Basic provisions regarding taxation of self-employed persons in the Czech Republic

Income from self-employment

Income from self-employment, if it is not income from dependent activity (employment), includes:

income from agricultural production, forestry and water management,
income from entrepreneurial activity (livestock),
income from other entrepreneurial activities for which an entrepreneurial licence is required (e.g. arbitration manager, estate manager, trust fund manager), as well as income of a payer without the relevant licence,
share of a participant in a general partnership and a general partner in a limited partnership in profits,
income from the use or granting of industrial property rights, copyrights, including related rights, including income from the publication, reproduction and distribution of literary and other works at one’s own expense,
income from the rental of property classified as commercial property,
income from the pursuit of independent professional activities.

Tax accounting

For income tax purposes, tax accounting is understood to mean accounting carried out for the purpose of determining the tax base and income tax.

This accounting contains data on income and expenses in the detail necessary to establish the tax base, as well as on property and debts.

For a meaningful determination of the components of property in tax accounting, special legal provisions on accounting apply, unless otherwise provided by the Income Tax Act.

Expenses determined as a percentage of income

If a taxpayer does not apply expenses actually incurred to obtain, secure and maintain income, he may apply expenses in the following amounts:

80% of income from agricultural production, forestry and water management, and income from craft entrepreneurial activities; however, the maximum expenses that can be applied are up to CZK 1,600,000,
60% of income from entrepreneurial activities; however, the maximum expenses that can be applied are up to CZK 1,200,000,
30% of income from the rental of property included in business assets; however, the maximum amount of expenses that can be applied is CZK 600,000,
40% of other income from self-employment, with the exception of income of a member of a general partnership; however, the maximum amount of expenses that can be applied is CZK 800,000.

The method of applying expenses determined as a percentage of income cannot be changed retroactively.

The amount of expenses includes all expenses incurred by the taxpayer in connection with receiving income from independent activities. The taxpayer is always obliged to keep records of income and a register of accounts receivable arising in connection with activities from which income from independent activities is received.

Tax base and tax loss

The tax base is the amount by which the income received by the taxpayer during the reporting period exceeds the expenses reliably incurred to obtain, secure and preserve it. The tax base does not include:

income exempt from taxation,
income for which it is separately established that tax is payable at a special tax rate in accordance with § 36 ZDP from the independent tax base (unless § 36(6) or (7) ZDP provides otherwise),
income included in the independent tax base in accordance with § 16a ZDP.

The taxpayer also takes into account inventories purchased in the calendar year preceding the year in which he commenced operations.

The same applies to other necessary expenses related to the commencement of operations.

If, according to accounting, tax accounting or income and expense records, expenses exceed income, the difference is considered a loss. The tax loss reduces the total amount of partial tax bases determined for individual types of income specified in § 7–10 ZDP.

Loss carryforward:

A tax loss that cannot be used in the reporting period in which it arose may be deducted from the total amount of partial tax bases for the next 5 reporting periods.
In accordance with § 34(1) ZDP, the loss may also be used in the 2 reporting periods immediately preceding the period for which the loss was determined (e.g. the loss for 2024 may be used for 2022 and 2023).

The taxpayer has the right to refuse to use the loss for the reporting period following the period for which the loss was determined; such notification must be submitted within the deadline for filing the tax return for the period for which the loss was determined. The refusal is final and applies to all subsequent reporting periods.

For previous periods, losses can only be deducted up to a total amount of 30 million crowns.

If a taxpayer refuses to use a loss for the period following the period for which it was determined, the deadline for determining the tax for the period in which the loss arose and for the periods in which it was used expires at the same time as the deadline for determining the tax for the period in which the loss arose.

(For example: loss for 2024 – declaration 1.4.2025, deadline expires 1.4.2028, even if the loss was taken into account; the same applies to 2022 and 2023 if the loss was used in those years).

Non-taxable parts of the tax base

Non-taxable parts of the tax base may be deducted from the tax base, including:

free benefits (donations, gifts),
interest on loans to finance housing needs (from building savings, mortgage loans, loans granted by a building society or bank in connection with a building savings loan or mortgage loan),
contributions paid for tax-supported products for old-age provision (pension affiliation, supplementary pension savings, pension insurance, private life insurance, long-term investment product).

Tax deductions under § 35ba ZDP (for 2024):

Per taxpayer – 30,840 Kč
Per spouse – 24,840 Kč
For a spouse who is entitled to a ZTP/P certificate – CZK 49,680
For 1st and 2nd degree disability – CZK 2,520
For 3rd degree disability – CZK 5,040
For a ZTP/P card – 16,140 CZK

ZTP/P (Zvlášť těžké postižení s průvodcem) is a card for persons with severe disabilities, which provides additional benefits. These discounts are deducted from the calculated tax, reducing the amount payable.

Tax benefits

The taxpayer is entitled to a tax benefit for a dependent child living with them in a shared household in a Member State of the European Union or a state forming part of the European Economic Area, in accordance with the following table.

Table: Tax relief – § 35c ZDP

	Annual rate (Kč)	Monthly rate (Kč)	ZTP/P annual rate (Kč)	ZTP/P monthly rate (Kč)
Per child	15,204	1,267	30,408	2,534
For the second child	22,320	1,860	44,640	3,720
For the third and each subsequent child	27,840	2,320	55,680	4,640

Note:

The taxpayer reduces the tax calculated in accordance with § 16 ZDP or reduced in accordance with § 35 or § 35ba ZDP by means of a tax allowance. The taxpayer may apply the tax allowance in the form of a tax credit, a tax bonus or a tax credit and a tax bonus at the same time.

Tax bonus

A tax bonus may be applied by a taxpayer who, during the reporting tax period, had income in accordance with § 6 or § 7 ZDP of at least six times the minimum wage (minimum wage 18,900 Kč × 6 = 113,400 Kč).

This income does not include:

income exempt from taxation,
income from which tax is withheld as a final tax at a special rate, with the exception of income to which the procedure under § 36(6) or (7) ZDP applies,
income that is exempt from taxation under § 38f ZDP.

Advance payments and personal income tax

The following are not required to pay:

taxpayers who only have income from dependent activities (i.e. from wages, unless it is foreign income) – the advance payment is withheld monthly by their employer,
taxpayers who, in addition to income from wages, also have income from other sources, but whose wages account for 50% or more of their total income, taxpayers whose tax liability for the tax period was less than CZK 30,000,
taxpayers with incidental income in accordance with § 10 ZDP,
the testator from the date of his death.

The following are obliged to pay:

a taxpayer whose last known tax liability exceeded CZK 30,000 but did not exceed CZK 150,000 – in the amount of 40% of the last known tax liability; the first advance payment is payable by the 15th day of the sixth month of the tax period and the second by the 15th day of the twelfth month. The amount of the half-yearly advance payment is rounded up to the nearest hundred crowns.
a payer whose last known tax liability exceeded CZK 150,000 – in the amount of 1/4 of the last known tax liability; the first advance payment is paid by the 15th day of the third month of the tax period, the second by the 15th day of the sixth month, the third by the 15th day of the ninth month, and the fourth by the 15th day of the twelfth month. The amount of the quarterly advance payment is rounded up to the nearest hundred crowns.

In 2025, advance tax payments and personal income tax shall be paid: