Recent findings by PAQ Research have reignited the discussion around how self-employed individuals (OSVČ) are taxed in the Czech Republic. The study reveals that many freelancers benefit from flat-rate expense schemes (so-called “paušály”) that often significantly exceed their actual business expenses — sometimes by up to four times. But what does this mean for the tax system, and should expats in the Czech Republic care?
💡 What Are Flat-Rate Expenses (Paušální Výdaje)?
In the Czech tax system, freelancers can either:
Deduct real business expenses, or
Apply a percentage-based flat-rate expense scheme, where a fixed percentage of income (typically 30–80%) is automatically deducted as presumed costs, regardless of actual expenditures.
This system simplifies bookkeeping and reduces the tax base — making it especially attractive to sole traders with low overheads.
📊 Key Findings of the PAQ Research Study
According to PAQ Research:
Half of all self-employed people pay virtually no income tax.
Many OSVČ using flat-rate schemes deduct significantly more than they actually spend on business-related costs.
For some, the flat-rate deduction is up to four times higher than their real expenses.
These schemes result in lower contributions to the public budget — including the health and social security systems.
⚖️ Why It Matters
While the flat-rate system encourages entrepreneurship and reduces administrative burden, it also:
Reduces the effective taxation of freelancers compared to employees.
Places pressure on public finances, especially in areas like pensions and healthcare funding.
Creates potential inequities between employees and OSVČ with similar income levels.
The Ministry of Finance is reportedly considering reforms to make the system more balanced and sustainable.
🌍 What Should Expats Know?
If you’re a freelancer in the Czech Republic, especially using the 60% or 80% flat-rate expense regime:
You may currently benefit from generous deductions, but reforms may reduce these in the future.
It’s wise to review your actual business costs and consider whether a real-expense deduction might make sense in the long run.
The flat-rate tax scheme (paušální daň) is a separate simplified regime with set monthly payments — and may also be affected by upcoming changes.
✅ Our Advice
At Expat-Tax.cz, we recommend regularly reviewing your setup. While the flat-rate expense system is convenient, its future may involve tighter rules or caps.
📩 Contact us for a personalized consultation.