Czech 60/40 Rule - Freelancer Tax Simplification — Czech Republic
Czech 60/40 rule (paušální výdaje - fixed expenses): freelancers/self-employed automatically deduct 60% gross income as business expenses without receipts. Only 40% taxable. Most popular tax method Czech freelancers (OSVČ). Dramatically simplifies accounting and reduces tax burden. Alternative to tracking actual expenses.
Czech 60/40 Rule - Freelancer Tax Simplification
Czech 60/40 rule (paušální výdaje - fixed expenses): freelancers/self-employed automatically deduct 60% gross income as business expenses without receipts. Only 40% taxable. Most popular tax method Czech freelancers (OSVČ). Dramatically simplifies accounting and reduces tax burden. Alternative to tracking actual expenses.
How 60/40 Works
Czech 60/40: deduct 60% income as business expenses automatically. No need prove or document expenses. Remaining 40% = taxable income. Then apply 15% or 23% rate plus social/health contributions. Example: CZK 1M gross revenue → CZK 400k taxable → CZK 60k tax (15%) + CZK 116.8k social + CZK 54k health = CZK 230.8k total (23% effective).
Czech 60/40 best when: low real business expenses (consultants, developers, designers), want simple accounting, don't want track receipts. If actual expenses >60% income, better use actual expenses method. Can switch methods year to year. Most Czech freelancers use 60/40 for convenience.
Czech 60/40 applies to: trade license income (živnostenský list), certain self-employment. NOT for: rental income (30% limit), employment income, hobby income. Must have proper trade license (OSVČ registration) to use 60/40.
Alternative: Actual Expenses
Czech actual expenses: deduct real documented business costs (office rent, equipment, travel, etc). Better if expenses >60% revenue. Requires receipts, accounting, more administration. Example: CZK 1M revenue, CZK 700k expenses → CZK 300k taxable vs CZK 400k with 60/40 → saves tax.
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