If you own one or two apartments in the Czech Republic and rent them out, the tax return you file every spring probably feels a lot larger than it should. Two flats generating half a million korun in rent can lead to wildly different outcomes at the tax office — from a comfortable refund to an unexpected bill for tens of thousands. The difference isn’t about how much rent you collect. It’s about which of two paths you choose to calculate your expenses, and how well you can defend that choice if the tax inspector comes knocking.
This guide walks through the mechanics using a realistic scenario, compares the two routes head-to-head, and explains what documentation you actually need to keep on file. It’s aimed at private landlords earning income under §9 of the Income Tax Act — not businesses running organized letting operations.
The two roads: skutečné výdaje vs. 30% paušál
Czech law gives private landlords two ways to declare expenses against rental income:
- Actual expenses (skutečné výdaje) — deduct everything you genuinely paid to produce the rental income: property depreciation, mortgage interest on the rental property, insurance, property tax, repairs, professional fees, and utilities you don’t pass through to tenants.
- Flat-rate expenses (30% paušál) — deduct a flat 30% of gross rental income, no receipts required. This is capped at 600,000 Kč, meaning it only makes full sense for rental income up to about 2 million Kč annually.
You pick one method per tax year for your entire §9 activity — no mixing across properties. Once chosen for a year, you’re locked in. But you can switch between methods from one year to the next (with some transitional rules to watch out for).
A worked example: two flats, 522,000 Kč in annual rent
Consider a landlord with employment income of 2,095,436 Kč (typical senior professional in Prague), two children, and a 150,000 Kč mortgage interest deduction on the family home. Rental income comes from two flats:
- Flat 1: 17,500 Kč × 12 = 210,000 Kč
- Flat 2: 26,000 Kč × 12 = 312,000 Kč
- Total: 522,000 Kč
The two flats were bought over five years ago and only recently placed into rental use. Their expert-appraised reproduction values (reprodukční pořizovací cena) at the start of rental total roughly 22 million Kč. Let’s run both scenarios.
Scenario A — Actual expenses with depreciation
Residential buildings sit in depreciation group 5, spread straight-line over 30 years. Year one is 1.4%; years two through thirty are 3.4%. In year two, 22 million × 3.4% = 748,000 Kč of depreciation. Add in property tax, insurance, and a bit of maintenance, and total expenses come to about 760,442 Kč. The §9 partial base is 522,000 − 760,442 = −238,442 Kč (a rental loss).
A rental loss under §9 doesn’t reduce employment income directly, but the overall tax base is preserved at the employment figure (2,095,436 Kč). After deducting mortgage interest and applying credits, the final tax liability comes to 244,994 Kč. With 280,654 Kč already withheld by the employer, this produces a refund of 35,660 Kč. On top of that, the 238,442 Kč loss can be carried forward for up to five years under §34 to offset future rental profits — potentially worth another 55,000 Kč in future tax savings.
Scenario B — 30% flat-rate expenses
Flat-rate expenses are 522,000 × 30% = 156,600 Kč. The §9 partial base becomes 522,000 − 156,600 = +365,400 Kč. This adds to the employment base for a total of 2,460,836 Kč. After deductions and credits, the tax liability rises to 329,036 Kč, meaning the landlord owes an extra 48,382 Kč at filing.
The bottom line
The gap between the two methods in this example is 84,042 Kč in the current year, plus a valuable loss carry-forward. For anyone with substantial depreciation, actual expenses win comfortably. For someone with a modest, fully-depreciated flat, the 30% paušál wins on simplicity alone.
The catch: depreciation only works with the right paperwork
Here’s what many landlords get wrong. You cannot simply pick a market value and start depreciating. §29 of the Income Tax Act specifies exactly which value goes on the depreciation schedule:
- If you rent within 5 years of buying — the depreciation base is your actual purchase price plus incidental acquisition costs. You still need an expert allocation between the building (depreciable) and land (not depreciable).
- If you rent more than 5 years after buying — you can use the reproduction acquisition cost (reprodukční pořizovací cena) at the date rental starts, established by a formal expert appraisal. This usually produces a much higher depreciation base and much higher annual deductions.
- Inherited or gifted property — separate rules apply, typically using the value from the inheritance proceedings or a §29 odst. 1 písm. e) appraisal.
The expert appraisal isn’t a realtor’s opinion or a bank’s mortgage valuation. It must be a znalecký posudek prepared by a soudní znalec (court-registered expert) in the specialization „oceňování nemovitostí.“ The report needs a valuation date at or near the start of rental use, methodology compliant with the Property Valuation Act (č. 151/1997 Sb.) and its implementing decree, and the expert’s stamp and registration number. Anything less won’t survive an audit.
What the tax office will ask for if they check
Under §92 of the Tax Code, the burden of proof falls entirely on the taxpayer. If you claim 700,000 Kč of expenses, you must be able to document every koruna. When a request for clarification (výzva k odstranění pochybností) arrives, you typically have 15 days to respond with a complete evidence package. Have these ready in advance:
- Znalecký posudek for each property, dated appropriately and by a certified expert
- Purchase contracts and land registry extracts proving ownership and acquisition date
- Written depreciation schedule (odpisový plán) — group, method, base, year-by-year amounts
- Rental contracts covering the tax year, plus bank statements showing rent received
- Invoices and payment proof for repairs, insurance, property tax, and any other claimed expenses
- Mortgage interest confirmation from the bank, distinguishing loans for your own home (personal deduction) from loans on rental properties (§9 expense)
- Birth certificates and confirmation the other parent isn’t also claiming the children
If any of this is missing when the tax office asks, they can disallow the claimed expense entirely. Additional tax gets assessed with a 20% penalty plus late interest running from the original due date. On a 175,000 Kč disallowed expense, that adds up quickly.
Practical tips to keep your position defensible
- Commission the expert appraisal before your first year of rental, not retrospectively. Backdated posudky are a red flag and often get challenged.
- Keep repairs and technical improvements separate. Repairs (opravy) are deductible immediately. Technical improvements (technické zhodnocení) above 40,000 Kč must be capitalized and added to the depreciation base. Mislabelling one as the other is one of the most common audit findings.
- Contributions to the fond oprav are not deductible when paid. Only actual repairs paid out of the fund count as expenses.
- Track your loss carry-forward in writing. A rental loss is a real asset worth up to 23% of its face value in future tax savings — worth remembering when future rental profits appear.
- Compare the two methods every year. As depreciation runs down and repairs decline, the 30% paušál may eventually become the better choice.
- Keep a single, organized folder — physical or digital — with everything an inspector would ask for. Fifteen days feels short when you’re hunting for a contract from four years ago.
Final thought
Taxing rental income in the Czech Republic isn’t especially complex, but it rewards preparation. The actual-expenses route can save five figures a year for a landlord with reasonable equity in the property — but only if the depreciation base rests on a proper expert appraisal and the paperwork is ready to defend on demand. The 30% paušál is cleaner and shorter, and often the right call for smaller portfolios or older, fully depreciated flats. Run both calculations every March before signing the return. The one that comes out ahead may surprise you.
This article is general information about Czech tax rules, not personal tax advice. For anything above a small refund at stake, spending an hour with a certified daňový poradce is well worth the fee — especially in the year you first place a property into rental use.
