Have you recently started a business and are you wondering whether it is worth switching to the flat-rate tax (paušální daň) from the start of a new tax period (usually the start of a new year)? Or have you only just heard about this option and are not sure whether it would suit you? We will look at who benefits from the flat-rate tax. And, on the other hand, when it is better to stick with paying the regular advance payments and filing a tax return.
What Is the Flat-Rate Tax?
The flat-rate tax means you pay a fixed amount into the tax office (finanční úřad) account every month. For 2024, the flat-rate tax amount in band 1 is 7,498 CZK (about 340 USD). You pay everything into one account and do not have to worry about anything else. This amount includes the advance payment for social security and health insurance. It also includes an amount that the tax office keeps for itself. The advantage is that you do not have to file a tax return or report your income and expenses. Another obligation you no longer have is submitting a statement of income and expenses to the district Social Security Administration office (okresní správa sociálního zabezpečení, OSSZ) and your health insurance company.
What Are the Flat-Rate Tax Bands?
For 2024, the bands with the amount of the flat-rate advance payment are set as follows:
Band I, 7,498 CZK (about 340 USD)
Band II, 16,745 CZK (about 770 USD)
Band III, 27,139 CZK (about 1,200 USD)
Band I:
- this covers taxpayers whose income from self-employment did not exceed 1 million CZK (about 46,000 USD) in the preceding tax period
- taxpayers with income from self-employment of up to 1.5 million CZK (about 69,000 USD) in the preceding tax period, provided at least 75% of this income is income for which, under the Income Tax Act (zákon o daních z příjmů), expenses can be claimed as a flat percentage of income of 80% or 60%,
- taxpayers with income from self-employment of up to 2 million CZK (about 92,000 USD) in the preceding tax period, provided at least 75% of this income is income for which, under the Income Tax Act, expenses can be claimed as a flat percentage of income of 80%.
Band II:
- taxpayers whose income from self-employment did not exceed 1.5 million CZK (about 69,000 USD) in the preceding tax period, regardless of what kind of self-employment this income comes from
- taxpayers with income from self-employment of up to 2 million CZK (about 92,000 USD) in the preceding tax period, provided at least 75% of this income is income for which, under the Income Tax Act, expenses can be claimed as a flat percentage of income of 80% or 60%.
Band III:
- taxpayers whose income from self-employment did not exceed 2 million CZK (about 92,000 USD) in the preceding tax period, regardless of what kind of self-employment this income comes from (that is, regardless of what flat percentage of income could be claimed as expenses for it under the Income Tax Act).
When Am I Required to File a Tax Return?
As soon as you breach one of the conditions for being in the flat-rate regime. These conditions are:
- your assessable income from self-employment (samostatná výdělečná činnost, SVČ) exceeds 2,000,000 CZK (about 92,000 USD),
- you become a VAT payer or a VAT registration obligation arises for you,
- you become a partner in a general commercial partnership (veřejná obchodní společnost, v. o. s.) or a general partner in a limited partnership (komanditní společnost).
What Are the Disadvantages for Payers in the Flat-Rate Tax Regime?
The biggest disadvantage is that, because you are not filing a tax return, you cannot claim any tax reductions. So if you have a relatively new mortgage and pay high interest, the flat-rate regime can be a disadvantage for you. You can read about how the mortgage interest deduction works. The child tax credit and the spouse tax credit do not apply to you either. At this point it is a good idea to work everything out carefully, so you can be sure that the flat-rate tax really is worth it for you.
When and How Do You Sign Up for the Flat-Rate Tax?
You can sign up by 10 January of each new year. So, for example, if you decide during 2024 that you want to switch to the flat rate, you must notify the relevant tax office (finanční úřad) by 10 January 2025. This is usually the tax office that covers your permanent address. You will find the correct form on the website of the Financial Administration. You can send it electronically through a data mailbox (datová schránka), or print it and send it by post or bring it in person to the office’s registry.
USD amounts are approximate, converted at the Czech National Bank rate of 21.80 CZK per USD on 2 October 2026.
