meal allowances for employees are in general deductible.

Tax losses can be carried forward for up to five years (unless there is a significant change in the company's ownership structure). From 2020, tax losses may also be carried back for 2 years (capped at CZK 30 million).

Investment incentives are available for the manufacturing sector and the technology and data centres in the form of exemptions from property tax or corporate income tax, financial support for job creation and employee training. Research and development expenses give rise to a tax allowance of up to 100%. An additional 10% tax credit is granted to companies whose research and development expenses in a tax year exceed those of the previous tax year.

Other Corporate Taxes

Companies are subject to a 15% to 35% tax on income paid to a non-resident for technical services, a real estate tax (varies according to the area, location, and usage of the land or buildings), environmental tax and road tax.

The employer contributes 9% of the gross salary of the employee to the health insurance fund and 24.8% for contributions to the social security fund, for a total of 33.8%. The maximum assessment base for social security purposes (i.e., old-age pension contributions and unemployment insurance, applicable in the case of both the employee and the employer, as well as for a self-employed individual) is 48 times the average wage for the calendar year (CZK 1,935,552 for 2023).

An exit tax is levied on the relocation of assets without a change of ownership between a Czech company and its foreign permanent establishment or when a Czech tax resident moves its residency abroad. The rate is the same as that of corporate income tax (currently 19%).

The transfer tax (imposed at a rate of 4% of the transaction price or the officially appraised value of the real estate transferred, whichever is higher) has been abolished with retroactive effect, hence it does not apply to real estate whose transfer was registered in the cadastral register on or after 1 December 2019.

A tax is payable annually with respect to vehicles used for commercial purposes, at variable rates according to engine capacity and vehicle size.

No stamp duties are levied in the country.

Starting in 2023, major banks and energy companies will be subject to a windfall tax. This entails a 60% surcharge on their corporate income tax for any profits exceeding their average historical earnings. The windfall tax is expected to remain in effect for a duration of three years. Banks are subject to a windfall tax if they achieve a net interest income of at least CZK 50 million and had the same income of at least CZK 6 billion in 2021. Non-bank taxpayers are subject to the windfall tax if their total annual net turnover from specific activities reaches at least CZK 50 million, and they achieved a turnover of at least CZK 2 billion from these activities in 2021. The activities include mining of coal, oil, and natural gas, production of coke oven products and refined petroleum products, electricity generation, transmission and distribution (with exceptions), gas production and distribution, wholesale of fuels, and pipeline transport of oil and gas. Taxpayers are also subject to the windfall tax if their total annual net turnover from mining and treatment of coal, oil, and natural gas, as well as production of coke oven products and refined petroleum products, reaches at least CZK 50 million, and their income from these activities accounted for at least 25% of their turnover in 2021.

Other Domestic Resources

Financial Administration of the Czech Republic

Tax Rate

Allowable Deductions and Tax Credits

Necessary expenses incurred in earning income (other than employment income) are generally deductible.

Non-residents should have at least 90% of their worldwide income from Czech sources to utilise the available deductions.

In 2023, the annual basic personal tax relief can be claimed in the amount of CZK 30,840. Allowance of up to CZK 24,840 can be claimed by a resident taxpayer whose spouse does not have an annual taxable income higher than CZK 68,000. The basic dependent-spouse relief doubles in case of disability of the spouse. The tax credit for children amounts to CZK 15,204 for the first, CZK 22,320 for the second, and CZK 27,840 for the third and other following dependent child, under certain conditions; if the total tax is lower than the respective child credit, the taxpayer will receive a special tax bonus equal to the difference between the child allowances and one’s tax liability, without any cap). Other credits are available in case of disability (CZK 2,520, CZK 5,040, or CZK 16,140 depending on the severity of disability), student tax credit (CZK 4,020 - up to 26-year-olds).

An employee's contribution to an old-age pension, a taxpayer's annual exemption, exemptions for non-working wife, disability allowance, high school/university students, etc. are among the available deductions. Tax deductions are granted for Czech mortgage interest (up to CZK 150,000 from 2022 onwards), life and supplementary pension insurance (up to CZK 24,000 each), as well as gifts. Donations to certain organizations can be deducted up to 15% the of personal income tax base when the donation is of at least CZK 1,000 or 2% the of personal income tax base.

For certain categories of income, a fixed percentage of gross income may be claimed as a deduction (e.g. lump-sum deductions of 80% for agricultural income or craft activities, 60% for a limited number of trading and entrepreneurial activities, 40% for activities pursuant to the special statutory provision, 30% for renting a property). However, the lump-sum expense deductions are applicable only up to the maximum amount of the respective percentage out of CZK 2 million (i.e. capped at CZK 1,600,000, CZK 1,200,000, CZK 800,000, or CZK 600,000, respectively).

Special Expatriate Tax Regime

Residents are liable for tax on their worldwide income while non-residents must pay tax only on income sourced in the Czech Republic. There is no special expatriate regime in the Czech Republic.