Flat Tax – 2025 Changes
If you’re self-employed and earn up to 2 million CZK per year, you can use the extended flat-rate tax.
For 2025, there are new lump-sum income and expense limits.
Please note: The flat tax in the Czech Republic has changed in 2025. The main changes are:
Tax is now divided into bands based on your income and expenses.
The income limit has increased.
The payment amounts for each tax band have changed.
Tax Rates vs Tax Bands vs Tax Brackets
A tax rate band is the amount of income which will be taxed at a particular percentage (tax rate). The current tax rates are 40%, 60%, and 80%
Example: the 60-40 tax reporting method is the most common. Using this method, the taxpayer deducts 60% of annual income, and pays tax on the remaining 40%
Each tax bracket is a range of income with a different tax rate.
In the Czech Republic, flat tax brackets are divided into earners up to 1 000 000 CZK, up to 1 500 000 CZK, or up to 2 000 000.
The flat tax rate bands are further divided by the taxpayer’s reported deductible expenses: either at 40%, 60%, or 80%.
Tax Rates: 40%, 60%, and 80%
The amount of flat-rate expenses depends on the type of trade business. In other words, we calculate expenses as a percentage of revenue, depending on the area of business. We subtract:
80% of income from agricultural production, forestry and water management and income from craft trades; however, you can claim expenses up to the amount of 1 600 000 CZK
60% of income from trade business; however, you can claim up to 1 200 000 CZK
40% of other income from independent activities (with the exception of income according to paragraph 1 letter. (d) and paragraph 6), however, you can claim up to CZK 800 000
30% of rental income from commercial property; however, expenses up to CZK 600 000 can be claimed at most.
Flat Tax Rate Band 1
For annual income up to CZK 1 million, no matter where the income derives from; or
Annual income up to CZK 1,5 million if at least 75% of income is from self-employment that can be reported using the 80-20 or 60-40 method; or
Annual income up to CZK 2 million if at least 75% of income is from self-employment in which a tax rate of 80% can be applied
Monthly payment for flat tax rate band 1: CZK 8,716 (covering monthly installments for income tax at CZK 100; social insurance at CZK 5,473; and health insurance at CZK 3,143 )
Flat Tax Rate Band 2
For annual income up to CZK 1,5 million, no matter of the activity which the income derives from; or:
Annual income up to CZK 2 million if at least 75% of income is from self-employment that can be reported using the 80-20 or 60-40 method
Monthly payment for flat tax rate band 2: CZK 16,745 (covering monthly installments for income tax at CZK 4,963; social insurance at CZK 8,191; and health insurance at CZK 3,591)
Flat Tax Rate Band 3
For annual income up to CZK 2 million, no matter of the activity which the income derives from
Monthly payment for flat tax rate band 3: CZK 27,139 (covering monthly installments for income tax at CZK 9,320; social insurance at CZK 12,527; and health insurance at CZK 5,292)
Switching Between Regular and Flat Tax
You have the option to choose between regular tax and flat tax once a year. This means you can switch from the regular tax method to the flat tax method, or vice versa. However, there are specific rules for when you can make this change:
Changes can only be made once a year.
You can make these changes from January 1st to January 11th.
You must wait until the end of the tax year to make any changes.
When Is the Czech Flat Tax (Paušální Daň) Canceled?
The Czech flat tax (paušální daň) can be canceled for several reasons. Here are the main ones:
You start qualifying for the Czech national VAT. This doesn’t apply if you only qualify for "Light VAT."
You became a shareholder of teh VOS (veřejná obchodní společnost) corporate.
You officially declared bankruptcy, and the bankruptcy process wasn’t completed by the end of the tax year.
Your trade license or other authority registrations were canceled.
You got a full-time job with a Czech company, and your trade license became a secondary income.
You stopped working as a self-employed person in the Czech Republic and became a tax resident abroad.
Advantages and Disadvantages of Flat Tax Reporting
Keep in mind that the flat tax reporting method isn’t always beneficial for the taxpayer. In fact, the flat tax system usually works better for solo entrepreneurs, as they often have fewer deductions and bonuses to claim, such as those for an unemployed spouse or for having children.
Advantages:
The main advantage of the flat tax is that there is no need for income tax paperwork.
You’ll pay much less tax than under the 60/40 rule if you are single and your income exceeds 1 million CZK.
Disadvantages:
Since no tax declarations or paperwork are required, you won’t have any official documentation to prove tax payments. This can make it difficult for foreigners under the flat tax system to prove Czech tax residency to their home countries.
Without tax return forms, there’s no proof of paying or declaring taxes in the Czech Republic.
You won’t have access to additional relief, discounts, or bonuses.
Registering for the flat tax can complicate mortgage applications.
It may make it impossible to get a Czech visa extension, permanent residency, or Czech citizenship.
Therefore, it’s always a good idea to consult with a professional tax advisor before registering for the flat tax.
If you have any doubts, feel free to reach out to Pexpats for professional help with taxes in the Czech Republic.
