End of contradictory rulings: morality goes aside, SAC upholds obligation to tax income from prostitution

The Supreme Administrative Court (“SAC”) reacted to the continuation of the well-publicised case concerning the taxation of income from prostitution with a new judgment 22 Afs 24/2025-48 that annulled the decision of the Regional Court in Ostrava 65 Af 4/2024-64, which we informed you about in our previous article. In its judgment, the SAC concluded that income from voluntary prostitution is subject to personal income tax.

The decision thus reverses the direction taken by the regional court in February and confirms the legal opinion of the tax administration: earnings from voluntary prostitution cannot be excluded from the tax system simply because it is a socially controversial activity.

Basic principle: what is not explicitly excluded is taxed

The SAC recalled that the Income Tax Act is based on a simple premise: all income of individuals is taxable unless it is expressly excluded or exempted from taxation by law. There is no provision stating that this rule does not apply to income from prostitution.

The court referred to its earlier case law that “income is any real increase in the taxpayer’s assets that is capable of being used”, and that earnings from voluntary prostitution meet this characteristic. The SAC emphasized that tax law does not distinguish between “morally acceptable” and “socially problematic” activities, unless the proceeds of crime are involved. In other words, the tax system remains morally neutral.

The New York Convention does not prevent taxation

One of the main arguments of the regional court was the interpretation of the 1950 New York Convention for the Suppression of the Traffic in Persons and of the Exploitation of the Prostitution of Others, which describes prostitution as a phenomenon contrary to human dignity. According to the regional court, the convention was intended to prevent the state from “accepting” prostitution through taxation.

The SAC rejected this conclusion. It pointed out that while the Convention obliges countries to combat forced and organized prostitution, it nowhere prohibits the taxation of voluntary prostitution. According to the Court, the interpretation that the Convention would prevent the collection of taxes does not stand up to a linguistic, systematic or purposive interpretation. In addition, some other countries that are party to the New York Convention do not exclude the taxation of prostitution. Conversely, countries that exclude taxation of prostitution do so on the basis of national legislation.

“The purpose of the New York Convention is to suppress prostitution, not to give it a tax advantage over other gainful activities,” the SAC said in its ruling.

Voluntary prostitution is not a crime – and therefore taxed

The court further emphasized that the current legislation does not prohibit prostitution. The Criminal Code only punishes its concomitant phenomena – for example, trafficking in human beings, pimping, sexual coercion or rape. The mere performance of prostitution, if voluntary, is not a criminal offence. It also stated that by taxing prostitution, the state is not committing pimping (or the crime of profiting from prostitution) because the taxing authority is not taking any steps to profit from the taxpayer’s practice of prostitution.

For this reason, prostitution cannot be equated with criminal activity, the proceeds of which are not subject to taxation. The SAC recalled that taxation of an activity does not in itself mean its legalisation or moral approval, but only the fulfilment of the legal obligation to pay tax on the income earned.

Tax law and morality as two separate worlds

Finally, the SAC explicitly stated that it did not assess the ethical, moral or social aspects of prostitution. Its task was only to interpret the tax law. According to the court, the moral issues that this phenomenon undoubtedly raises do not affect the assessment of tax liability.

In this judgment, the SAC confirmed the legal opinion of the tax administration and the Regional Court must respect its conclusions in further proceedings. Income from voluntary prostitution will thus form part of the individual’s tax base – and concealing it may lead to tax assessments and penalties. The judgment of the Supreme Administrative Court brings one of the clearest definitions of the boundary between tax law and moral ethics in Czech case law.