Tax revolution for non-residents in the management of companies: What awaits you from 2026?

From 1 January 2026, a major change in the tax regime for members of corporate bodies who are not tax residents in the Czech Republic will come into force. This change will affect all managing directors, members of boards of directors and other persons in managerial positions who have income from the performance of this function in the Czech Republic.

What is changing?

Up to now, only 15% tax was being withheld from the remuneration of the above-mentioned persons in the form of withholding tax. However, this will change from 2026 onwards, when a new advance tax will be applied at rates of 15% and 23%, depending on the amount of income. The method of taxation is therefore newly unified with the regime applied to ordinary employees, i.e. managing directors, members of the board of directors and other persons in managerial positions who are tax residents in the Czech Republic.

Simplification for employers

This change will undoubtedly simplify the administration for the employer’s payroll department. In practice, the process of determining tax residency was often complex and ambiguous, as it was necessary to determine tax residency in advance for a given calendar year. Thus, situations of reclassification of withholding tax into advance tax could occur due to different assessment of tax residence after the end of the tax period, which could also result in relatively high penalties for the employer.

Higher taxation for high-income non-residents

This change also brings a less pleasant side of things for employees. If the income from employment of an executive or a member of the board of directors exceeds the statutory limit for progressive taxation, they will be subject to the higher tax rate of 23%. For 2026, this limit is set at CZK 1,762,812 per year, which corresponds to 36 times the average wage. Many top executives of companies can be expected to exceed this threshold and thus their tax burden will increase quite significantly.

New obligation: tax return

Another key novelty is that if a non-resident’s income as a member of a corporate body exceeds the aforementioned limit, he or she is newly obliged to file a tax return in the Czech Republic. In this case, it will not be possible to make the annual settlement through the employer – in other words, the non-resident will have to “take care” of the taxes himself.

We will be happy to help you evaluate the situation individually and prepare an optimal tax strategy in relation to the new conditions.

Do you have any questions? Please, do not hesitate to turn to us.