In 2025, lump-sum tax and lump-sum expenses remain in place in the Czech Republic, but there has been a change in the first tier of the lump-sum tax. This article will analyze this change and also remind you of the key information you should know about lump-sum expenses and taxes.

 

Lump-Sum Tax

The lump-sum tax for self-employed individuals remains divided into three tiers based on income levels. Each tier has a different monthly payment amount:

1st tier: The monthly payment is CZK 8,716, consisting of:

• CZK 100 in income tax,
• CZK 5,473 in social insurance,
• CZK 3,143 in health insurance.

 

2nd tier: The monthly payment is CZK 16,745, consisting of:

• CZK 4,963 in income tax,
• CZK 8,191 in social insurance,
• CZK 3,591 in health insurance.

 

3rd tier: The monthly payment is CZK 27,139, consisting of:

• CZK 9,320 in income tax,
• CZK 12,527 in social insurance,
• CZK 5,292 in health insurance.

 

This system allows self-employed individuals to better plan their financial obligations, ensuring that contributions align with their income.

The most significant change is the increase in the monthly advance payment in the first tier to CZK 8,716, which is an increase of CZK 1,218 compared to 2024, when the advance was CZK 7,498. The main reason for the substantial annual increase in the lump-sum tax in the first tier is the fundamental change in social insurance contributions. In 2024, the rate was 30% of the average wage (CZK 43,967), whereas in 2025, it is 35% of the average wage (CZK 46,828).

Despite the increase in advance payments in the first tier, the lump-sum tax remains beneficial for most small business owners, thanks to the symbolic income tax of CZK 100 per month and overall lower contributions compared to the standard tax regime.

To enter the lump-sum tax regime, it is still necessary to submit a notification to the tax office, as well as in cases of tier changes or exiting the regime. The deadline for all these cases in 2025 was January 10, 2025.

 

Income Limits for Lump-Sum Tax in 2025

The income limits for the lump-sum tax remain the same as in 2024. A self-employed individual can use the lump-sum tax if their annual income (turnover) does not exceed CZK 2 million. This also means they must not be a mandatory VAT payer. Here’s a summary of the tier limits:

1st tier (CZK 8,716/month):

• Annual income up to CZK 1 million, regardless of activity type.
• Annual income up to CZK 1.5 million, if at least 75% of income comes from activities eligible for an 80% or 60% expense lump sum.
• Annual income up to CZK 2 million, if at least 75% of income comes from activities eligible for an 80% expense lump sum.

 

2nd tier (CZK 16,745/month):

• Annual income between CZK 1 million and CZK 1.5 million, regardless of activity type.
• Annual income between CZK 1.5 million and CZK 2 million, if at least 75% of income comes from activities eligible for an 80% or 60% expense lump sum.

 

3rd tier (CZK 27,139/month):

• Annual income between CZK 1.5 million and CZK 2 million, with no additional conditions.

 

Exempt income and income taxed by withholding tax are not included in the limit.

 

Lump-Sum Expenses

Lump-sum expenses provide an alternative to keeping tax records or accounting. Self-employed individuals can apply expenses as a percentage of their income, reducing their tax base. The limits remain the same as in the previous year:

• 80% of income – for craft and agricultural trades, up to CZK 1.6 million in expenses.
• 60% of income – for free trades, up to CZK 1.2 million in expenses.
• 40% of income – for liberal professions (e.g., lawyers, doctors, tax advisors), up to CZK 800,000 in expenses.
• 30% of income – for property rentals, up to CZK 600,000 in expenses.

 

Lump-Sum Expenses vs. Actual Expenses: Which is More Beneficial?

The advantage of lump-sum expenses depends on the ratio of actual expenses to income. If a business owner has low actual expenses, the lump-sum regime is beneficial, as they can deduct a fixed percentage of income regardless of actual costs. However, if they have high operating costs (e.g., for materials, energy) and these exceed the possible lump-sum deduction, it may be better to keep tax records and deduct actual expenses.

For example:

• A self-employed IT service provider with an annual income of CZK 1.5 million and minimal costs (software, internet) can reduce their tax base to CZK 600,000 using a 60% lump-sum expense.
• A craftsman with an annual income of CZK 1 million, who has actual expenses of only CZK 200,000, can deduct CZK 800,000 in the lump-sum regime, which is significantly more advantageous than actual expenses.