Czech Taxation of Revenues from Property Rental

In the Czech Republic, revenues from long-term rental of properties are taxable. Both foreign (non-Czech) property owners and Czech residents are subject to this tax under these two conditions:

• • Anyone residing in the Czech Republic for less than 183 days a year must pay income tax only on revenues formed in the Czech Republic.

  • The owner's annual taxable income must be over CK 15,000 (lower amounts are not reported to the Tax Authority and are not taxable).

In this case, the tax charged will be 15% of the tax base, which includes all revenues (i.e., rental fees) less the expenditures (costs involved in obtaining / maintaining / providing the income).

Tax Accounting Methods

The tax payer must choose one of the following tax accounting methods:

• 1. Pay 15% of the tax base (only as documented by invoices and receipts), or

  2. Pay a constant rate of 30% of your revenues, with no inclusion of expenditures

Tax payers usually choose to pay a constant rate. Use of the constant rate is less complicated and less complex from an administrative and accounting perspective.

Expenditures may include

Renovations, repairs (both up to a maximum of CK 40,000), equipment (up to CK 40,000 per unit), maintenance fund (but only for repairs approved by the authorities and covered by this fund), property tax, property insurance, fees involved in the building's management not including energy fees (for electricity, gas).

Depreciation of the property (the flat itself, equipment and repairs of more than CK 40,000) – the time and amount of depreciation are determined by current regulations (for example, for a rented flat purchased no more than 5 years ago – calculated by the price of purchase divided by 30 years).

Certain deductions from the tax base (for example, untaxed income) are relevant only 

for foreign residents residing in European Union countries, Norway, and Iceland. In 

other cases they are relevant only for foreign residents who pay tax on at least 90% of 

their total revenues in the Czech Republic.

Mortgage

Interest on mortgage payments may be deducted from the tax base only if:

• • The flat was purchased for residential purposes of the purchaser or of a family member.

  • The person living in the flat is a contractual party to the mortgage contract.

There are also certain deductions from the calculated tax. Foreign residents can make use of the "taxpayer deduction" (approximately CK 25,000, depending on current regulations) –no further conditions are stipulated for use of this benefit.

In conclusion

If the monthly rental fee is no more than CK 18,000 you will not have to pay tax on revenues from your property in the Czech Republic.

For example:

CK 18,000 × 12 months = CK 216,000 a year

216,000 × 70% (deducting 30% expenditures) = CK 151,200, the taxable income

CK 151,200 taxable income × 15% income tax = tax of CK 22,680

Taxes are paid only from a minimum of CK 25,000 a year, i.e., if the final payment to the tax authorities will be less than CK 25,000 then although it must still be reported  to the tax authorities – you will be exempt from paying tax. Hence, if the rental fee is less than CK 18,000 the owners shall pay no tax.

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