The year 2024 has brought several significant changes in tax legislation affecting both individuals and corporations. In a series of articles, we will look at all these changes in turn, and in particular at their impact in 2025. Today, we will focus specifically on the impact of the changes on personal income tax.

 

A brief history of the development of the personal income tax

There have been several changes to personal income tax rates in the Czech Republic over the past decade. An overview of the development:

• 2014-2020: The basic tax rate was 15% for all taxpayers. For high earners, a so-called solidarity tax of 7% was introduced, which applied to the part of income exceeding 48 times the average wage.
• 2021: The super gross wage and solidarity tax were abolished. Two tax rates were introduced:
  • 15% for the part of the tax base up to 48 times the average wage.
  • 23% for the part of the tax base above this threshold.
• 2022-2023: The rates remained the same as in 2021, i.e. 15% and 23%, with the threshold for applying the higher rate based on 48 times the average wage.

 

Changes in 2024 – Basic rate remains, conditions for progressive rate changed

The basic personal income tax rate in 2025 remains unchanged at 15%. The threshold for applying the 23% rate has been reduced to 36 times the average wage. This means that the higher rate applies to a lower proportion of the tax base than in previous years.

Therefore, the following applies to 2024 income: the 15% rate applies to income up to CZK 1,582,812 and the entire portion above this threshold is taxed at the 23% rate.

It should be noted that this change will affect only high-income groups. The annual tax base of CZK 1,582,812 means a monthly income adjusted for deductible costs (whether in the form of a lump sum or actual costs for self-employed persons; and tax-free income or tax rebates for all individuals) of CZK 131,900.

 

How the tax payable for you will change in 2025

Let’s give some examples with calculations to illustrate the impact:

Tax base up to and including CZK 1,582,812 (calculation for CZK 1,582,812):

• It is taxed at a rate of 15%.
• Tax liability: CZK 237 421.8 (15% of CZK 1 582 812)
• Conclusion: No impact from the progressive rate

 

Tax base slightly above the threshold of CZK 1 582 812 (e.g. CZK 1 700 000 per year):

• Part up to CZK 1 582 812 is taxed at 15%, the rest at 23%
• Tax liability: CZK 237 421.8 (15% of CZK 1 582 812) + CZK 26 953.24 (23% of CZK 117 188) = CZK 264 375
• Before the reduction of the progressive tax limit: CZK 255 000

 

Higher income (tax base e.g. CZK 2,000,000 per year):

• Tax liability: CZK 237,421.8 + CZK 95,953.24 = CZK 333,375
• Before the reduction of the progressive tax limit: CZK 305,158

 

Tax base CZK 3 000 000 per year:

• Tax liability: CZK 237,421.8 + CZK 325,953.24 = CZK 563,375
• Before reduction of the progressive tax limit: CZK 535,158

 

Is it time to see a tax advisor?

If you are concerned about the increase in your tax liability due to these changes, the best advice is to see a tax advisor or accountant with great tax knowledge. He will discuss with you the investment options by which you can reduce your tax base. Alternatively, he or she will check with you that you have claimed all possible allowances and deductions and have done everything within the law to keep your tax bill as low as possible.

You can also contact our expert advisers. Just contact us.