Czech Republic Cross-Border Tax Guide

Tax Residence — The 183-Day Rule and Habitual Abode

Tax residence in the Czech Republic is determined primarily by two criteria: the 183-day physical presence test and the habitual abode (bydliště) test. A person is considered a Czech tax resident if they have a permanent home in the Czech Republic with the intention to stay permanently, or if they are physically present in the territory for more than 183 days in a calendar year. Residents are taxed on their worldwide income, while non-residents are taxed only on Czech-source income. See our detailed Tax Residency Guide for more information.

• 183-day rule: Physical presence in the Czech Republic for more than 183 days (cumulative) in any 365-day period (or calendar year, depending on the DTA wording) establishes tax residence.
• Habitual abode (bydliště): Having a permanent home in the Czech Republic with the intention to reside there permanently is sufficient to establish residence, even if physically present for fewer than 183 days.
• Center of vital interests: When a DTA applies, the tie-breaker test considers the center of vital interests (personal and economic relations) to determine residence.

Worldwide Income vs. Source-Based Taxation

Tax residents of the Czech Republic are subject to personal income tax (IIT) on their worldwide income — all income earned within the Czech Republic and abroad. This includes employment income, business income, investment income, rental income, and capital gains from global sources. Non-residents are taxed only on Czech-source income, which includes income from employment performed in the Czech Republic, business carried out through a permanent establishment, rental income from Czech property, and certain other categories defined in the Income Tax Act. Double taxation is relieved through DTAs and the domestic foreign tax credit mechanism.

Double Tax Agreement (DTA) Network

The Czech Republic has one of the most extensive DTA networks in the world, with 90+ bilateral treaties in force. These treaties follow the OECD Model Tax Convention and allocate taxing rights between the Czech Republic and the treaty partner. The treaties cover income types such as employment income, business profits, dividends, interest, royalties, capital gains, and pensions. In most cases, the DTA provides for: employment income to be taxed in the country where the work is performed (subject to the 183-day rule), business profits to be taxed in the country of residence unless there is a permanent establishment, and dividend/interest/royalty withholding tax rates to be reduced below domestic rates.

Foreign Tax Credit (FTC)

The Czech Republic provides a foreign tax credit (FTC) mechanism to relieve double taxation for residents who pay tax abroad on foreign-source income. The credit is calculated as the lower of the Czech tax attributable to the foreign income and the foreign tax actually paid. The credit cannot exceed the Czech tax liability on that income. Unused foreign tax credits generally cannot be carried forward or backward. The FTC is claimed on the annual tax return (daňové přiznání) with supporting documentation (proof of foreign tax payment, certified by the foreign tax authority).

CFC Rules (Controlled Foreign Company) — Since 2023

The Czech Republic implemented controlled foreign company (CFC) rules effective from 1 January 2023, transposing the EU Anti-Tax Avoidance Directive (ATAD). The rules target Czech tax residents who control a foreign entity (company, trust, or other arrangement) in a low-tax jurisdiction. A foreign entity is considered a CFC if a Czech taxpayer (alone or with associated persons) holds more than 50% of the voting rights, capital rights, or profit entitlement, and the foreign entity pays less than 50% of the tax that would have been payable in the Czech Republic. The attributable income of the CFC is included in the taxpayer's Czech tax base and taxed at the applicable IIT or CIT rate.

FAQs

How is the 183-day count calculated?

The 183 days are counted cumulatively — any part of a day counts as a full day. Days of arrival and departure both count. For EU/EEA cross-border workers, the count may be affected by the applicable DTA and the specific facts of the employment arrangement.

Are foreign pensions taxable in the Czech Republic?

Pensions paid from abroad to a Czech tax resident are generally taxable in the Czech Republic. However, most DTAs provide that government pensions are taxable only in the source country (the country paying the pension), while private pensions (occupational and personal) are taxable only in the country of residence (the Czech Republic).

What is the withholding tax rate on dividends paid to a foreign parent company?

The domestic withholding tax rate on dividends is 15%. Under most DTAs, this is reduced to 5% or even 0% for qualifying shareholdings (typically 10% or 25% depending on the treaty). The EU Parent-Subsidiary Directive eliminates withholding tax on dividends between associated companies in different EU member states.