Progressive Taxation in the Czech Republic: How Does It Work and Who Is Affected?

Do you have a high income and want to know how much you actually pay in taxes? We’ll explain how the tax brackets currently work and provide a specific example showing how much you ’ll actually have left after progressive taxation.

What is a progressive tax and how does it work?

The term “progressive tax” often appears in the media and in political discussions. It can sometimes give the impression that once a certain threshold is exceeded, the entire income will automatically be taxed at a higher rate. But that’s not the case.

Progressive taxation means that as the tax base increases, so too may the rate at which income is taxed. People with higher incomes therefore generally pay not only a higher amount of tax, but a portion of their tax base may also be subject to a higher percentage rate.

Importantly, the higher rate is not usually applied to the entire income. The tax base is divided into individual brackets, and each portion is taxed at the corresponding rate.

Therefore, if a taxpayer exceeds the threshold of a higher tax bracket by, for example, 10,000 CZK, the higher rate applies only to those 10,000 CZK. The remaining portion of the tax base continues to be taxed at the lower rate.

What tax rates apply in the Czech Republic?

The Czech tax system already incorporates a progressive element in personal income tax. Currently, two rates apply:

• 15% for the portion of the tax base up to a specified threshold,
• 23% for the portion of the tax base exceeding that threshold.

For 2026, the annual threshold for applying the 23% rate is 1,762,812 CZK, which corresponds to 36 times the average wage. For employees’ monthly advance payments, the threshold is set at 146,901 CZK. These amounts may change each year depending on changes in the average wage.

The second tax rate was introduced in 2021, and starting in 2024, the threshold for its application was reduced from 48 times to 36 times the average wage.

How is the progressive tax calculated in practice?

Let’s consider a taxpayer whose tax base for 2026, after taking into account the applicable deductions, is 2,000,000 CZK.

The tax base is divided into two parts:

• the portion up to 1,762,812 CZK is taxed at a rate of 15%,
• the remaining 237,188 CZK is taxed at a rate of 23%.

The approximate tax calculation before applying tax credits is therefore:

• CZK 1,762,812 × 15% = CZK 264,422,
• CZK 237,188 × 23% = CZK 54,553,

The total tax before credits amounts to 318,975 Kč.

As a taxpayer, you therefore do not pay 23% on the full two million crowns. The higher rate applies only to the portion of the tax base that exceeds the statutory threshold. The same procedure is followed when calculating employees’ monthly estimated tax payments.

Relevant tax credits and deductions, such as the basic taxpayer credit, can then be subtracted from the tax calculated in this manner. Consequently, the resulting tax liability may be lower.

What would the introduction of a broader progressive tax entail?

Progressive taxation in the narrower sense is generally considered to be a system that includes multiple tax brackets, for example:

• lower incomes are subject to a reduced rate,
• middle incomes are subject to the base rate,
• high incomes are subject to one or more higher rates.

The current system in the Czech Republic can be described as mildly progressive, as it operates with only two tax rates. A multi-bracket system would allow for a more granular adjustment of the tax burden.

The main difference from the current Czech system would therefore not lie in the introduction of progressivity itself. That already exists in some form. What could change, above all, is the number of tax brackets, the rates themselves, and the thresholds at which the individual rates would apply.

Progressive taxation: What are the arguments for and against it?

Who is affected by the higher tax rate?

The higher rate may apply to employees, self-employed individuals, landlords , and individuals with other taxable income that is included in the tax base. As a rule, it is not just the amount of gross wages, sales, or payments received that is decisive, but the resulting tax base.

For the self-employed, therefore, the threshold cannot simply be compared to an employee’s annual revenue or income. Actual or flat-rate expenses are first deducted from the self-employed person’s income. Subsequently, other income, any tax losses, non-taxable portions of the tax base, and deductible items are taken into account.

Only then is tax calculated at a rate of 15% or, where applicable, 23% based on this adjusted tax base. Tax credits and tax benefits are then deducted from the calculated tax.

Don’t struggle with tax issues on your own

Not sure if or how the progressive tax rate applies to you? Contact our accounting firm. We’ll review the structure of your income, calculate your estimated tax liability, and recommend the best course of action. Simply contact us using the form below.