Company income tax: rate, calculation and VAT return

What is corporation tax?

Corporation tax, known as DPPO, is a direct tax paid by companies and other legal entities on their profits. They pay it once a year on the basis of their tax return (if they pay more tax, they also pay interim payments in the following period).

The rate of DPPO

Compared to before, the basic tax rate has increased from 19% to 21% in 2025. You will therefore be taxed on profits for 2024 and beyond at 21%.

Who pays corporation tax?

Companies that have their registered office in the Czech Republic or actually manage their business from here pay the VAT. In this case, they are so-called tax residents, who must tax all their income in the Czech Republic, both domestic and foreign.

On the other hand, companies with their registered office and management abroad are subject to only limited tax liability in the Czech Republic because they are non-tax residents. Thus, they are taxed in the Czech Republic only on the result of their economic activity from the Czech territory. This applies, for example, when a foreign company rents offices in Prague or operates a restaurant there.

Tax registration

Every legal entity, whether a company, association, foundation, cooperative or other entity, must register for VAT within 15 days of its establishment.

You can find the DPPO registration form on the website of the tax administration. After filling it in, just send it to the tax office responsible for your company's registered office. The tax office will deliver a confirmation of registration to your data box within 30 days and will also assign you a tax identification number (TIN).

Procedure for calculating corporate income tax

In short, the DPPO is calculated in the tax return as follows:

Income, receipts, costs, expenses... How do they differ and what is taxed?

To calculate corporation tax correctly, you need a good understanding of the legislation, which sets out the rules and conditions, including a number of exemptions. In order to avoid unnecessary problems, it is recommended that you use the services of an accountant or tax advisor or at least always consult with experts about your situation.

It is essential to know that income and expenses, not income and expenses, enter into the calculation of VAT - and that they are not the same. Each arises at a different time and can occur in a different order.

• Income arises, for example, when you issue an invoice for your services or goods. Income is when you actually receive money into your account or cash register.
• An expense may be, for example, an invoice received for goods. An expense is only incurred when payment is made, whether it occurs before or after the invoice is received.

Note also that not all income is taxable and not every expense can be deducted from your tax base.

• For example, income from your business activities (invoices for services, sales of goods, etc.), rent, interest or dividends may be taxable. However, some income is legally exempt or not taxable at all.
• Tax-deductible expenses must be demonstrably related to the business and serve to achieve, secure or maintain taxable income. These may include purchases of goods, wages, utility bills or accounting services. However, non-tax deductible costs (Section 25 of the Income Tax Act) will not reduce your tax.

When and how to file a company tax return?

Businesses must always file a tax return - regardless of whether or not they have made any profit or are active in business. Even if they have no income (or only income that is not subject to tax), they will prepare what is known as  a zero return.

It is compulsory to submit your DPPO return electronically (e.g. via the My Taxes portal or via a data box) by the following deadlines:

• If you file the return yourself, you must send it no later than 4 months after the end of the tax year (by 1 May if your accounting period is a calendar year).
• If you work with a tax adviser who files the return for you under a power of attorney, the deadline is extended to 6 months after the end of the tax year (by 1 July if your accounting period is a calendar year).

If you have serious health problems or if the tax portal or data box is down, you can ask the tax office for an extension before the deadline.

Deadline for payment of DPPO and refund of overpayments

• Have you incurred a tax liability (non-negative tax of more than CZK 200)? Send the amount to the tax office's account by the same deadline as you file your tax return. It is not the day you send the payment that is decisive, but the moment the money arrives. It is therefore better to pay a day or two earlier.
• Have you been overpaid? You can simply request a refund on your return form. If the application is in order and you don't owe the state anything, the tax office will refund the overpayment within 30 days.

Advance payments of VAT for the next period

Your income tax return is used to determine your income tax advances for the next tax year (the payments you will make to the tax office during the year).

The amount of the advance payment is determined by the last tax paid as follows:

We can help you with your accounting and taxes

Don't want to worry about the paperwork? Spend your time on your business and leave the bookkeeping to us. We will take care of your bookkeeping, including the preparation of tax returns and financial statements. We will take care of deadlines and factual accuracy and file everything for you. Get in touch via the form and we'll take care of the rest.

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