Taxes in the Czech Republic are increasingly attracting Polish entrepreneurs and people working abroad. The tax system is characterized by its simplicity and favourable tax rates. This can serve as an alternative to the Polish fiscal system. How does taxation work in the Czech Republic? What should you know before you decide to do business or work in this country?
Table of Contents
- Taxes in the Czech Republic – How Does Taxation Work in the Czech Republic?
- Taxes in the Czech Republic – Income Tax
- Taxes in the Czech Republic – VAT
- Taxes in the Czech Republic – Social and Health Insurance Contributions
- Taxes in the Czech Republic – Taxation of Business Activity
- Taxes in the Czech Republic – Summary
- FAQ -Taxes in the Czech Republic
Taxes in the Czech Republic – How Does Taxation Work in the Czech Republic?
The Czech tax system is based on several basic pillars, i.e. personal income tax, VAT, and business tax.
Basic assumptions of the tax system in the Czech Republic:
- Personal Income Tax. The rate is 15% for income up to 48 times the average monthly wage and 23% for income above this threshold.
- VAT. The standard rate is 21%, but there is also a reduced rate (12%) on specific goods and services, as well as a 0% rate.
- Social security contributions. They are mandatory for employees and employers.
Thanks to a simple and transparent tax system, the Czech Republic attracts investors and those considering relocation.

Taxes in the Czech Republic – Income Tax
In 2025, there are two personal income tax rates in the Czech Republic:
- 15% for income up to 48 times the average monthly salary;
- 23% for income above the threshold.
Persons with income exceeding 100 000 CZK are required to pay an additional 7% tax on the excess.
The income threshold at which higher tax rates apply has also changed. Under new regulations, the 36-times average wage multiplier for 2025 will be 1 676 052 CZK. Therefore, incomes exceeding 139 671 CZK per month will be taxed at the progressive rate of 23%. Compared to the previous year, the increase is 7 770 CZK.
Importantly, personal income tax in the Czech Republic covers both residents and non-residents. Tax residents pay tax on global income. Non-residents are taxed only on income earned in the Czech Republic.
Key information about income tax:
- Income is divided into categories e.g. salaries, income from business activity, rental income or income from investments;
- The tax-free amount is relatively high. This means less burden for people with lower incomes.
- There are possibilities for tax deductions, such as for children or insurance premiums.
Taxes in the Czech Republic – VAT
VAT (Value Added Tax) in the Czech Republic is similar to the one functioning in Poland. However, it stands out in several important respects.
VAT rate | Types of goods/services |
21% | Applies to most goods and services. |
12% | It includes services such as accommodation, catering, water-sewage, heating, and passenger transport. |
0% | Applied to books that were previously subject to a 10% rate. |
As of 1 January 2025, the VAT registration threshold has been raised from 2 000 000 CZK to 2 536 500 CZK.
Taxes in the Czech Republic – Social and Health Insurance Contributions
The social security system in the Czech Republic is mandatory for all employees and self-employed persons. These contributions are paid by both employers and employees.
Amount of contributions:
- Employee: approximately 11% of gross salary.
- Employer: approximately 34% of gross salary.
These contributions include e.g.:
- health insurance;
- pension insurance;
- unemployment insurance.

Taxes in the Czech Republic – Taxation of Business Activity
Setting up a company in the Czech Republic is relatively quick and simple. The most popular forms of doing business in the Czech Republic are:
– sole proprietorship (živnostenský list) and
– limited liability company (s.r.o.).
Income Tax on Business Activity:
- 15% on net income;
- the ability to use a simplified accounting system.
For companies operating in international industries, the Czech Republic offers favourable conditions. This results from double taxation avoidance agreements.

Taxes in the Czech Republic – Summary
Taxes in the Czech Republic stand out for their simplicity and transparency. Tax rates are relatively low compared to other European countries. As a result, Czech tax system is an attractive solution for both employees and entrepreneurs. If you are planning business or work in the Czech Republic, it is worth familiarizing yourself with the local tax system. Do not forget to consider the benefits of available deductions and exemptions.
Do you have questions about taxes in the Czech Republic? Contact us for detailed information and expert support in doing business abroad!
FAQ -Taxes in the Czech Republic
Is there a tax-free amount in the Czech Republic?
Yes, the tax-free amount in the Czech Republic is about 30 840 CZK per year.
What are the income tax rates in the Czech Republic?
15% for income up to a certain threshold and 23% for higher income.
Do I have to pay social security contributions in the Czech Republic?
Yes, contributions are mandatory for both employees and entrepreneurs.
Is VAT in the Czech Republic different from VAT in Poland?
Yes. Although the standard rates are similar, the Czech Republic has different thresholds and categories of reduced rates.
Can I set up a business in the Czech Republic as a foreigner?
Yes, the procedure is relatively simple and accessible to EU citizens.
What is the taxation of real estate rental in the Czech Republic?
Rental income is taxed at a rate of 15% after deducting costs.
Does the Czech Republic have double taxation treaties with Poland?
Yes, double taxation of income can be avoided thanks to these treaties.
Do I have to pay taxes in the Czech Republic if I work remotely there?
It depends on your tax residency status and where you earn your income.
How to register for VAT in the Czech Republic?
VAT registration requires submitting an application to the tax office. It is mandatory after exceeding 2 million CZK turnover per year.
Does the Czech Republic offer child tax credits?
Yes, child tax credits are available and can significantly reduce the value of tax.