Disclaimer: This article is informational and does not constitute tax or legal advice. Amounts and rules change — always verify the current state at financnisprava.gov.cz or with a licensed Czech tax advisor.
Every year, foreign freelancers in Czech Republic hand the tax office more money than they need to — not because they cheated, but because they picked the wrong way to deduct their expenses. The Czech system gives OSVČ (self-employed persons) two methods, and the gap between them can easily be 50,000 CZK or more per year for a mid-sized freelance income. The choice is simple to understand once you see the mechanics, and this guide walks you through it with concrete 2026 numbers.
The Two Methods, in One Paragraph
When you file your Czech income tax return, your tax base is your revenue minus expenses. You then pay income tax of 15 percent on that base (23 percent on the portion above 1,762,812 CZK in 2026). The question is how you calculate the "expenses" you subtract. You have two options, and you choose one for the whole year:
- Flat-rate expenses (paušální výdaje): You deduct a fixed percentage of your revenue — no receipts, no documentation, no proof of any actual spending required.
- Real expenses (skutečné výdaje): You deduct your documented, genuine business costs — equipment, subcontractors, travel, office, software — and you must keep the records to back them up.
Note that both of these are different from the paušální daň (flat-tax regime), which replaces the whole return with one monthly payment. That is a separate decision covered in our guide to the Czech flat tax for foreigners. Here we are talking about how you compute expenses within a normal tax return.
The Flat-Rate Percentages and Caps for 2026
The flat-rate percentage you may use depends on your type of activity, and each band has an absolute cap on the crowns you can deduct. These are the 2026 figures:
| Flat-rate | Who it applies to | Maximum deduction (cap) |
|---|---|---|
| 80% | Craft and agricultural trades (řemeslné a zemědělské činnosti) | 1,600,000 CZK |
| 60% | Other trades — most freelancers (IT, consulting, marketing, design) | 1,200,000 CZK |
| 40% | Independent professions (e.g. lawyers, doctors, some authors) | 800,000 CZK |
| 30% | Rental of business assets | 600,000 CZK |
For the majority of foreign freelancers — software developers, consultants, copywriters, designers, marketers operating on a standard volná živnost — the relevant figure is 60 percent, capped at 1,200,000 CZK. That cap becomes relevant once your revenue passes 2,000,000 CZK, because 60 percent of anything above that is no longer deductible under the flat rate.
The Core Rule of Thumb
The decision comes down to a single comparison. Ask yourself: are my real, documented business costs higher or lower than the flat percentage of my revenue?
- Flat-rate wins when your genuine costs are low relative to revenue. This describes most knowledge workers: a laptop, some software subscriptions, a coworking desk. If you bill 800,000 CZK and spend 60,000 CZK on real costs, the 60 percent flat rate hands you a 480,000 CZK deduction for free.
- Real expenses win when you have high genuine costs: expensive equipment, subcontractors you pay, significant travel, a rented studio or office, inventory, or materials.
The beauty of the flat rate is not only that it is often bigger — it is that it requires zero documentation. You do not keep receipts, you do not fear an expense audit, and your bookkeeping shrinks to simply tracking revenue. For a freelancer whose costs are genuinely low, this is both the cheaper and the simpler path.
A Worked Example: Revenue of 800,000 CZK
Let us make this concrete. Suppose you are a marketing consultant (60 percent band) with annual revenue of 800,000 CZK. Compare the two methods, assuming your real documented costs come to 150,000 CZK for the year:
| Item | Flat-rate (60%) | Real expenses |
|---|---|---|
| Revenue | 800,000 CZK | 800,000 CZK |
| Deductible expenses | 480,000 CZK (60%) | 150,000 CZK (actual) |
| Tax base (before credits) | 320,000 CZK | 650,000 CZK |
| Income tax at 15% | 48,000 CZK | 97,500 CZK |
| Less basic taxpayer credit | −30,840 CZK | −30,840 CZK |
| Income tax payable | 17,160 CZK | 66,660 CZK |
The difference in this example is 49,500 CZK of income tax — and that is before you factor in that a lower tax base also reduces the assessment base for your social and health insurance, widening the gap further. The flat rate wins decisively here because 480,000 CZK of "free" deduction dwarfs the 150,000 CZK of real costs.
Now flip it. If that same consultant had spent 550,000 CZK on real costs (say they subcontract most of the work), the picture reverses: real expenses would produce a 250,000 CZK tax base versus 320,000 CZK under the flat rate, and real expenses would win. The lesson: run both numbers, every year, on your actual figures.
The Credits That Survive Under Both Methods
A crucial point that trips up foreigners: under both flat-rate and real expenses, you keep access to the full suite of Czech tax credits. This is not true of the paušální daň flat-tax regime, where you forfeit them. Under the normal return with either expense method you can still claim:
- The basic taxpayer credit of 30,840 CZK per year (applied in the examples above)
- Child tax credits (per dependent child)
- The spouse credit (for a low-income spouse, subject to conditions)
- Other statutory deductions where applicable
This is why, for many freelancers with families, staying on a normal return with the flat rate beats the flat-tax regime outright — you get the generous flat-rate deduction and your family credits. If you have children or a non-earning spouse, factor this in before you get seduced by the simplicity of the monthly flat tax.
When Real Expenses Are Clearly the Answer
Do not default to the flat rate blindly. Real expenses are the better choice when any of the following describe you:
- You subcontract a large share of your work and pay other freelancers or agencies.
- You made a major equipment purchase this year — cameras, computers, tools, a vehicle used for business.
- You rent a studio, workshop or office and pay meaningful rent and utilities.
- You have high travel, materials or inventory costs relative to revenue.
- Your real costs simply exceed the flat percentage — for a 60 percent freelancer, that means real costs above 60 percent of revenue.
Remember that with real expenses you take on the obligation to keep proper records and to be able to defend every deduction if the tax office asks. For high-cost businesses that trade-off is well worth it; for low-cost knowledge workers it rarely is.
Can You Switch Between Methods?
You choose your method when you file each annual return, so in principle you can switch from year to year. However, switching between real and flat-rate expenses can trigger adjustments to your tax base in the transition year (for example, relating to receivables, payables and stock), so it is not always a clean swap. If you are contemplating a switch — especially after a year with a big equipment purchase — it is worth modelling both years or speaking to a tax advisor first.
Common Mistakes Foreigners Make
Because the two-method system does not exist in many other countries, newcomers repeatedly fall into the same traps. Watch for these:
- Assuming real expenses are always better because "you deduct what you actually spent." For a low-cost knowledge worker, the flat rate typically hands you a far larger deduction than your genuine costs — and with none of the record-keeping burden.
- Choosing the flat rate but then still hoarding receipts "just in case." Under the flat rate you do not document costs at all. Keeping meticulous receipts you will never use is wasted effort — the flat percentage is fixed regardless.
- Forgetting the cap. The 60 percent flat rate is capped at 1,200,000 CZK of deduction. If your revenue is very high, the effective flat-rate percentage falls once you pass 2,000,000 CZK, and real expenses may quietly become better.
- Applying the wrong percentage band. A craft trade can use 80 percent, but a general free trade is only 60 percent. Using a percentage you are not entitled to is a classic audit finding.
- Confusing this decision with the flat-tax regime. Flat-rate expenses and the paušální daň flat tax are different things. You can use flat-rate expenses on a normal return and still claim all your credits — you cannot in the flat-tax regime.
Getting the method right is not a one-time setup — your cost profile changes as your business grows, so the winning method can flip from one year to the next. Treat it as an annual review, not a permanent decision.
How Taxorio Makes the Comparison for You
The only reliable way to make this decision is to compute both methods on your real numbers — and that is exactly what Taxorio does. As you record invoices and expenses through the year, the income-tax summary calculates your tax base and payable tax under both the flat-rate and real-expense methods side by side, applying the correct percentage and cap for your activity and factoring in your credits. Instead of guessing in March, you can see the answer at any point in the year.
You can also model scenarios quickly with our free income tax calculator and the dedicated flat-rate calculator, and check how your choice ripples into contributions with the social and health advances calculator. If you are new to the whole system, start with our freelancing in Czech Republic guide, and if you are weighing the fully simplified monthly regime instead, read our breakdown of the Czech flat tax.
Stop overpaying by default. Open a free Taxorio account, enter your real revenue and costs, and let the income-tax summary show you — in crowns — which expense method wins for you this year. For many freelancers that single comparison pays for the tool many times over.
Remember: Flat-rate expenses win when real costs are low relative to revenue and require no receipts; real expenses win when genuine costs are high. Both preserve your basic taxpayer credit (30,840 CZK), child and spouse credits — unlike the flat-tax regime. Always run both on your own figures and verify the current caps at financnisprava.gov.cz.