Common Business Expenses Often Overlooked

Many entrepreneurs in the Czech Republic end up paying more in taxes than necessary – simply because they don’t take advantage of all the deductions allowed by law. And that can cost them thousands of crowns every year.

Know the Law, Save Money

The Income Tax Act (No. 586/1992) allows you to deduct a wide range of expenses – if they’re tied to your business and can be properly documented. But in reality, many small business owners don’t use these options at all. As a result, they report a higher tax base and end up paying more in social and health insurance, too.

Car and Travel Costs

Most entrepreneurs rely on a car to run their business. Travel and car-related expenses along with other deductible costs are detailed in § 24 of the Income Tax Act.

Under paragraph 2 of this section, travel expenses can be claimed in your tax return. These include accommodation, public transportation, and fuel for vehicles used in business – whether owned, leased, rented, or borrowed. Other necessary travel-related expenses can also be included.

You can even claim costs for a vehicle that isn’t listed as part of your business assets. In that case, you can apply the standard reimbursement rate (the same one used for employees) along with fuel costs. To calculate fuel expenses, you can use the average fuel prices published for travel compensation under the Labour Code. If your actual fuel prices are higher, you’ll need receipts to back it up.

If you use the car for both business and personal purposes, you’ll need to split the expenses proportionally. Keeping a detailed travel log is strongly recommended so you can correctly attribute the business-related share.

If your driving expenses – like fuel and parking – are relatively low, you might benefit from using the lump sum method. This allows you to deduct up to CZK 5,000 per month, or CZK 60,000 per year, as a flat-rate expense.

Home Office and Utility Costs

Many small business owners in the Czech Republic work from home, but only a few take advantage of the option to deduct a portion of their energy, internet, or water bills if they are used for business purposes.

You can claim part of these costs as tax-deductible expenses, but you’ll need to back it up. It’s important to define the share used for work: for instance, based on the size of the home office space compared to the total living area.

Common deductible costs include electricity, heating, internet, mobile phone services, and even basic office equipment. Section 24, paragraph 1 of the Income Tax Act makes it clear: any expenses incurred to generate, secure, or maintain income can be deducted.

Many entrepreneurs interpret this rule too narrowly and forget that a work chair, desk, or even a laptop used strictly for business counts as a legitimate expense.

You can also allocate shared services like internet or phone bills proportionally, based on actual business use.

Education and Professional Development

Another area where entrepreneurs often miss out is education-related expenses. According to Section 24, paragraph 2, letter j) of the Income Tax Act, costs for professional training, courses, or literature can be claimed as tax-deductible, if they relate to your business.

For example, a cosmetologist can deduct the cost of a seminar on new techniques, while an accountant can write off a course about changes in tax legislation.

In practice, many self-employed people end up paying for books or online courses “out of pocket” and don’t include them in their expenses at all. But education is one of the clearest examples of a legitimate business investment. It’s fully tax-deductible and directly contributes to improving the quality and competitiveness of your services.

Small Property and Work Equipment

The law distinguishes between tangible assets and what’s known as “small property.” If you buy an item worth up to CZK 80,000 with a useful life of less than one year, you can deduct the full amount as an expense right away. This typically includes things like laptops, phones, tools, printers, and other everyday business equipment.

However, many entrepreneurs make the mistake of purchasing such items “for personal use” and don’t include them in their accounting. As a result, they miss out on a straightforward way to lower their taxes.

Other often-overlooked expenses include small office accessories like planners, pens, software licenses, or subscriptions to online tools. While they may seem minor, these recurring costs can add up quickly over time.

If you purchase equipment worth more than CZK 80,000, you can’t deduct the full cost immediately. Instead, it must be spread out over time through depreciation.

Marketing and Entertainment Expenses – What You Can and Can’t Deduct

Marketing and entertainment form a special category of expenses. According to § 25, paragraph 1, point t) of the Income Tax Act, costs related to entertainment, such as refreshments, drinks, or gifts without an advertising purpose, are not tax-deductible. On the other hand, clearly justified advertising expenses are deductible.

But in practice, the line between the two is often blurred. Ordering branded promotional items or running online ads? That’s a legitimate business expense. Inviting a client to lunch? Not deductible – unless it’s part of a larger, documented event like a seminar or business presentation. The key is being able to prove a direct link between the expense and income generation.

Many small business owners think that saving on taxes means complex accounting maneuvers. In reality, it’s more about being consistent, and knowing what the law allows. Expenses that you currently pay out of pocket could, in fact, reduce your tax base in a legal and transparent way.

If you’re not sure what qualifies, consider consulting a tax advisor. Sometimes, the right interpretation of a single paragraph can save more than you think.

Do you need help navigating Czech tax rules? The team at 360WEDO offers clear, reliable consulting for entrepreneurs, so you can focus on your business, while we handle the fine print. Contact us through our website.

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