For some time there has been talk of the fact that it would not be bad if pensions were taxed in the Czech Republic in the same way as it is, for example, abroad. A large part of pensions is not subject to income tax today. If it were to change, it would partially solve the problems of the pension system, without affecting future generations.
Applicable rules
Little is known, however, that income tax has to be paid on some pensions already. There is a clearly defined rule for this that you must follow. Many people make the mistake of leaving their pension untaxed because they think they don’t have to. But that can get them into a lot of trouble.
A pension in the Czech Republic is taxed on the condition that the amount paid exceeds 36 times the minimum wage that applies for the given year for which it is taxed. It should be said that it is not calculated in terms of months, but of the whole year. So it’s nothing so far-fetched, and many pensioners are actually subject to taxation.
For the year 2023, the minimum wage is set at CZK 17,300. If we multiply it by 36 times, we get an amount of CZK 622,800, and then CZK 51,900 per month. If you exceed these amounts with your pension, you simply have to tax it. And be careful, it is not only a retirement pension, but also a disability or survivor’s pension.
Pretty strict limits
This year, the minimum wage has increased significantly to CZK 18,900, which is positive for pensioners, as the tax limit has increased to CZK 680,400 per year. On the contrary, pensions grew overall by only CZK 360. This year, fewer pensioners will probably have to pay taxes than last year.
If you exceed the given limit, then you are taxed at the classic 15% tax rate, like everyone else. But beware, if you really had an extraordinary pension, or if you were still earning on top of it, there is a risk that you will have to be taxed at a rate of 23%. This applies to amounts higher than 48 times the average salary.
Read also: Pensioners are already overdoing it. They take more than working Czechs. It can’t go on like this, change is coming
In addition, this only applies to the year 2023, but in the case of this year it is already reduced to 36 times the average salary, i.e. the annual amount of CZK 1,585,812. So, as you can see, it’s quite a mess, and if you’re anywhere near that kind of money, you should definitely check all your responsibilities.
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