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Czech Republic Income Taxes



Taxation of an individual's income is progressive. In other words, the higher your income, the higher the rate of tax that you will pay. Tax on the income of individuals is payable at rates of 15% - 32%. There are reduced tax rates for certain income earners.
Corporate tax in 2004 is 28%. There is a reduced tax rate for certain corporations. The rate of corporation tax is reduced constantly to encourage economic activity, so that for instance, the rate of corporation tax in 1992 was 45% as compared to the present rate of 28%.
Czech Republic Taxation of Current Income (Personal Income Tax)
An individual pays tax on his income as a wage earner or as a self-employed person. Tax for an individual who meets the criteria of a "permanent resident" of the Czech Republic is calculated on his income earned inside the Republic and abroad. A foreign resident who is employed in the Czech Republic pays tax only on income earned in the Republic.
An employer is bound to deduct, immediately on a monthly basis, the requisite tax from employees salaries. A self-employed person must prepay taxes that will be offset on making an annual tax return. The advances are determined on the basis of the previous year's tax return. In the case of a new business, the prepayments are calculated on the basis of estimates made by the owner of the business.
Certain payments are deductible from taxable income as will be specified later.


Czech Republic Individual income tax rates 2004
Tax base (CK) Tax
0 - 109,200 15%
109,201 - 218,400 20% of base exceeding 109,200 CK
218,401 - 331,200 25% of base exceeding 218,400 CK
331,201 and over 32% of base exceeding 331,200 CK.


Czech Republic Reporting Dates
The tax year in the Czech Republic is the calendar year ending on December 31.
If your income is derived solely from a salary, you are not bound to file a yearly return. In all other cases, the annual return must be submitted by March 31 (3 months after the end of the tax year).

If you are represented by an authorized Czech tax advisor, you may make an application to submit the return by June 30.
A delay in submitting an annual return will entail fines, in most cases, of 10% of the tax payable. Fines are imposed even after tax has been prepaid.


Czech Republic Corporate Tax
  • Corporation tax is currently 28%.
  • A reduced rate of 25% applies to investment companies, investment funds and pension funds.
  • A tax of 15% is imposed on dividends paid by Czech corporations.
  • Income from interest is deemed ordinary income and as such is taxed at 28%.


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    Registering a Corporation in the Czech Republic
    The first stage in setting up a corporation is to obtain a commercial license through the Companies Registrar (Obchodni Registrar). To do this, the company must contact a Czech resident who carries a Czech identity card. When submitting the application to incorporate, the following data must be provided:
  • A commercial license.
  • Documents of incorporation.
  • Business name of the company and the address of its registered office or of its owners.
  • Location of the company activities.
  • Types of activity.
  • Form of incorporation
  • Confirmation that the original capital has been deposited with a Czech bank.
  • Lease agreement.
  • Approval for foreign workers.
    • As a general rule, it is possible to incorporate in the Czech Republic in any of the following ways:
  • Commercial company (general) -the company will include at least 2 people.
  • Limited partnership - that includes the liability of one or more of the parties to the joint undertaking.
  • Limited company (with the letters 'S.R.O.' after the company name) - having at least one but no more than 50 members.
    • The liability is to the limit of the company's registered capital.
    The registered capital is not less than 100,000 Czech Kurona, with each member's share being no less than 20,000 Czech Kurona.
  • Joint Stock Company with the letters 'A.S.' after the company name
    • A company with a minimum registered capital of one million Czech Kurona.
  • A Cooperative - with an unlimited number of members. The business name of the Cooperative must include the word 'Cooperative'.
  • Commercial branch/representation.
  • Joint Venture - a combination of the above forms of incorporation.
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    Czech Republic Depreciation of Fixed Assets

    The regulations on depreciation were amended in 1999 to enable a company to depreciate an asset over a shorter period than in the past.
    As a general rule, the classes of fixed assets are divided into 5 groups (categories).



    No. of years of depreciation Class of fixed asset Category
    4 Automobiles and buses
    Computers
    Office equipment    		 1
    6 Machinery & equipment
    Trucks & tractors
    Non-tangible rights     		2
    12 Motors and metal structures
    Industrial & agricultural machinery & equipment
    Ships
    Elevators    		 3
    20 Gas & oil pipelines
    Water distribution systems    		 4
    30 Buildings
    Bridges
    Roads and canals    		 5



    The company may select either the straight line or the accelerated method of depreciation. However, during the period of depreciation, the company may not alter the method of depreciation. Similarly, should the ownership of the asset change during the period of depreciation, the new purchaser may not alter the method of depreciation that was selected by the original owner.
    Additional relief is often provided, for instance, on the purchase of new equipment, an additional depreciation of 10% may be claimed in the year of purchase, subject to certain conditions, in addition to the depreciation listed in the above table.






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