Daně a legislativa ČR
Progressive Taxation and Capital Income: What High Returns Mean for Your Tax Bill
Key takeaways
- There are two personal income tax rates in the Czech Republic: 15% (up to the threshold) and 23% (above it) — the threshold is four times the average annual wage.
- Capital income (dividends, taxable gains) enters total taxable income and can push it into the 23% band.
- Exempt income (time test or value test) does not enter taxable income at all — which is crucial for high-income investors.
- High dividend income without the time test can lead to a higher effective tax rate.
- This is not tax advice — verify the current rates and thresholds with an adviser.
Czech personal income tax is not flat — above the statutory threshold the rate is 23% instead of the standard 15%, and this applies to investment income too, if it enters the tax base.
Two Income Tax Rates in the Czech Republic
Since 2021 progressive taxation applies for individuals in the Czech Republic:
- 15% — for the portion of the tax base up to four times the average wage (verify the current figure for 2026 on the financial administration website).
- 23% — for the portion of the tax base exceeding this threshold.
The threshold (four times the average wage) changes each year by decree — for the exact figure for 2026 you must verify the current level.
When the Higher Rate Affects an Investor
If your total income (from employment, self-employment, and investments) is high, capital income can push the total tax base into the 23% band. Specifically:
- Taxable dividends from foreign funds — enter the tax base as foreign income.
- Taxable gains from securities sales (not meeting the exemption tests) — enter as other income under Section 10 of the Income Tax Act.
Example: An Investor with High Employment Income
If your employment income is near or above the threshold, every non-exempt dividend or taxable gain from a sale can push you into the 23% band. Conversely — if all investment income is exempt (accumulating ETF, time test met), the tax base from investments is zero. This is one of the arguments for accumulating funds with a long holding period. A comparison of fund types is in accumulating vs. distributing ETFs.
The Solidarity Surcharge — a Historical Note
The solidarity surcharge (7% above a certain threshold) was a separate add-on until the end of 2020. From 2021 it was replaced by the progressive structure described above (15%/23%). If you come across older materials mentioning the solidarity surcharge as current, they are likely out of date.
More on the basics of investment taxation in ETF taxes in the Czech Republic. This article is not tax advice. Rates and thresholds may change — verify the current legislation or consult a tax adviser.
FAQ
What is the income tax rate for investors in the Czech Republic?
The standard rate is 15%. If total taxable income exceeds the statutory threshold (four times the average wage), the portion above that threshold is taxed at 23%. Exempt income does not enter the tax base and does not affect the rate.
Do exempt income amounts count towards the 23% threshold?
No — income exempt under the time or value test does not enter the tax base. This is one of the key advantages of meeting the exemption conditions for investors with higher income.
As an investor, is a higher or lower dividend income better for me?
From a tax perspective, high non-exempt dividend income is disadvantageous — it is always taxed at 15% (and can trigger the 23% band) with no possibility of the time test. Accumulating ETFs with no regular payouts are generally a tax-efficient choice for investors with higher income.