Expense records are one of those parts of running a business that look like paperwork and turn out to be leverage. They let you claim real costs against your tax base, and they are what protects you if the tax office ever asks. This guide covers the whole picture — the legal duties, the practical habits, and what digital storage does and does not replace.
Why the records matter
As an OSVČ (self-employed person, sole trader) you have two ways to claim expenses in your tax return:
- Flat-rate expenses — a percentage of income, typically 40 % or 60 % depending on the activity
- Actual expenses — based on documents you can produce
If you go with actual expenses, § 7b of the Income Tax Act (ZDP) requires you to keep tax records: income and expenses broken down in the detail needed to determine the tax base, plus a record of assets and liabilities.
Even on flat-rate expenses you must record income and receivables. Keeping track of real costs anyway is still worth it — it is the only way to see your actual profitability and to know which method is better for you next year.
Three reasons to be careful about it
- Tax — if your real costs exceed the flat rate, the difference is money you would otherwise pay in tax. On 1 000 000 Kč of income the 60 % flat rate gives you 600 000 Kč of expenses; if your real costs are 700 000 Kč, you are taxed on 100 000 Kč less by claiming them.
- VAT deduction — if you are registered for DPH (VAT), the input deduction depends on holding a proper tax document. No document, no deduction.
- Inspections — the tax office can look back roughly three years, to the end of the period in which the tax can still be assessed. Records that are not in order mean additional tax and penalties.
Which documents to keep
Every expense needs a document that fits the transaction.
Invoice (a tax document)
The usual document when buying from companies and other sole traders. Under § 29 of the VAT Act a tax document must show:
- the supplier and the recipient — name, registered address, IČO (business ID)
- the supplier's DIČ (tax ID), if they are VAT-registered
- the document's reference number
- the date of issue and the date of the taxable supply
- the tax base and the VAT amount, at the 21 % or 12 % rate
- a description of what was supplied
Paragon (simplified tax document)
For purchases up to 10 000 Kč a simplified tax document may be issued. It does not have to identify the recipient, but it must identify the supplier and show the date, what was supplied and the total including VAT.
Bank statement
A statement proves payment. On its own it does not support a claim — you need the invoice or receipt that goes with it.
Travel order
For travel allowances — meals, fares — you need a travel order recording the purpose, route, duration and the amounts claimed.
Contract
For continuing obligations such as rent or leasing, the contract is the basis. You still need the individual payment documents alongside it.
How long to keep everything
Retention periods come from several acts and differ by document type:
- Tax records of income and expenses — under § 7b ZDP, for as long as the tax can still be assessed or re-assessed (§ 148 of the Tax Code) — three years after the filing deadline, but the period can be extended, up to ten years
- Tax documents for VAT purposes — under § 35 of the VAT Act, ten years from the end of the tax period in which the supply took place
- Accounting documents, if you keep full accounts — five years from the end of the accounting period under the Accounting Act
- Payroll sheets and related documents — forty-five years, for pension insurance purposes (relevant only if you have employees)
In practice, keep everything for ten years. Storage — digital storage especially — is cheap, and a long archive protects you in any backward-looking review.
Digital versus paper
Czech law allows documents to be archived digitally. Under § 35(3) and the following provisions of Act No. 235/2004 Coll. on VAT, a digital copy is valid for tax purposes as long as it preserves the authenticity of origin, the integrity of the content and legibility throughout the retention period. Authorised conversion — the procedure under § 22 of Act No. 300/2008 Coll. that gives a scan the legal force of the paper original — is a separate thing, and a sole trader does not need it for ordinary invoices and receipts.
What digital gives you
- It survives — thermal receipts fade to nothing within months. A scan does not change.
- It is searchable — digital documents can be categorised and found by supplier, date or amount.
- It is safer — paper is lost, burnt or flooded. A cloud backup is not.
- It travels — you have the document wherever you happen to need it.
How to do it properly
- Scan or photograph the document as soon as you receive it, while it is still legible
- Check the quality — all of the text has to be readable, including the small print
- Save it in a common format: PDF, JPEG, PNG
- Back it up in more than one place — cloud and a local disk
- Keep the paper originals at least until the end of the current tax period, as a fallback
Categorising expenses
Categories make the records navigable and make the tax return quicker to prepare. As a minimum, separate:
- Software — licences, SaaS subscriptions, hosting
- Hardware — computers, monitors, printers, accessories
- Travel — fuel, tickets, accommodation on business trips
- Phone and internet — mobile tariffs, fixed connections, data
- Services — accounting, legal advice, marketing
- Office — rent, utilities, supplies
- Other — whatever does not fit the above
Claiming a share rather than the whole
Most sole traders use some things for both work and life. The usual ones:
- a mobile phone also used privately
- a car used partly for business
- home internet, in the home where you also work
In those cases only the business share is deductible, and you have to be able to defend the ratio — a log of business journeys for the car, a reasoned estimate for the phone. Ratios between 50 % and 80 % are what most situations come out at.
Doing it in Taxorio
Typing expenses into a spreadsheet or a paper ledger is slow and easy to get wrong. Taxorio has a few features that take most of the work out of it.
Categories and business-use share
Every expense gets a category — the groups are IT & technology, operations, travel & transport, professional services, business, trade & materials, education, non-deductible expenses and other — and a percentage of business use. The dashboard then shows spending by category and the totals you need for the return.
AI document recognition
Photograph a receipt or an invoice and the system reads it and fills in:
- the supplier and their IČO
- the total
- the tax base and the VAT amount
- the date of the document
Your part is to check what was recognised, add the category and the business-use share, and save.
Mobile scanning
Scanning runs through a QR code: open the code on the desktop, scan it with your phone, then photograph documents from the phone. They upload to the app and go through recognition. The feature is on every plan, and scanned documents count towards the monthly AI recognition quota.
That is what lets you capture receipts at the moment you get them — in the shop, on the road, in a meeting — instead of filing paper you will later have to find.
Five mistakes that cost the most
- Putting it off. Receipts pile up in a wallet or a drawer, and in January nobody remembers what half of them were for. Record as you go, ideally straight after the purchase.
- Missing documents. An expense without one cannot be claimed. If you lose a document, ask the supplier for a duplicate.
- Personal purchases claimed as business. Purely private spending is not deductible, and claiming it invites additional tax and penalties.
- VAT not recorded separately. VAT-registered traders have to record the tax base and the VAT separately on every expense, or the deduction is not available.
- An implausible business-use share. Claiming 100 % on something you obviously also use privately is hard to defend.
A check before you save
- Do I have the document — invoice, receipt or contract?
- Is it legible and does it show everything the law requires?
- Do I have a digital copy?
- Is the expense in the right category?
- Are the tax base and the VAT split correctly?
- Is the business-use share set honestly?
- Can I show that this expense serves the business?
In short
Expense records are a legal duty and, more usefully, a management tool. Knowing where the money goes is what lets you cut the right costs, price work correctly and claim everything you are entitled to. With AI recognition and mobile scanning in Taxorio, the recording itself stops being the part you dread.
The FREE plan covers 5 expenses a month and 5 AI recognitions, mobile scanning included, which is enough for a sole trader with modest spending. PRO, from 69 Kč a month, removes the expense limit and raises AI recognition to 150 documents a month.
Taxorio scope: Taxorio provides invoicing and income/expense records for Czech sole traders. It is not full accounting or personalised tax advice. For an unsupported or unusual case, verify the treatment with a Czech accountant or tax adviser before filing.