In connection with the introduction of the Uniform Monthly Employer Report, changes are also being made to taxation, specifically the withholding tax on income from dependent activities is being gradually abolished. With effect from 1 January 2026, the withholding tax on income received by tax non-residents for the performance of the function of members of the statutory bodies of legal entities will be abolished. From 1 January 2027, the withholding tax on income from dependent activities will be completely abolished.
Until the end of 2025, remuneration for the performance of the function of executive directors or other members of statutory bodies who are, in accordance with Section 2(3) of Act No. 586/1992 Coll., on Income Taxes (ITA), or in accordance with the relevant double taxation treaty, considered tax non‑residents of the Czech Republic, could be taxed preferentially through a 15% withholding tax. Thus, there was no progressive taxation even if the total income exceeded the threshold for progressive taxation, i.e. 36 times the average wage, and at the same time the amount of withheld tax was final, without any obligation to file a tax return.
However, from 1 January 2026, such income is already subject to a tax advance withholding at rate of 15% or 23% depending on the amount of income. This aligns the conditions for Czech tax residents and non‑residents who perform the functions of members of statutory bodies of legal entities. The net income of these persons may therefore increase up to a certain income level, but for members of statutory bodies with higher incomes, their net income will decrease after exceeding this income level above the threshold for progressive taxation.
At the same time, these individuals will be obliged to file a tax return if their aggregate income from the performance of the function of members of statutory bodies of legal entities for the tax period exceeds 36 times the average wage. For the first time, they will file tax returns for 2026, i.e. at the beginning of 2027.
With effect from 1 January 2027, the withholding tax on income from dependent activities will subsequently be abolished entirely.
Currently withholding tax applies, among others, to income from dependent activities under Section 6(4) of the ITA, i.e. income from agreements to complete a job (DPP) for which the taxpayer’s declaration is not signed and which does not reach the decisive amount for participation in sickness insurance (currently up to CZK 11,999 per month), and income from small-scale employment, such as agreements on work activity (DPČ), if their monthly amount does not reach the decisive amount for employees’ participation in sickness insurance (in this case, CZK 4,499 per month).
There were fears that the introduction of the tax advance withholding for income from dependent activities under Section 6(4) of the ITA would result in the obligation to file tax returns for tens of thousands of people with income from agreements or part-time jobs. However, these concerns have been taken into account in the amendments, which ensure that advance income tax under Section 6(4) of ITA may be treated as final without the obligation to file a tax return. However, if it would be more advantageous for the taxpayer to file a tax return, even if they have no other taxable income — for example due to the more effective application of tax credits or a reduction in the tax base — they may do so.
Also, if the taxpayer is obliged to file a tax return due to other reasons (e.g. due to receiving rental income), they will not be obliged to include to income under Section 6(4) of the ITA and already taxed by tax advance withholdings in the tax return. However, they may still include it if it is more advantageous.
Until the end of 2026, the income of publicly performing artists, athletes and performers who are tax non-residents of the Czech Republic in connection with their activities personally performed in the territory of the Czech Republic is also subject to withholding tax, regardless of who this income comes from and whether it is income from self-employment or from dependent activities.
However, the withholding tax on the income of publicly performing artists, athletes and performers who are tax non-residents of the Czech Republic and who perform this activity as a dependent will also be abolished as of 2027 and replaced by an tax advance withholding, if their employer is in the position of a payer of tax and is thus obliged to tax this income through payroll in the Czech Republic.
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