Czech Tax: Two Methods for Freelancers
Freelancers and trade license holders in the Czech Republic can choose between two tax methods:
Income minus expenses – Tax is calculated on your income after subtracting actual business expenses.
60/40 method – You automatically deduct 60% of your income as expenses, even if your real expenses are lower or zero.
The 60/40 method is ideal for freelancers with low expenses, as it reduces tax liability and requires no bookkeeping. Since you cannot combine both methods, most self-employed professionals prefer 60/40 for its simplicity.
What is the 60/ 40 Czech Tax Method?
What is the 60/40 tax method in the Czech Republic, and how does it apply to your personal income tax return? Pexpats explains!
How the 60/ 40 Czech tax rule works
The 60/40 tax method is the most common way Czech trade license holders file the personal income tax return. This is because it is advantageous for freelancers and businesses with very little business expenses. It is also extremely easy.
By tax law, it allows taxpayers to automatically deduct 60% of their gross annual income as a business expense. This is even if there were zero expenses for the entire year. It also requires no documentation, recordkeeping, or submitting invoices along with the tax return.
In this way, it is much simpler than the real expenses tax method, and in some ways similar to the flat tax method (Paušální Daň). The flat tax method doesn’t require you to submit the annual tax return, but isn’t always beneficial for taxpayers.
Who can use the 60/ 40 tax method?
You can only use the 60/40 method on income up to a certain limit. In 2024, the income limit for deducting 60 percent of expenses is CZK 2 million. This is approximately 80,000 Euros.
If you earn over CZK 2 million, the 60/40 method is still applicable, but only for the income up to the two million koruna limit. Anyone qualifies for the 60/40 tax method
How it works for income over CZK 2 million
Say for example that you earn 100,000 over the CZK 2 million limit. In this case, you can still deduct 60% of expenses on your income up to the 2 million.
The remaining 100,000 will adjust your final taxable income. In this case, the calculation would be:
CZK 2 million x 60% (deductible) + CZK 100,000 = CZK 900,000 taxable income.
This taxable income will then have a tax rate of 23 percent. That is rather than 15 percent, as this amount falls into the higher tax bracket.
Can you deduct additional expenses?
If you are already using the 60/40 method, it is not possible to declare any additional deductibles.
This is because you have already deducted 60 percent from your gross annual income without submitting any documentation or proof of expenses.
That means no additional write-offs for your laptop, office equipment, or transportation costs. You can only claim 60 percent off in total.
How to calculate personal income taxes online
The Czech tax system can be confusing, but it doesn’t have to be. Try Pexpats’ completely free online tax calculators and tools for employees, freelancers, and expats in the Czech Republic. We developed these custom solutions together with certified tax advisors and accountants to simplify Czech taxes and support our services. Explore the best of our free tools today, or find professional tax assistance in our service packages for Czech taxpayers.
Czech Trade License Tax Calculation
Enter your yearly gross income, and our online Czech tax calculator will estimate your income tax, social security, health insurance, and net income under the 60/40 tax method.
