Income tax of natural persons
The natural persons income tax is governed by Act No. 586/1992 Coll. on income taxes.
Income is understood to mean both monetary and non-monetary income.
The taxpayer is a natural person, who is registered for permanent residence in the Czech Republic or resides in the Czech Republic at least 183 days in the calendar year. The tax liability also applies to income from sources abroad.
If a natural person is not registered for the permanent residence in the Czech Republic, the tax liability applies only to income from sources in the territory of the Czech Republic.
Every person/legal subject must register for the income tax. For employees, this is done by their employer and the tax is further paid by the employer on their behalf. Business entities (natural persons - OSVČ, legal persons - trading company) are obliged to register on their own within 30 days of their registration with the local financial office and pay the tax themselves.
The rate of personal income tax is 15% (for corporations it is 19%).
Subject of the tax
The subject of personal income tax is:
Income from dependent activity - Most of the earnings from dependent activity are mostly wages and salaries including earnings for the work of members of cooperatives, partners, directors and others
Income from self-employment - Incomes from business and self-employment activities, which exceeds the expenditure that is spent on achieving, securing and maintaining the income during the taxable period (calendar year)
Income from capital assets - Profits, interests and other earnings from deposits in savings books, income from the sale of other securities, or income from the supplementary pension plans and life insurance plans.
Income from rents - These are generated by e.g. renting both real estate and movable property.
Other income – Other incomes include e.g. revenues from occasional renting, lottery rewards and bets.
Incomes not subjected to the income tax:
Income earned through inheritance or donation of real estate and movable property (Inheritance and gift tax must be paid – please refer to our article https://www.innofin.co/blog/types-of-taxes-in-the-czech-republic)
Loans and mortgages
Income from the extension or reduction of the joint property of spouses,
Income deriving awarded by the European Court of Human Rights to the extent that the Czech Republic is obliged to pay
Revenues exempt from income tax include:
Competition or advertisements rewards, lotteries, and prizes from a sports competition worth up to CZK 10,000
Interest on house saving plans
Revenue from the sale of real estate, if the time between acquisition and sale exceeds 5 years
Revenue from the sale of a family house or apartment if the seller had been resident for at least 2 years immediately prior to sale
Support received from child/spouse maintenance obligations
Received damages and benefits from property insurance and liability for damages
Revenues from the operation of hydropower plants up to 1MegaWatt power
Revenue in the form of social benefits, health benefits, retirement, and insurance
Financial support for the victims of crime
Subsidies from the government
The tax base for a natural person can be also reduced through tax reliefs. Most of the tax reliefs can be applicable monthly, only the discount on spouses is applied annually. The table below summarizes tax relieves available for a natural person.