Employees who earn income from rent or shares are required to file a tax return

In the Czech Republic, most employees don’t have to worry about taxes, as their employer typically handles all tax obligations in their annual tax return. However, some employees need to file their own tax returns. This includes those with higher income from capital assets, who rent out real estate, or have other income outside of employment.

From a tax perspective, passive income from capital assets or rent is advantageous because it’s not subject to social security and health insurance contributions, regardless of the amount.

However, income tax on these assets is still payable unless specific conditions for tax exemption are met, such as when selling real estate.

“If your taxable passive income for 2024 exceeds CZK 20,000, you’ll also need to file a tax return,” notes Gabriela Ivanko, a tax consultant at Forvis Mazars.

Filling Out a Tax Return

Employees who receive only employment income typically fill out a simplified two-page tax return. However, if they earned passive income during the year, they must complete a standard four-page tax return. The deadline for filing is April 1 for paper submissions and May 2 for electronic ones.

“The tax base for rent or other taxable income is calculated in Appendix 2 of the tax return, which must be attached in these cases,” Ivanko noted.

Paying Tax Arrears

When claiming certain annual tax deductions, employees whose employers handle their annual tax calculations might receive a tax overpayment. This excess is then used to increase their net salary.

Employees with passive income generally need to consider annual tax arrears when receiving tax deductions. “This is because the total annual income tax, including passive income, is often higher than the advance tax payments made from their employment income throughout the year,” Ivanko explained.

Employer Verification

All employees filing a tax return must obtain a verification of their taxable income for the previous year from each of their employers. This form provides the taxable base for part-time employment and the total amount of tax paid for the previous year.

The certificate of taxable income is a crucial part of every employee’s tax return. “The total income from all employers, as listed on each certificate, is entered in line 31 of the four-page tax return, and the total of withheld advance payments on income tax is entered in line 84,” Ivanko explained.

Passive Income in the Tax Return

Partial tax bases for passive income are reported in lines 38, 39, and 40 of the four-page tax return. The taxable base for rental income is taken from line 206 of Appendix 2, and the taxable base for other income is taken from line 209 of Appendix 2.

The total taxable base is listed in line 42. “Rental income expenses can be claimed either at their actual amount or at a flat rate of 30%,” Ivanko noted.

Don’t Forget About Deductions and Benefits

When filling out your tax return, remember to claim any tax deductions or benefits you’re eligible for. If you don’t, you might end up with an unfairly high annual tax bill.

Tax deductions are listed in the third section of the tax return, while tax benefits are in the fifth section. If you’re claiming deductions for children, don’t forget to complete the children’s table on the third page of the tax return.

“In line 64, every taxpayer receives a standard deduction of CZK 30,840. This deduction applies to all taxpayers, regardless of income structure or marital status,” Ivanko explained.

Working for Two Employers

If you earned income only from employment last year but worked for two employers at the same time in any month in 2024, you’ll need to file a tax return. This applies if advance income tax was paid on both wages or salaries.

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