Our guide to Payroll in Czech Republic

Doing Business in Czech Republic

Investing in Czech Republic

When it comes to attracting foreign investors, the Czech Republic is one of the most successful states in the EU. Located in the heart of Europe, with its significantly enhanced rail network, the Czech Republic has direct links to almost all major European cities. The Czech Republic offers investors a competitive economy, supported by a highly educated and skilled workforce.

Basic Facts about Czech Republic

General Information

Full Name: Czech Republic (Česká republika)

Population: 10.88 million (Czech Statistical Office, 2024)

Capital: Prague

Primary Language: Czech

Main Religion: Christianity 7,04

Monetary Unit: Czech Crown (CZK), in Czech typed Kč (Koruna česká)

Main Exports: Machinery and transport equipment, raw materials and fuel, chemicals

GNI per Capita: US $49,160 (World Bank, 2023)

Internet Domain: .CZ

International Dialing Code: +420

How to say

Hello: Ahoj

Good morning: Dobré ráno

Good evening: Dobrý večer

Do you speak English? Mluvíš anglicky?

Good bye: Na shledanou

Thank you: Děkuji

See you later: Na shledanou

Dates & Numbers

Dates are usually written in the day, month and year sequence. For example, 1 July 2025 or 1/7/2025. Numbers are written with a decimal coma. For example, 2,07 CZK, 2458,50 CZK, etc. The monetary unit is written after the number.

Registrations and Establishing an Entity

A company is required to have a legal entity established in order to process a payroll.

For companies that are looking to process payroll in the Czech Republic, the company registrations to the tax, health and social security authorities include:

• Employer number with social authority
• Tax registration for the taxes related to the payroll (personal income tax)
• Registration of the employees to the health authority
• Employer tax number

The timeline for processing depends on the registering authority, this can take up to two weeks.

The key legislative authorities in the Czech Republic varies depending on where the employer is located.

Banking

It is mandatory to make payments to the authorities from an in-country bank account.

Generally, banks are open to the public from 09:00 to 17:00 hours on weekdays. Some banks in the centre of larger cities are often open until 20:00 on weekdays.

Working Week

The working week in the Czech Republic is Monday to Friday, working 40 hours on average per week. The working day for commercial offices is typically from 09:00 to 18:00 hours.

Employment Law

Holiday Accrual / Calculations

Most employees are legally entitled to paid holidays/annual leave. A worker’s statutory paid holiday entitlement is a minimum of 20 days/160 hours. This is refunded by the employer and calculated from an average salary from a previous quarter.

Maternity Leave

Maternity leave entitlement is 28 weeks (37 weeks at twins, triplets etc.) and starts 6-8 weeks before giving birth. There is no cost bear by the employer, the mother cannot be dismissed and her working contract cannot be terminated.

Parental leave is available up to three years of child age, fully subsidized by the State, the mother cannot be dismissed and her working contact cannot be terminated.

Paternity Leave

The paternity benefit is a sickness insurance benefit aimed at providing financial security for economically active citizens when they lose short-term earnings due to illness or maternity.

The paternity allowance is payable for 14 days in connection with the care of a newborn child to the child's father or to the insured person (male or female) who has taken the child into care in lieu of parental care on the basis of a decision by the competent authority. From 1 December 2022, it is also payable to the father whose child is stillborn or dies within 6 weeks of the date of birth and must be taken within six weeks of birth or date of placement. During their absence, new fathers will receive as much as 70% of their salary.

Sickness

The first 14 days of sickness are refunded by the employer, however the employer will only refund working days out of the 14 days.

The employer refunds 60% of a taxable income.

National Service

There is no compulsory national service in the Czech Republic.

Tax & Social Security

The tax year runs from 1st January to 31st December.

Income Tax

Monthly income tax contributions must be paid by the 20^th day of the following month.

Calculation Example

Tax allowances = 0 (no children, no wife/husband without a taxable income)

Therefore, basic tax allowance only totals 2,570 CZK per month.

Employees tax = 15% (individual income tax) calculated for gross salary up to 139,671 CZK.

23% for the incomes above the 139,671 CZK.

Social Security

Monthly social security contributions must be paid by the 20th day of the following month. The typical penalty awarded for late submission and payment of tax and social security contributions are:

• Social and Health Insurance: 0.05% per day
• Tax Office: Repo rate of a Czech National Bank + 14%

Tax and Social Security Requirements

Pension Scheme: The employer can contribute to an individual employee pension account up to CZK 50,000 per year. This amount is tax deductible for the employer and is not considered as a benefit in kind for the employee (therefore no subject for further taxation). Individual employee accounts can be opened by a registered bank fund only.

A company must be licensed to make any tax and/or social security filing on behalf of a client, a power of attorney must be signed by the client.

Reporting

Monthly

• Social Insurance Authorities

• Health Insurance Authorities

Quarterly

• Calculations of the insurance against labor accidents for Kooperativa Insurance Company

Yearly

• Income tax statement of account for annual wages/salaries and withholding tax statement

• Employers employing more than 25 employees on average within calendar year are obliged to employ disabled persons in accordance with Section 81 (1) of the Employment Act, in the amount of 4% of the total number of their employees.

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• Pension sheets with overview of each employee´s income no later than by 31. 5.

Payroll

It is legally acceptable in the Czech Republic to provide employees with an online payslip, provided the employee has given written approval beforehand.

Theoretically, it is mandatory to make payments to employees and authorities from an in-country bank account, but it has to be denominated into the correct equivalent of CZK and you can charge bank charges to the authority.

Reports

2023 to extend the statutory deadline for archiving employee payroll and other accounting records related to pension coverage. Employers will now be required to archive these documents for up to 45 calendar years following the year to which the documents relate, instead of the previous 30 years.

New Employees

When an employee is hired, they must be registered with local authorities within eight days of starting the new job, this applies to expat new starts as well.

If the new start is an expat, they will be required to provide the following:

• Passport or any form of ID

• Signed working contract

• Working permit – Only expats from out with the EU need to provide this, EU citizens only have to provide mandatory registration plus authorized confirmation in which country the employee is registered for Social and Health Insurance (can only be insured in one EU country).

EU citizens - no working permit is required, only mandatory registration and authorized confirmation in the country the employee is registered for social and health insurance (you can only be insured in one EU country).

Leavers

Redundancy payments are free of social and health insurance contribution. Typical redundancy scheme is 2 (termination notice) +3 (redundancy payment). Final payment has to be done within a regular salary payment date.

Entitlement for redundancy is paid only in case of termination by the employer for organizational reasons.

In the case of termination by the employee, there is not entitlement for redundancy.

Redundancy Payments:

Employment shorter than 12 months – 1-month salary

Employment for 12-24 months – 2-month salary

Employment for more than 24 months – 3-month salary

Social and health insurance authorities must be notified when an employee leaves the company.

Employee Benefits

The annual exemption limit for non-cash employee benefits has increased to CZK 23,278.50 for 2025. This is an increase of CZK 1,295 compared to 2024.

At the same time, there is an additional category of employee benefits that are not included in the above limit. These are health promotion benefits (e.g., rehabilitation allowances in a medical facility, above-standard medical care of the Canadian Medical type), for which the income tax exemption limit of CZK 46,557 applies as of 1 January 2025.

The limits for contributions to superannuation and products of a similar type remain the same, at 50,000, and do not count against the previous limit.

The cash meal allowance for one shift is exempt from income tax (and thus from insurance contributions) on the part of the employee up to 70% of the upper limit of the meal allowance provided for a working trip lasting 5 to 12 hours and set for a salaried employee, i.e. an employee referred to in Section 109(3) of the Labour Code. As of 1 January 2025, the amount is CZK 123.90 (70% of CZK 177).

Expenses

Company Car:

• A company car is also available for private purposes.

• 1 % A vehicle that is neither low-emission nor zero-emission.

• Rate already in force 0,5 % Vehicle category M1, M2, N1 - low emission (vehicle must not exceed a CO2 emission limit of 50 g/km and 80% of the emission limits for air pollutants in real operation).

• Already applicable rate 0.25% A vehicle that uses only electricity or hydrogen as a fuel source or another vehicle that has no CO2 emissions, i.e. is zero-emission.

Car Mileage:

• Fuel used for private consumption can be deducted from a net salary directly on the payroll. Please note these payments are subject to VAT.

General expenses calculated based on travel insurance forms are tax exempt.

Minimum Wage 2026

From 1 January 2026, the statutory minimum wage in the Czech Republic is CZK 22,400 per month (based on a 40-hour working week). The hourly minimum wage is CZK 134.40.

Visas & Work Permits

EU citizens can work in the Czech Republic without a work permit, however most nationals from other countries require a work permit to work in the country legally. It is also necessary to have a valid visa should a non-EU citizen wish to work in the Czech Republic; however, they must obtain a work permit before applying for a visa.

Some foreigners are exempted from requiring a work permit, including citizens of EU and EEA countries and citizens of Switzerland.

Key Legislative Changes for 2026

Income Tax Threshold Update:

The 23% progressive income tax rate applies to annual income exceeding CZK 1,762,812 (approx. CZK 146,901 per month). The 15% rate applies below this threshold).

Maximum Assessment Base for Social Security:

The maximum annual assessment base for social security contributions for 2026 is CZK 2,350,416.

Unified Monthly Employer Report (UMER / JMHZ):

Effective 1 January 2026, a Unified Monthly Employer Report replaces multiple filings. Full implementation begins 1 April 2026. Retroactive reporting for January–March 2026 must be submitted by 30 June 2026.

DPP Contribution Threshold:

For agreements to perform work (DPP), social and health insurance contributions apply if monthly income exceeds CZK 12,000.

Employee Benefits Exemption Limits 2026:

Non-cash employee benefits exemption limit: CZK 24,483.50 per year. Health-related benefits exemption limit: CZK 48,967 per year.

Meal Allowance Update:

The tax-exempt meal allowance for one shift may apply up to CZK 129.50.

Further Information

For more information, or assistance with Czech Republic Tax inquiries please contact: gi@activpayroll.com

About This Payroll and Tax Overview

Please note that this document gives general guidance only and should not be regarded as an authoritative or complete statement of the law, regulations or tax position in any country. You should always seek specific advice for each specific situation. This document should not be relied upon as professional advice and activpayroll accepts no liability for reliance on its contents.