Czech Republic Rental Income Tax Guide

Rental Income and IIT — 15%/23% Progressive Rates

Rental income (příjmy z pronájmu) in the Czech Republic is classified as income under Section 9 of the Income Tax Act (zákon o daních z příjmů). It is NOT subject to a separate rental tax — instead, it is aggregated with other income and taxed at the progressive personal income tax (IIT) rates of 15% for income up to approximately CZK 1,935,552 (36x the average wage for 2026) and 23% for income exceeding this threshold. The tax return (daňové přiznání) must include the rental income in the relevant section, and the total tax liability is calculated on the aggregate income base after deductions.

Rental income includes rent received from leasing residential property, commercial property, land, and movable property associated with the leased premises. Income from occasional or short-term rentals (e.g., Airbnb) may also fall under Section 9, though the tax administration sometimes treats systematic short-term rentals as business income under Section 7.

30% Lump-Sum Expense Deduction

Taxpayers can choose between two methods of deducting expenses from rental income: the 30% lump-sum deduction (paušální výdaje) without needing to document actual expenses, or actual expenses (skutečné výdaje) with full documentation. The lump-sum deduction is simple and popular — 30% of the gross rental income is treated as expenses, and the remaining 70% is the taxable net income. The 30% rate is fixed by law and cannot be increased. The lump-sum deduction is available only for the standard rental income category (Section 9) and not for business rental activities classified under Section 7.

Actual Expenses Method

Instead of the 30% lump-sum deduction, the taxpayer may deduct actual, documented expenses incurred in generating the rental income. Allowable expenses include: mortgage interest (úroky z úvěru), property maintenance and repairs, insurance premiums (pojistné), property management fees, real estate agent commissions, legal and advisory fees, depreciation of the property (odpisy), utilities if paid by the landlord, and other directly attributable costs. The actual expenses method is beneficial when the total allowable expenses exceed 30% of the gross rental income — typically for properties with high mortgage interest or significant maintenance costs.

CGT Exemption — Časový test (5-Year Holding Period)

Capital gains from the sale of real estate are generally subject to IIT at 15%/23%. However, a key exemption is the časový test (time test): if the property is held for more than 5 years before the sale, the gain is entirely exempt from capital gains tax. The 5-year period runs from the acquisition date to the sale date. For inherited property, the period includes the deceased's holding period. For property acquired by gift, the period generally starts from the original acquisition by the donor.

• Primary residence exemption: Gains from the sale of a taxpayer's primary residence (rodinný dům or byt where the taxpayer lived for at least 2 years immediately before the sale) are exempt from CGT, even if held for less than 5 years.
• Reinvestment exemption: Gains from the sale of property may be exempt if the proceeds are reinvested in a new housing property (bydlení) within 1 year before or 1 year after the sale, provided the taxpayer meets certain conditions.
• Gift and inheritance: Gains from the sale of gifted or inherited property are taxed under Section 10 (other income) and the 5-year test applies from the original acquisition by the donor or deceased.

FAQs

Is rental income subject to social and health insurance?

Rental income under Section 9 is generally NOT subject to social insurance (sociální pojištění) or health insurance (zdravotní pojištění) for the landlord. However, if the rental activity is classified as business income under Section 7 (systematic and professional property letting — e.g., a hotel or boarding house), the landlord must register as OSVČ and pay social and health insurance.

Can I offset a rental loss against other income?

No. Rental income and expenses are taxed separately under Section 9. A loss from rental activities can be carried forward and offset against future rental income (up to 5 years) but cannot be offset against employment income (Section 6), business income (Section 7), or other income (Section 10).

What is the tax treatment of Airbnb rentals?

Short-term rentals through platforms like Airbnb are classified differently depending on the frequency and nature. If the rental is occasional and not the taxpayer's primary activity, it typically falls under Section 9 (rental income). If the rental is systematic, frequent, and professionally managed (e.g., multiple properties, active marketing, services beyond basic accommodation), the tax administration may classify it as business income under Section 7, which has different deduction rules and social/health insurance implications.

Do I need to register with the tax administrator if I rent out property?

Yes. A landlord receiving rental income must register with the tax administrator (Finanční úřad) and file an annual tax return (daňové přiznání) reporting the rental income. There is no separate rental tax registration — the rental income is reported as part of the general IIT return.