Global Daily Tax News, Czech Coalition Pledges Tax Cuts, Including Lower CIT Rate, (Nov 7, 2025)

The Czech Republic's coalition government has set out its tax reform priorities, including a cut to the corporate tax rate from 21 percent to 19 percent.

To further support businesses, the Government has pledged to enhance depreciation rules for investments and simplify deductions for research and development.

Numerous changes are proposed to tax administration to boost compliance rates. Among other things, new transfer pricing obligations will be introduced for multinationals, including a requirement to prepare contemporaneous documentation regarding the method used to determine arm's length prices.

The tax agency will also introduce new analytic tools and use AI to detect fictitious transactions and abusive structures, and the Government intends to strengthen the Customs Administration, with a particular focus on the collection of excise taxes and the gambling sector.

Alongside the introduction of the nation's electronic sales reporting system, EET 2.0, from 2027, the Government will lower taxes on self-employed persons, introduce a tax exemption for tips, cut tax on restaurant services, and implement the aforementioned corporate tax cut.

Further, the Government has announced plans to offer tax relief to workers, including by restoring the tax discount for working students and by providing relief for households with four or more children.

In the area of value-added tax, the Government has promised to introduce a zero rate of VAT for certain pharmaceuticals. The Government has said the VAT rate on catering services and the serving of non-alcoholic beverages will be unified at a rate of 12 percent.

The Government has also committed to settling VAT refunds more quickly, including by shortening the deadline for settlement of VAT refunds for unpaid invoices from the current six months to three months. The Government will seek EU approval to raise the VAT registration threshold "significantly above" the current CZK2m (USD94,800) level.

Voluntary tips for employees in the catering industry will be exempted from social and health insurance contributions and income tax under defined conditions. In addition, the cap on leisure benefits provided to employees by employers will be removed.

Finally, the Government has said real property valuations for real estate tax purposes will no longer be indexed to inflation automatically.