Changes to Czech Taxes - Updated Rules and Rates
Follow the changes to taxes in the Czech Republic, including year-to-year tax regulations, rates and amendments for freelancers and employees.
Czech Income Tax Changes for Freelancers & Employees
Follow the changes to Czech taxation year-to-year in these regularly updated guidelines for internationals, freelancers, and employees. All changes come directly from the Czech Ministry of Finance, and include:
- Freelancer personal income tax changes, regulations, and rates.
- Employee income tax changes, and corporate tax amendments.
- Available tax relief, discounts, and bonuses.
- Updated deductible eligibility requirements.
- Yearly changes to social security and health insurance payments.
- Sickness insurance requirements.
- Flat tax payment changes and updated rules.
- DPP contract changes, updated VAT rates, and more.
Note: Pexpats has updated these guidelines to include accurate information on Czech taxes for the year 2024.
1 - Freelancer (OSVC) Tax Changes, Rates, and Rules
In 2024, the tax rates for trade license (živnostenský list) holders remain the same at 15% or 23%. However, there are some changes in who needs to pay the higher tax rate, and to available tax discounts. This is along with the standard updates to social security contributions, health insurance payments, flat taxes, and VAT rates.
The changes to freelancer (OSVC) taxes for 2024 include:
- The income limit for paying the higher 23% tax rate has lowered. Previously, the limit was average gross salary x 46. In 2024, it is average gross salary (CZK 43,967) x 36. This makes the income limit for the higher tax rate CZK 43,967 x 36 = CZK 1,582,812. If earning income under this amount, the 15% tax rate applies.
- There is no longer a student freelancer tax discount. From 2024, this discount (previously CZK 4 200) will no longer be available.
- There is a new condition for claiming a spouse with lower income. In 2024, the spouse must also provide daily care to a child under 3 years old. This condition did not previously exist, and is in addition to the spouse’s income threshold which remains the same (under CZK 68 000).
- Tax discounts for fees on kindergarten are no longer available. Previously, the discount for kindergarten fees was CZK 15 200 per child per year.
- Czech Non-Tax Residents can claim tax relief, discounts, and bonuses (if meeting the condition). This is for example when living in and reporting income from multiple countries at once. However, the taxpayer must have at least 90% total income from a Czech registered trade license (zivno).
Freelancer Payments to Social and Health
Along with the above changes, OSVC freelancer mandatory payments to social security and health insurance in 2024 are as follows.
- Social security and health insurance taxes now derive from 55% of the tax base (up from 50%). Previously, for example, if your gross income was CZK 1 million, your tax base would be CZK 400,000 (after using the 60/40 method). This calculation would then be: 400,000 x 0.5 x 29.2 (social security), and 400,000 x 0.5 x 13.5 (health insurance). Now in 2024, these calculations become CZK 400,000 x 0.55 x 29.2 (social), and CZK 400,000 x 0.55 x 13.5 (health).
- Minimum social security advances increase to CZK 3,852 per month (CZK 46,224 minimum per year). Note: This amount you pay for example even if reporting zero income from trade license activities for the year.
Mandatory health insurance tax deposits increase to CZK 2,968 per month (CZK 35,616 minimum per year). Note again: this is even if reporting zero freelance income.
Zivnost Sickness Insurance
Czech sickness insurance for self-employed freelancers on a trade license in 2024 remains optional, and has the following changes.
- The amount for sickness insurance has increased from 2.1% to 2.7%.
- Minimum monthly deposits are CZK 216 per month.
Note: There is still no minimum sickness insurance payment condition per year like for social security and health insurance.
Freelancer Flat Tax Changes
In 2024, the Czech Flat Tax changes to monthly payments are as follows.
- For flat tax rate band 1: the monthly payment is CZK 7,498. (This covers monthly installments for income tax at CZK 100; social insurance at CZK 4,430, and health insurance at CZK 2,968.)
- Flat tax rate band 2: the monthly payment is CZK 16,745. (This covers monthly installments for income tax at CZK 4,963; social security at CZK 8,191; and health insurance at CZK 3,591.
For flat tax rate band 3: the monthly payment is CZK 27,139. (This covers monthly installments for income tax at CZK 9,320; social security at CZK 12,527; and health insurance at CZK 5,292)
2 - Employee Payroll Tax and Employee Taxes
The minimum wage and average gross salary in the Czech Republic is also higher in 2024. Now, as of 1.1.2024, the minimum gross salary is CZK 19,400. Meanwhile, the average gross salary is CZK 43,967.
Changes to Employee Sickness Insurance
Starting January 2024, changes to corporate tax law will mean employees must pay sickness insurance from their gross salary. In the past, the employer paid this contribution, and it was only their responsibility.
Now, both the employee and the employer will have to pay the sickness insurance. The rate of employee sickness insurance in 2024 is 0.6% of gross salary.
Employee Income Tax Changes
Employee tax rates remain 15% or 23% depending on total income, but include the following changes in 2024.
- The coefficient to determine who pays the higher Czech tax rate of 23% changes from average gross salary x 4 to x 3.
- Example: average gross salary (CZK 43,967) x 3 = CZK 131 901. This is the income threshold on the progressive tax rate. Earn anything over this amount, and you pay at the tax rate of 23%
Changes to Part-Time DPP Contracts
A DPP contract (“dohoda o provedení práce” in Czech), sometimes “brigada” agreement, is a contract for temporary work. DPP contracts are one of the most common part-time job contracts for students, retirees, and seasonal or short-term workers. These contracts also do not make the employer responsible for income tax or employee contributions.
Previously, DPP contracts allowed for work not exceeding 20 hours per week, or 300 hours in any calendar year. If an employee went over these limits, the employer would then be responsible for hiring them on a full-time contract. However, this is no longer the case.
In 2024, the limit to the DPP contract becomes a salary threshold, effectively canceling the 300-hour condition. Instead, this condition becomes 25% of the average salary per month. For example: the average salary of CZK 43,967 x 0.25 = CZK 10,992 per month. If the employee on a DPP earns higher than CZK 10,992, they must switch to a normal employment contract.
Czech Corporate S.R.O. Income Tax Changes
Corporate s.r.o. income tax is 21% in 2024. This is up from the previous year’s 19%.
An s.r.o. (“společnost s ručením omezeným” in Czech) is one of the most common corporate entities for small to medium businesses. It can have multiple official shareholders, founders, CEOs, and managing directors.
Curious to learn more about the Czech s.r.o.? See our guide on how to register a Czech business for all the details.
Changes to Czech VAT
2024 also introduces significant changes to the Czech VAT system. In brief, these are:
- Two new VAT rates (12 percent and 21 percent), replacing the three previous rates of 10%, 15%, and 21%.
- Lower food product VAT rates.
- Higher rates on beverages, select services, and draft beer.
Need to determine exactly how much VAT to add on your Czech invoices? Try Pexpats’ VAT Payment Calculator.
Looking for Professional Advice on Czech Taxes?
Do you have more questions about Czech taxes? At Pexpats, we have answers! Our certified tax advisors work out of the heart of Prague 1, and are available in-person or 100% remotely. We offer advice and professional tax services for internationals, freelancers, and employees in the Czech Republic. That on top of completely free online Czech tax calculators for anybody to use. Curious to learn more? All it takes is sharing how Pexpats can help, and one of our tax agents will get right on your case!