Czech Republic's 60% Lump-Sum Deduction: How OSVČ Freelancers Pay Around 4% Income Tax
Instead of tracking real expenses, Czech self-employed freelancers can deduct a fixed 60% of revenue and pay 15% tax on the rest — one of the widest gaps between headline and effective rate anywhere in Europe. Here is how the math actually works in 2026, and where it caps out.
The short answer
On CZK 1,500,000 revenue using the 60% lump-sum deduction
Lump-sum expense rates by activity (2026)
| Expense rate | Applies to | Max deductible amount (cap) |
|---|---|---|
| 80% | Craft trades (řemeslná živnost) and agricultural production | CZK 1,600,000 |
| 60% | Free, bound, and licensed trades — most freelance/IT/consulting activity | CZK 1,200,000 |
| 40% | Other independent activity: liberal professions, authors' royalties | CZK 800,000 |
| 30% | Rental income (business assets) | CZK 600,000 |
All caps are calculated off the same CZK 2,000,000 annual revenue ceiling — above that, lump-sum expenses cannot be used at all and you must switch to real bookkeeping or a limited company.
The worked example: CZK 1,500,000 of revenue
Step by step for a typical IT freelancer
A developer invoicing CZK 1,500,000 a year under a free-trade licence (volná živnost) qualifies for the 60% deduction. Since 60% of 1,500,000 is CZK 900,000 — below the CZK 1,200,000 cap — the full 60% applies without restriction:
Revenue: CZK 1,500,000. Deemed expenses (60%): CZK 900,000. Taxable base: CZK 600,000.
Income tax at 15%: CZK 90,000, minus the basic personal tax credit of CZK 30,840 = CZK 59,160 payable (≈3.9% of revenue).
Social insurance: assessment base is 55% of the taxable base (CZK 330,000), taxed at 29.2% = roughly CZK 96,400/year.
Health insurance: assessment base is 50% of the taxable base (CZK 300,000), taxed at 13.5% = roughly CZK 40,500/year.
Total mandatory burden: about CZK 196,000, or roughly 13% of gross revenue — still low by European standards, but well above the headline '~4%' figure people quote from the income-tax line alone.
The alternative: paušální daň (flat monthly tax)
One monthly payment instead of a tax return
Rather than filing an annual return, an OSVČ can opt into paušální daň — a single fixed monthly payment that bundles income tax, social insurance, and health insurance. Eligibility requires annual revenue up to CZK 2,000,000, not being a VAT payer, and generally not having other income above CZK 50,000/year outside the trade. There are three bands for 2026, chosen based on revenue and how much of it qualifies for the higher expense percentages:
Band 1 — revenue up to CZK 1,000,000: CZK 9,984/month for January-June 2026, reduced to CZK 9,162/month retroactively from July 2026.
Band 2 — revenue up to CZK 1,500,000 unconditionally, or up to CZK 2,000,000 if 75%+ of income qualifies for the 60% or 80% expense category: CZK 16,745/month.
Band 3 — revenue up to CZK 2,000,000: CZK 27,139/month (roughly CZK 9,320 tax, CZK 12,527 social, CZK 5,292 health).
Registration or band changes must be filed by January 10 for the current year; the flat monthly amount is due by the 20th of each month.
Where the regime stops working
See your real take-home pay in Czechia
Compare net income under the 60% lump-sum deduction against paušální daň and against other European freelancer regimes.
FAQ
Is the 60% expense deduction the same as paušální daň?
No. The 60% lump-sum deduction (výdajový paušál) is a way to reduce your taxable income by deeming 60% of revenue as expenses — you still file an annual tax return and pay social/health insurance separately based on the resulting profit. Paušální daň is a completely different opt-in regime that replaces the return with one fixed monthly payment covering tax, social, and health insurance together.
What income qualifies for the 60% rate versus 80% or 40%?
80% applies to craft trades (řemeslná živnost, e.g. construction, hairdressing) and agricultural production. 60% applies to free, bound, and licensed trades — most freelance consulting, IT, and creative-services work. 40% applies to other independent activity like liberal professions and authors' royalties. 30% applies to rental of business assets.
Why is the effective rate quoted as ~4% when insurance adds much more?
The ~4% figure refers strictly to income tax on the taxable base after the 60% deduction and personal credit. Mandatory social insurance (29.2% of 55% of the base) and health insurance (13.5% of 50% of the base) are calculated and paid separately, bringing the total mandatory burden to roughly 13% of revenue in a typical case — still competitive in Europe, but not '~4% total.'
What happens if my revenue exceeds CZK 2,000,000 during the year?
You lose eligibility for lump-sum expenses and paušální daň going forward and must switch to real, documented expenses (or organized accounting). Many freelancers who consistently exceed this threshold incorporate as an s.r.o. instead, trading a higher administrative burden for a flat 21% corporate rate and more control over when profit is taxed personally.
Keep reading
Czech Republic Tax Calculator 2026
Model net income for OSVČ freelancers and employees under 2026 rates.
Czechia Personal Taxation Guide
Income tax bands, social contributions, and filing basics for residents.
The 183-Day Rule: How Tax Residency Actually Works
When you become a Czech tax resident and owe tax on worldwide income.
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