Tax changes in the Czech Republic: How they affect your business in 2025

Several significant tax changes, affecting both individuals and legal entities, entered into force in the Czech Republic on January 1, 2025. Their main aim is to strengthen public finances while making tax administration more efficient. Our article provides an overview of the key tax changes in the Czech Republic:

Corporate Income Tax changes in the Czech Republic

Tax rates

Although the corporate income tax rate has increased from 19% to 21% already in 2024, taxpayers will not pay the higher tax until 2025, when they file their tax returns for the 2024 tax year.

Gift tax deduction

The period for claiming the increased gift tax deduction has been extended. For the tax period 2025, or for tax years ending no later than 28 February 2027, legal entities will be entitled to deduct from their tax bases the value of gifts up to 30% of the tax base.

Functional currency

As of 1 January 2024, accounting units may keep their accounts and prepare their financial statements in EUR, GBP or USD in addition to CZK. However, they are still obliged to use CZK to determine their tax liability and to state it in the tax return for 2024. In practice, the information presented on individual lines of the tax return will continue to be presented in CZK. The exchange rate of the functional currency to CZK set by the Czech National Bank (ČNB) on the last day of the tax period will be used for the conversion. If the tax is paid in a functional currency, it will be credited to the taxpayer’s personal account in Czech crowns. For the conversion, the exchange rate of the ČNB valid on the day preceding the day of payment of the tax shall be used. If this procedure results in an underpayment or overpayment of tax, the tax administrator will not take them into account (provided that the discrepancy is due to the conversion of the functional currency into CZK).

Tax Echo project

At the end of 2024, the Czech tax administration launched the first stage of the so-called Tax Echo project (Daňové echo). This is a personalised letter sent to taxpayers in cases where the tax administration identifies discrepancies in taxpayers’ tax obligations based on available data. The declared aim of the tax administration should be to promote voluntary compliance with tax obligations, increase efficiency and reduce the time and administrative burden of tax administration from the perspective of both taxpayers and tax authorities. Based on an evaluation of the success of this project, the tax administration launched the Tax Echo II project in 2025. The Tax Echo II focuses on incorrectly claimed deductible items for spouses in 2022 tax returns.

Personal Income Tax changes in the Czech Republic

Securities and crypto-assets

Since 2025, a new limit of CZK 40 million has been introduced for the exemption of income from the sale of securities, shares, and cryptocurrencies. This limit is assessed in combination with income from the sale of shares, business shares, and cryptocurrencies.

Starting in 2025, it is now possible to exempt income from the sale of cryptocurrencies, which was not possible until the end of 2024. The exemption can be applied if the value or time test is met, which also applies to income from the sale of shares.

The time test means that after holding the cryptocurrency for at least 3 years, its sale would be exempt from tax. The same applies if the income from the sale of cryptocurrencies in a given calendar year does not exceed CZK 100,000 in gross amount (the value test). We would like to point out that these exceptions cannot be combined i.e. only one can be applied at a time.

Benefits

In the area of employee benefits, the tax-free limit for non-monetary benefits was increased to CZK 23,279 as of January 1, 2025. In addition, a new limit for non-monetary health benefits equal to the average wage (CZK 46,557 for 2025) was introduced.

Income from work performance agreements

There has also been a change in the taxation of income from work performance agreements. The earnings limit without health insurance and social security contributions and the application of special withholding tax is set at 25 percent of the average wage (CZK 11,500 for 2025).

Value-Added Tax (VAT) changes in the Czech Republic

An amendment to the Czech VAT Act has been in effect since January 1, 2025, bringing many important changes.

VAT registration

First of all, there are two thresholds for VAT registration. If a business exceeds CZK 2,000,000 in turnover from activities with a place of supply in the Czech Republic within the calendar year, it will become a VAT payer from January 1 of the following year or immediately the day after the exceeding the threshold (whatever it choses in the application form). However, if turnover exceeds CZK 2,536,500, the business becomes a VAT payer immediately the day after exceeding the threshold.

Other VAT changes

One of the major changes is the shortening of the deadline for claiming VAT deductions from 3 years to 2 years from the end of the calendar year in which the claim arose.

There is also a significant extension of the deadline for corrections of the tax base (issuance of corrective VAT documents – both credit notes and debit notes) from the 3 years to 7 years from the original taxable supply.

The amendment to the Czech VAT Act also brought a number of changes in the areas of VAT treatment of bad debts, immovables or place of taxable supply of certain services. It also introduced a new cross border VAT regime for small enterprises.

Excise Duties

From January 1, 2025, the excise tax on cigarettes, smoking tobacco, cigars, and cigarillos will increase by 5% annually, continuing at the same rate in 2026 and 2027. The excise tax on spirits will increase by 10% in 2025.

Barbora Stejskalová

Tax Partner | Accace Czech Republic

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