Taxes
Flat-Rate Expenses vs. Actual Expenses: Which Pays Off?
· 3 min read
The decision is straightforward arithmetically, but it carries significant implications for your administration and assets. Here is an overview of the rates, caps, and the break-even threshold.
Quick take
- Flat-rate expenses are calculated on a maximum revenue of CZK 2,000,000.
- The rates are 80%, 60%, 40%, and 30% depending on the type of business activity.
- A flat-rate deduction pays off if your actual expenses are lower than the percentage calculation.
- Under the flat-rate regime, you do not keep expense records, but you must still record revenue and receivables.
Rates and Caps for Flat-Rate Expenses
The statutory deduction cap is always calculated from a maximum income ceiling of CZK 2 million.
| Rate | Applicable To | Maximum Expense Deduction |
|---|---|---|
| 80 % | Craft trades (řemeslné živnosti), agricultural production | CZK 1,600,000 |
| 60 % | Other trade licences (ostatní živnosti) | CZK 1,200,000 |
| 40 % | Other business activities, copyright/freelance royalties, liberal professions | CZK 800,000 |
| 30 % | Rental of assets included in business assets | CZK 600,000 |
When the Flat-Rate Regime Wins
For low-overhead services such as consulting, IT development, marketing, and lecturing. Beyond tax savings, it saves considerable time: you do not have to prove expenses or retain hundreds of receipts. The flat-rate method also eliminates potential disputes with the tax office regarding whether an expense is tax-deductible.
When Actual Expenses Win
For craft businesses with significant material costs, transportation, retail/wholesale trading with stock, and whenever you acquire depreciable capital assets. Claiming actual expenses is also essential if you need to carry forward a tax loss to subsequent tax years — under the flat-rate regime, a tax loss cannot be generated.
What to Expect When Switching Regimes
A change of expense regime is enacted at the beginning of the tax period and requires adjusting the tax base for outstanding receivables, unpaid liabilities, and inventory. This adjustment is often the most unexpected cost, so make sure to calculate it in advance.
What to do now
- 1Sum up your actual expenses from last year and compare them with the applicable percentage flat rate.
- 2Check whether the revenue cap of CZK 2 million limits your tax deduction.
- 3Before switching regimes, calculate the required tax base adjustment for receivables, payables, and inventory.
When to call an accountant
Before transitioning between expense regimes, when purchasing long-term assets, or when combining multiple revenue streams with different flat-rate percentages.
Frequently asked questions
- Can I combine flat-rate and actual expenses?
- Not within the same type of income category. Where different income categories apply, each is assessed separately in line with statutory tax rules.
- Do I have to keep full bookkeeping under the flat-rate expense regime?
- No, but you are legally required to keep records of revenue and receivables.
- Does the flat-rate regime affect social and health insurance contributions?
- Yes, insurance contributions are calculated from the tax base — i.e., total revenue minus the flat-rate expense deduction.
Sources
Author: FinTaxo expert team
Operated by: Zaklipso s.r.o.
Information valid as of: 17 August 2026
Czech original: read this article in Czech
This article is general information and does not replace individual tax, accounting or legal advice. Czech legislation changes frequently — verify the current wording or discuss your situation with us before acting on it.
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