According to the Czech law, you are obliged to pay health insurance (Act no. 592/1992 Coll.), social security (Act no. 589/1992 Coll.) and personal income tax (Act no. 586/1992 Coll.). If employed, the sums are monthly deducted (the tax in form of a prepayment) from your wage by your employer, so you have no direct obligation to make the payments yourself. In addition, the employer contributes to your insurance and security and pays certain proportion of the sum for you.
Tax allowances and benefits
If you are entitled to, you can apply for relevant personal tax allowances such as basic tax allowance, tax allowance for a disabled person, tax allowance for the student, child benefit etc. The basic tax allowance is available to everyone, but it is not granted automatically; you have to apply for it. The reason is that you may have multiple employers simultaneously, but you can use the allowance only at one employer at the same time, thus you have to choose at which of your employers you want to apply for it. This is done by you signing so called “pink declaration” (Declaration of the taxpayer liable to personal income tax from dependent activity) at the chosen employer’s payroll office (usually the one you have highest income at). In case of e.g. child benefit, allowance for a student or disabled person, you must submit further documents.
There are benefits which you may apply for only yearly (benefit for maintained wife/husband with low income etc.) via the annual tax account (done by your employer and settled within your wage) after the end of the year. However, there are certain conditions under which you cannot apply for the usual benefits monthly or you cannot ask your employer to do the annual tax account for you (e.g. if you were employed simultaneously at more than one employer during the relevant tax period). In these cases, you have to apply for the tax benefits yourself via the tax return (Income tax return by individuals) after the end of the tax period and submit it to a Tax Office.
If you need any help to understand what and when you are entitled to apply for, or you struggle with filling in the tax return, contact any support centre for foreigners (see section Important Contacts) or take advantage of professional tax consulting services (see section Tax System).
Wages & Deductions and benefits in numbers
The wage you agreed to when arranging your employment contract is called gross wage (“hrubá mzda”). It is the sum which the insurance, security and income tax prepayment will be deducted from. The sum after deductions, benefits etc. is called net wage (“čistá mzda”), i.e. money you receive in cash or on your bank account.
Until December 2020, there had been so called "supergross wage". This concept was invented years ago in order to improve Czech economy balance by people paying more on taxes. The supergross wage was to work as a tax base and was calculated as gross wage increased by insurance and security paid by an employer. Since January 2021, there is no supergross wage anymore and the gross wage is used as a tax base instead. Thus, the tax is now calculated from lower tax base, which leads to lower tax and higher net wage. Even though the calculation of supergross wage is identical to labour costs calculation, it has originally nothing to do with it. The labour costs (and its calculation) stay the same. The extra money an employee now receives within the net wage does not affect the labour costs, it affects a contribution in the state resources.
Rates of insurance, security and income tax are expressed as a percentage and are calculated from the gross wage:
- Health insurance: 13,5 % in total (4,5 % paid by an employee, 9 % paid by an employer)
- Social security: 31,3 % in total (6,5 % paid by an employee, 24,8 % paid by an employer)
- Income tax: 15 % (paid by an employee)
What is paid from your health insurance and social security? See links in section Insurance. More about taxes at link in section Tax System.
Allowances and benefits are in fixed absolute numbers, some of them are (monthly, in CZK):
- Basic personal tax allowance: 2 320,- (27 840,- per year)
- Personal tax allowance for a disabled person: 210,- (disability of I or II degree; 2 520,- per year) or 420,- (III degree; 5 040,- per year)
- Personal tax allowance for a student: 335,- (4 020,- per year)
- Child benefit: 1 267,- for one child in a household (15 204,- per year), 1 617,- for second child (19 404,- per year) and 2 017,- for third and every other child (24 204,- per year)
More about allowances and benefits e.g. here: https://www.podnikatel.cz/clanky/jake-danove-slevy-lze-vyuzit-v-roce-2020-a-2021/ (in Czech)
Net wage calculation
Example of monthly net wage calculation (in CZK) supposing the taxpayer has signed the “pink declaration” and has applied only for the basic tax allowance:
|Agreed gross wage||30 000,-|
|Health insurance and social security paid by the employee (4,5 % + 6,5 % = 11 % of 30 000)||3 300,-|
|Income tax prepayment (15 % of 30 000)||4 500,-|
|Income tax prepayment after deduction of basic tax allowance (4 500 – 2 320)||2 180,-|
|Net wage (30 000 – 3 300 – 2 180)||24 520,-|
If you claim any other allowances, the amount of income tax prepayment would be further reduced, so the final amount of prepayment would be even lower than 2 180,-.
More about the delineation of net wage calculation: https://www.vypocet.cz/popis-vypoctu-ciste-mzdy (in Czech)
Online net wage calculator: https://www.platy.cz/en/calculator
From the employer’s point of view, real labour costs of the employee from our example above are 40 740,- (30 000 x 1,338) because the employer pays 33,8 % (9 % + 24,8 %) of the gross wage for the employee’s insurance and security. Based on an internal regulations, the BC pays additional 2 % of the employee’s gross wage as a contribution to the Social fund, which is then disbursed in form of various benefits (contribution to lunch price etc.).
Note: All the aforesaid figures are in CZK. Information on this site are valid by January 2021 and we do our best to keep it updated. However, please use other sources to check the rates. And if you find any error, we will be glad if you notice us via the contact form below. Thank you!
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