When Is Income Up to CZK 50,000 Tax-Free?

Incidental income refers to extra earnings that you don’t have to pay tax on, as long as they don’t exceed CZK 50,000 per year (starting in 2024). We’ll clarify what happens if you go over this limit and explain why you can’t hold a business license in the Czech Republic in that case.

As of 2024, if your incidental income is up to CZK 50,000 per year (up from CZK 30,000 in 2023), it won’t be taxed. 

Consultant Michal Dvořáček points out, “This income must come from one-time activities or services provided by someone who doesn’t have a valid business license.”

If you earn more than this amount from part-time jobs throughout the year, you’ll need to pay taxes and file a tax return — even if you aren’t a sole proprietor.

According to Hana Barakova from the Main Financial Department, “The law exempts income from one-time activities and periodic leasing of movable property from personal income tax. This includes earnings from agricultural production, forestry, and water management that aren’t conducted by registered entrepreneurs.” For more details on how incidental income is taxed, check out Article 10 of the Law on Income Tax.

Examples of incidental income can include things like tutoring, house cleaning, selling your homegrown fruits or vegetables, or occasionally renting out items like a computer or car. 

What Is Incidental Income?

Incidental income refers to earnings that you receive from activities you do occasionally, such as:

• Working under a temporary employment contract
• One-time rentals of movable property
• Agricultural production, unless you are managing it as a business
• Activities and income from beekeeping (if you have a maximum of 60 bee colonies in a year, you can count a one-time income of 500 Czech Crowns per colony).

“Even a small income of less than CZK 50,000 cannot be considered incidental income if it is earned under a business license,” explains the consultant.

Examples:

Mr. Novák, a retiree, tutors his neighbor’s son in English once a week for CZK 500 per hour. Over the course of the year, he earns a total of CZK 40,000. Since this incidental income is below the CZK 50,000 limit, Mr. Novák does not pay any taxes on it, does not need to fill out forms for the tax authority, and does not have to declare this income anywhere.

In 2024, employee Mr. Dvořák will earn CZK 35,000 by occasionally renting out movable property. Although his employer typically handles tax payments under normal circumstances, in the spring of 2025 he will need to file his own tax return and report all his income (from both work and rentals). To do this, he will request confirmation of his taxable income for 2024 from his employer. 

What Penalties Are There for Exceeding the Limit?

If you exceed the limit of CZK 50,000, all of your incidental income (not just the amount over the limit) will be subject to taxation.

Failing to file a tax return or pay your taxes on time will result in penalties similar to those faced by any other income taxpayer.

Typically, taxpayers incur a penalty if they are more than five working days late in submitting their return or making a payment. If the delay is longer, they will face additional penalties and interest on the late payment.

The penalty for each day of delay is 0.05 percent of the tax owed (or 0.01 percent of any loss). The maximum penalty can reach up to five percent of the total tax due. If you fail to file a tax return altogether, you will face a minimum penalty of CZK 500. The same penalty applies if you do not pay your taxes on time.

What Can Entrepreneurs Deduct from Their Expenses?

For entrepreneurs, it’s essential to know that if someone does occasional work for them, and they receive “tax-free incidental income,” self-employed individuals and companies can deduct those expenses.

According to Petra Homolová, press secretary of the Financial Directorate, anyone performing even a one-time service must do so based on a contractual agreement, whether oral or written.

When it comes to providing services, a sales contract or a work contract can be established implicitly — simply by paying for the goods or services and taking possession of them. This means that a written contract isn’t always necessary. However, relying on oral agreements comes with its own risks.

The Financial Directorate points out that if the tax inspectorate conducts an audit, it’s the entrepreneur’s responsibility to document the claims made in their tax return. “In this case, both the entrepreneur’s and the non-entrepreneur’s evidentiary positions will be significantly weakened,” says the representative.

Since non-entrepreneurs cannot issue tax documents, it’s advisable to formalize payments through an agreement for non-entrepreneurial activity, such as an employment contract, or to provide an expense receipt where they acknowledge receipt of payment.

The approach you take may depend on the scope of work and the amount paid. “For small, insignificant amounts, a simple description of the service on the expense receipt may be sufficient,” adds Alisa Shramková from the Chamber of Tax Consultants.

However, Shramková warns that part-time work without a written contract carries additional risks. “Without a formal agreement, it may be challenging for entrepreneurs to ensure that the other party fulfills their obligations if the terms of an oral agreement are not met,” she explains.
For any questions related to taxes and laws in the Czech Republic, feel free to consult the experienced specialists at 360WEDO. Submit your request for a consultation on the website.