The incoming government plans to cut the corporate tax rate to 19%, reform VAT with reduced rates for medicines and hospitality, shorten VAT return periods, raise the EU VAT registration threshold, and require pre-declared transfer pricing documentation for multinationals.
The Czech Republic’s new incoming government has unveiled its draft program, pledging not to increase taxes.
The draft program declaration of the Czech Republic government, slated for November 2025, outlines an ambitious plan for securing sound public finances, asserting that a strong, stable state is built upon the responsible management of taxpayer money and a commitment to transparent and efficient spending.
The key tax measures include:
Corporate tax reduction initiatives
The current administration commits to lowering the tax rate on corporate income from 21% to 19%.
VAT reforms
- The VAT rate on prescription medicines will be set at 0%.
- For the hospitality sector, the VAT rate on catering services and the serving of non-alcoholic beverages will be unified at a single rate of 12%.
- The deadline for VAT returns on unpaid invoices will be substantially shortened from the current six months to just three months.
- The government is committed to opening negotiations at the European Union level to seek a significant increase in the mandatory VAT registration limit. The goal is to raise this threshold well above the current CZK 2 million.
New transfer pricing documentation
The new government plans on introducing new transfer pricing documentation requirements for multinational companies. The draft program emphasises a targeted approach to arm’s-length pricing for multinational companies. To curb potential profit manipulation, these large international firms will now be required to submit pre-declared documentation explaining how they determine their arm’s length prices.
