Czech tax rate for individuals: the 15% and 23% bands explained

A foreign visitor reading about Czech taxes meets the number 23% and concludes that the country has two classes of taxpayer. It does not. It has one schedule with two steps, and the second step starts at an income that few employees reach. The common error is the opposite of the headline: people assume that once they pass the threshold the whole income is taxed at the higher rate. It is not.

This article explains the two bands, what counts as the income they apply to, and a worked example with a hypothetical income. For how an employee's tax is withheld month by month, read Czech income tax for employees. For a list of what changed this year, see Czech tax news for individuals.

The two rates

The threshold is defined as 36 times the average wage, and the average wage is set each year. For 2026 the average wage is CZK 48,967, and 36 times that is CZK 1,762,812. Because the average wage rises, so does the threshold, and the number changes every January. The rates themselves are set in law and do not follow the average wage.

The higher rate applies to the part of the tax base above the threshold. That is a marginal rate, just as in most income tax systems. Earning one crown more than the threshold means that crown, and no earlier crown, is taxed at 23%.

A worked example

The following is hypothetical. A taxpayer has a tax base of CZK 2,000,000 for the year, no deductions and the standard taxpayer credit.

The tax of about CZK 288,135 is about 14.4% of the base. Without the higher band the same base would have been taxed at 15% less the credit, which would be CZK 269,160. The extra cost of the 23% band is therefore about CZK 18,975 in this example, which is the 8 percentage points (23 less 15) on the CZK 237,188 above the threshold. That is the number to hold on to: the 23% band costs its holder eight points on the slice, not eight points on everything.

For a taxpayer with a base of CZK 1,500,000, below the threshold, the tax is 15%, or CZK 225,000, less the credit, giving CZK 194,160. The higher band does not touch them.

What counts as income for the bands

The bands apply to the tax base, and what goes in depends on the type of income.

Employment. The base is gross pay: salary, bonuses and taxable benefits. Social and health contributions paid by the employer on top are not added to the employee's base. The employee's own contributions, 7.1% for social and 4.5% for health insurance, are deducted from pay but do not reduce the income tax base. They are a separate charge.

Business income. For a self-employed person the base is receipts minus expenses, either actual expenses or a flat-rate percentage: 80% for crafts and agriculture (capped at CZK 1.6 million), 60% for other trades (capped at CZK 1.2 million), 40% for liberal professions (capped at CZK 0.8 million) and 30% for business rental (capped at CZK 0.6 million). Because the caps limit the deduction, a high earner on a flat rate pays tax on more than expected. See the flat-rate regime for the self-employed. Under the lump-sum scheme (paušální daň) a fixed monthly payment replaces income tax, social and health insurance up to income limits, so the bands do not arise in the usual way.

Rental income. A private landlord can deduct actual expenses or use a 30% flat rate capped at CZK 600,000; no social or health insurance is due on private rental income. See tax on rental income.

Other income. Gains on property sold before the time test is met, and on securities sold inside their holding period, join the base unless another exemption applies. Interest on Czech bank accounts is taxed at source and is final. Dividends and other withholding items are taxed under their own rules, generally by withholding at 15%, with 35% for payments to certain jurisdictions without a treaty or exchange of information. See dividend taxation.

The incomes of different kinds are combined in the annual return for the purposes of the bands, with a few exceptions, so an employee with a side business or a landlord with a salary can cross the threshold on the sum.

Deductions and credits: why they differ

A deduction taken from income that would otherwise be taxed at 15% saves 15 crowns per hundred. One that cuts into the slice at 23% saves more. The mortgage interest deduction, up to CZK 150,000 a year per shared household where the housing need was acquired from 1 January 2021, saves at most about CZK 22,500 at 15% (as of 2026; check the Financial Administration). Whether the higher band applies to a given taxpayer depends on how close the base is to the threshold after deductions. Credits for children are CZK 15,204, CZK 22,320 and CZK 27,840 a year for the first, second and third and later child. The spouse credit applies only where the couple has a child under three.

Who actually pays 23%

The people who reach the higher band are usually of three kinds. Highly paid employees, whose annual gross pay exceeds the threshold. Self-employed people and contractors with large receipts and flat-rate expenses capped below their real costs. And people with several sources: a salary plus a business, rental income or a one-off taxable gain.

The threshold is high relative to typical pay. For perspective, the annual gross pay of someone earning the average wage of CZK 48,967 for twelve months is about a third of it (CZK 587,604, against CZK 1,762,812). We make no claim about the share of taxpayers in the band, since that is a number for the Financial Administration to publish.

Residence matters

A person who is tax resident in Czechia, with a permanent home there or at least 183 days in a calendar year, is taxed on worldwide income, subject to treaty relief. A non-resident is taxed on Czech-source income. A foreign employee who becomes resident part-way through a year should read Czech tax residency rules and the article on double tax treaties.

What the bands mean for a purchase

Net income is what a lender looks at, and the bands are one reason the net-to-gross relationship is not constant. A household whose income sits near the threshold sees a smaller gain from each extra crown. The borrowing estimator on Hypoteky.com shows roughly how a Czech bank might weigh your income and costs, and our guide to how much you can borrow explains the lender's view.

Frequently asked questions

Is the whole income taxed at 23% once I pass the threshold?

No. Only the part above CZK 1,762,812 (2026) is taxed at 23%. The rest is taxed at 15%.

Why does the threshold change each year?

It is defined as 36 times the average wage, which is set annually. The 2026 average wage is CZK 48,967.

Do social and health insurance count as income tax?

No. They are separate charges. An employee pays 7.1% for social insurance and 4.5% for health insurance of gross pay.

Does the lump-sum tax regime use the bands?

No. The paušální daň is a fixed monthly payment within income limits and replaces income tax and the insurance contributions. Band 1 is CZK 9,162 a month for 2026 (as of 2026; check the Financial Administration).

A practical next step

Add up your expected income for the year from every source. If the total is within reach of CZK 1,762,812, look at your deductions and the flat-rate caps that apply to you, and ask the Financial Administration or an adviser how the two interact.

This is a general explainer, not legal, tax or mortgage advice.