Employers must make monthly contributions into the social security insurance of each employee at a rate of 25% of their gross salary, including benefits and allowances. The social security system funds pension (21.5%), unemployment benefits (1.2%), and sickness (2.3%). The maximum annual cap for the assessment base for calculation of contributions into the social security system is 48 multiplied by the average monthly wage per year (CZK 1,867,728 for 2022).
Employers must also make monthly contributions to the health insurance for each employee, at a rate of 9% of the employee’s gross salary, including benefits and allowances, with no cap existing. Minimum monthly base for employees is CZK 15,200 in 2021. This applies typically to employees with low or no renumeration, usually on a sabbatical.
Residents of the Czech Republic are subject to tax on their worldwide income, whereas non-residents are subject to tax on the income generated only within the country. To be considered a resident, a person must spend more than 183 days a year in the country or have a home in the Czech Republic, in which they intend to stay permanently. According to Double Taxation Treaties, the permanent home available to the individual is essential. If the individual has a permanent home in both countries, DTT gives preference to the state with which the personal and economic relations are closer. Then the application of the habitual abode (183 days) applies. The tax domicile may change during the year, immediately after moving to the Czech Republic, with no need to stay 183 days in the Czech Republic.
Individuals are taxed a progressive tax rate based on all their types of income combined, including employment and passive incomes such as capital gains and rental income. Employers must withhold each employee’s employment income tax monthly and remit it to the tax authorities. Couples cannot file their income tax jointly.
|Monthly Gross Income||Progressive Tax Rate (%)|
|Up to CZK 1,867,728||15|
|Over CZK 1,867,728||23|
In the Czech Republic, individuals employed get tax credits instead of allowances. You can find more information in the Tax-Free Allowance section.
During payroll, employers withhold and remit the employee’s mandatory contributions to the social security insurance monthly. The social security system finances old-age pension, sickness, and unemployment benefits. Employees contribute at a rate of 6.5% of their gross salary, including benefits and allowances, capped at CZK 1,701,168 annually. The maximum annual assessment base of CZK 1,867,728 for 2022 applies.
Employers are also responsible for withholding and remitting the employee’s mandatory contributions to the health insurance monthly. Employees contribute at a rate of 4.5% of their gross salary, including benefits and allowances. No cap. However, the minimum monthly base of CZK 16,200 in 2022 applies.
Benefits in kind are taxable income, except for a few minor exceptions. Benefits in kind are valued at open-market values, although a fixed rate of 12% per year applies to cars specifically, regardless if it’s for business or personal use.The provision of a car for both business and private use is considered a gross taxable income that equals 1% of the purchase price monthly.
Travel expense reimbursement in excess of a fairly low statutory limit (determined by the length of the trip and varying between CZK 99 and CZK 283) is also a taxable benefit for the employee. The 2022 minimum statutory limits are CZK 99 for local business trips 5–12 hours long, CZK 151 for trips 12–18 hours long, and CZK 237 for trips exceeding 18 hours per day. The amounts of CZK 99 – CZK 118 for local business trips 5–12 hours long, CZK 151 – CZK 182 for trips 12–18 hours long, and CZK 237 – CZK 283 for trips exceeding 18 hours per day are tax exempt (no employment income tax and no social security/health insurance contributions) and tax-deductible costs for the employer.
Certain non-monetary educational, cultural, sporting, and health benefits are non-taxable, with an annual limit of CZK 20,000.
The 2022 minimum statutory limits are CZK 99 for local business trips 5–12 hours long, CZK 151 for trips 12–18 hours long, and CZK 237 for trips exceeding 18 hours per day. The amounts of CZK 99 – CZK 118 for local business trips 5–12 hours long, CZK 151 – CZK 182 for trips 12–18 hours long, and CZK 237 – CZK 283 for trips exceeding 18 hours per day are tax exempt (no employment income tax and no social security/health insurance contributions) and tax-deductible costs for the employer.
If an employer provides an employee with temporary accommodation, it’s not taxable up to CZK 3,500 per month as long as the arrangement is structured well. If however, the benefit comes as a cash allowance, it is taxable.
As of 2022, employers may provide tax-exempt cash catering allowance up to CZK 82.60 per work shift. This benefit comes in addition to already existing meal vouchers or a company canteen as alternative forms of tax-advantaged catering support.
Unlike most countries, the Czech Republic has adopted a system of tax credits rather than tax-free allowances, as follows (2021):
These tax credits lower the tax liability. Tax deductions modify the tax base only (reducing the liability by 15%–23% of the deduction only).
No deductions are provided for expenses connected to taxable income from employment. However, reimbursements for travel expenses are exempt from tax, as long as they don’t exceed certain limits.
Donations that finance science, education, culture, etc., are deductible for an individual if it’s between 2% (or minimum CZK 1,000) and 15% of the tax base (for 2021, the max limit was temporarily increased to 30% of the tax base).
Donating blood in the Czech Republic is also seen as a form of charitable donation. It’s valued at CZK 3,000 per collection.
A deduction for the interest paid on mortgages is applicable under several strict conditions and is up to CZK 150,000 per year for housing needs “procured” after 1 January 2021, calculated on a monthly basis.
A deduction for private contributions made on life insurance is applicable under certain conditions and is up to CZK 24,000 per year.
A deduction for private contributions made to a private pension insurance fund is applicable under certain conditions and is up to CZK 24,000 per year.