Flat Tax in 2026: Who Really Benefits?

The flat (lump sum) tax frees entrepreneurs from paperwork and simplifies the process of paying mandatory insurance and income tax. Still, for some, sticking with the standard regime — calculating tax based on documented income and expenses — may be more profitable.

What is the flat tax?

The flat tax regime has become increasingly popular in recent years, largely thanks to the reduced administrative burden it offers small business owners. Entrepreneurs who opt into the flat tax don’t have to file an income tax return or submit reports to the health insurance company or the district social security office. A single monthly payment covers income tax, pension contributions, and health insurance — a simple and convenient solution.

The main factor that determines which flat tax “band” an entrepreneur falls into is their annual income. Only after that are the type of business activity and applicable lump-sum expense rates taken into account.

Monthly Flat Tax Advance Payments in 2025

In 2025, flat tax payers fall into one of three income bands, each with its own fixed monthly payment. These payments cover income tax, health insurance, and social security contributions — and are adjusted annually.

Flat Tax Bands for 2025:

• Band I — CZK 8,716/month

Income tax: CZK 100
Health insurance: CZK 3,143
Social security: CZK 5,473

• Band II — CZK 16,745/month

Income tax: CZK 4,963
Health insurance: CZK 3,591
Social security: CZK 8,191

• Band III — CZK 27,139/month

Income tax: CZK 9,320
Health insurance: CZK 5,292
Social security: CZK 12,527

Who Benefits from the Flat Tax?

The flat tax is generally more advantageous for entrepreneurs whose income is relatively high and expenses are low. It also tends to be a better option for those who do not claim tax deductions, allowances, or other deductible items.

The Ministry of Finance provides an online calculator where you can enter your income, expenses, and any applicable tax allowances to assess whether the flat tax is a suitable choice for your specific business activity.

But the benefits go beyond just saving on taxes and contributions to social and health insurance. The flat tax regime also significantly reduces administrative workload — there’s no need to file an annual tax return, which can save both time and money on accounting or tax advisory services.

This regime is especially beneficial for entrepreneurs using a 60% lump-sum expense rate — typically service providers who tend to have lower costs but higher income. These include real estate agents, marketing professionals, accountants, and others.

The flat tax can also work well for those applying the 40% lump-sum rate, such as lawyers, tax consultants, and other professionals who operate under a different legal framework.

On the other hand, for entrepreneurs using the 80% lump-sum expense rate, the flat tax is usually not advantageous. Even if their actual expenses are low, the standard regime — where the tax base is calculated as a percentage of income — often results in lower taxes. At the upper income threshold, these entrepreneurs would pay taxes and insurance contributions based on a tax base of CZK 400,000.

Who is not benefiting from this?

If an individual entrepreneur has the opportunity to apply deductible amounts from the taxable base, that is, most often, paid interest on a mortgage loan, paid life insurance premiums, the value of gratuitous receipts, etc., it is necessary to consider whether it would be better for them to file a tax return.

The lump-sum tax may also be disadvantageous to those who can use the spouse benefit, disability benefit and other benefits. The same applies to taxpayers with children. The so-called tax benefits amount to quite large amounts for just one child.

Another disadvantage of the lump-sum tax regime is the possible difficulty in obtaining a loan – banking institutions require not only confirmation of transactions in the bank account, but also a tax return.

The lump-sum tax regime is almost always disadvantageous for artisans and representatives of other professions who fall under 80% of lump-sum expenses. Even at the upper income limit, they have a relatively low final tax base.

How to Calculate the Benefit

How can an entrepreneur determine whether the lump-sum tax regime is the right choice? The rough calculation is fairly simple. You need to know:

• Approximate income
• Actual or lump-sum expenses
• Any deductible items
• Eligibility for tax allowances or benefits

Example:
Mr. Novák is a self-employed mechanic with an annual income of CZK 1,600,000 in 2025. He does not claim any deductions or tax benefits and meets all the requirements to enter the flat tax regime.

Standard regime calculation:

• Taxable base: CZK 1,600,000 − (1,600,000 × 0.8) = CZK 320,000
• Income tax: CZK 320,000 × 0.15 = CZK 48,000
• After taxpayer allowance: CZK 48,000 − 30,840 = CZK 17,160
• Social insurance: CZK 320,000 × 0.55 × 0.292 = CZK 51,392
• Health insurance: CZK 320,000 × 0.5 × 0.135 = CZK 21,600 (based on minimum assessment base of CZK 37,716/month for 2025)
• Estimated total cost under standard regime: CZK 106,268/year

Flat tax regime:

• CZK 8,716/month × 12 months = CZK 104,592/year

In this example, the costs are nearly identical. Therefore, from an administrative perspective, switching to the flat tax regime would be more efficient.

This kind of comparison can be made for any entrepreneur — but it’s always recommended to assess each case individually, ideally with support from a tax advisor or accountant.

If an entrepreneur chooses to switch to the flat tax regime, they must notify the tax office using the form “Notification of Transition to the Lump-Sum Tax Regime.” Note that the deadline for filing this application is January 10, 2026.

The same deadline also applies to those who wish to exit the flat tax regime.

Need help deciding if the flat tax regime is right for you? Experienced lawyers at 360WEDO can help you make the right choice. Leave a request on our website and we’ll get in touch.Source: https://www.podnikatel.cz/clanky/komu-se-od-pristiho-roku-nevyplati-pausalni-dan/