Czech Republic Considers Corporate Tax Rate Reduction and Other Tax Changes

On November 12, the Czech government coalition presented its draft policy statement. In the section dedicated to public finances, it emphasizes the principles of promoting economic growth, avoiding tax increases, and ensuring proper tax collection.

Most noticeable changes offered are the reduction of the corporate income tax rate from 21% to 19%, as well as the introduction of mandatory transfer pricing documentation and electronic sales reporting.

Proposed concepts in various tax matters include:

1) Income tax:

• introduction of a duty to maintain transfer pricing documentation for multinational groups;

• creation of an incentive depreciation policy for investors in start-ups;

• introduction of faster and more effective tax depreciation of fixed assets;

• simplification and enhancement of research and development allowances, increase in the legal certainty for their deductibility (for example, in cooperation with the Technology Agency of the Czech Republic), and extension of the period during which allowances can be claimed;

• investment incentives focusing on economically disadvantaged regions, on local businesses generating added value, and on companies that allocate their earnings back into the Czech economy;

• introduction of investment incentives and tax relief for long-term investors in affordable rental and cooperative housing;

• reduction of costs for active Czech farmers through tax and fiscal measures.

2) VAT and indirect taxes:

• increase of the limit for mandatory VAT registration significantly above CZK 2 million/EUR 83 ths (subject to EU approval);

• shortening of the deadline for returning VAT deduction claimed on unpaid invoices, from the current six months to three months.

3) Tax credits for individuals:

• introduction of increased tax credit for fourth and subsequent children;

• reinstatement of: tax credit for a spouse, in its original form; tax credit for students; tax credit for placing children in pre-school facilities.

4) Taxation for employees:

• removal of the cap on tax exemption of leisure-related benefits provided to employees;

• exemption of voluntarily provided gratuity (under defined conditions) to employees in the catering industry from social security and health insurance contributions and from income tax.

5) Taxation for self-employed:

• stopping the increase the minimum monthly assessment base for social security contributions for self-employed persons for whom self-employment is their main activity, at 35% of the average wage.

Draft Program Declaration of the Government of the Czech Republic November 2025