If you work in the Czech Republic and earn enough to pay tax at the higher 23 percent rate, the Czech tax code lets you shelter up to 98,000 CZK per year from income tax inside a flexible retirement-investment framework. That is roughly 22,500 CZK in direct annual tax savings, before counting any investment growth on the contributions themselves. Compounded over a decade, the structure can build a six-figure nest egg almost entirely from money that would otherwise go to the state.
Almost no expat uses it correctly. The reasons mostly come down to five persistent misconceptions about how the structure works. This piece walks through each one with the actual rules, the actual numbers, and what to do about it.
1. "DIP is a single product"
The Long-Term Investment Product (Dlouhodobý investiční produkt, DIP) is not a product. It is a tax-advantaged framework introduced by Czech law in 2024 that can hold a wide variety of underlying investments. Inside a DIP wrapper you can hold ETFs, individual stocks, bonds, mutual funds, structured products, and other regulated investment instruments offered by your DIP provider.
The closest analogy in the English-speaking world is an ISA in the UK or a Roth IRA in the US. The wrapper itself is a tax structure, not an investment. What you put inside the wrapper determines your returns.
In practice this means choosing a DIP provider is a two-step decision. First, which firm offers a DIP wrapper at fees you are happy with. Second, which underlying investments you put inside it. Most expats stop at step one because the marketing makes DIP feel like a single product to be evaluated. The more important decision is what is inside.
For most long-horizon savers (5+ years until withdrawal), a globally diversified equity ETF inside DIP performs the best math. For shorter horizons or more conservative investors, a balanced fund or bonds may be more appropriate. The key point is that you have meaningful choice, and that choice matters more than the wrapper choice.
2. "Expats cannot access it"
This one is straightforward to debunk. Any expat who is a Czech tax resident and has Czech-source taxable income can open a DIP account. There is no nationality requirement. There is no requirement to be a Czech citizen, a permanent resident, or to have lived here for any particular length of time.
The actual requirements are:
- Czech tax residency (you spend 183+ days per year in Czechia, or have your "center of life interests" here)
- Czech taxable income (employment, business, investment income reported in Czechia)
- A Czech birth number (rodné číslo) or substitute identification number
- An agreement with a registered DIP provider (banks, investment companies, brokerages)
The first two are needed to claim the tax deduction. The third and fourth are administrative. None of them are nationality-gated. American citizens have specific complications worth discussing with a cross-border specialist (because of FATCA reporting and US taxation of foreign accounts), but everyone else can typically open a DIP within a few weeks.
3. "It is locked until age 60"
The full tax benefit requires holding the DIP investment for at least 120 months (10 years) and withdrawing only after age 60. That much is true. What people interpret as "locked" is more nuanced.
Inside the DIP, you can rebalance, switch between investment options, change strategies, and otherwise manage the portfolio actively. You are not locked into one fund. You can move from a conservative bond allocation to an aggressive equity allocation as your timeline shortens or your circumstances change.
You can also withdraw early. The consequence is that you have to repay the tax deductions you previously claimed. You do not lose the principal, you do not lose the investment growth, you do not pay penalties. You just give back the tax benefit you received. For many expats, that is an acceptable trade if life circumstances change (relocation, large emergency expenses, etc.).
The "locked" framing comes from the British or American pension model where early withdrawal triggers stiff penalties and tax. The Czech DIP framework is more flexible than either. The core retirement money is encouraged to stay in long-term, but the architecture does not punish you for withdrawing if you need to.
4. "DPS is better because of the state contribution"
DPS, the older Supplementary Pension Savings product, includes a state matching contribution: up to 4,080 CZK per year if you contribute at least 1,700 CZK per month. That sounds like a great deal, and it is, but the comparison most expats run is too simplistic.
Consider a 35-year-old expat with a 25-year horizon to age 60. The DPS path: contribute 1,700 CZK per month, get 340 CZK per month state match, invest in the participation funds offered by the pension company. Average return on these funds is typically modest, around 3 to 5 percent per year, because regulation requires conservative allocation. After 25 years, the DPS pot might be 800,000 to 1,200,000 CZK depending on returns.
The DIP path: contribute the same 1,700 CZK per month, but now you can invest in a globally diversified equity ETF with historical returns around 7 percent per year. You miss the 340 CZK monthly state match, but you gain access to higher-return investments. After 25 years, the DIP pot could be 1,300,000 to 1,800,000 CZK.
The math depends entirely on the return differential. State matching is roughly 20 percent of your contribution, which is meaningful but not enormous. If DIP returns outperform DPS by 2 to 3 percentage points per year (which is plausible given the investment freedom), DIP wins comfortably over a 20-25 year horizon. Over shorter horizons, DPS state matching is often the better deal because there is less time for the return differential to compound.
The actual best answer for most expats is to use both. Contribute 1,700 CZK per month to DPS to capture state matching, and put any additional retirement savings into DIP for the higher-return investment options. This is what gets you closer to the 98,000 CZK total annual tax shelter.
5. "You cannot combine personal and employer contributions"
This is the misconception that costs expats the most money, and it is the reason the headline number is 98,000 CZK rather than the more commonly cited 48,000 CZK.
The Czech tax code creates two separate envelopes for retirement savings tax benefits:
- Personal contributions: You can deduct up to 48,000 CZK per year from your tax base across DIP, DPS, and life insurance combined. At 23 percent tax rate, that is 11,040 CZK in direct annual tax savings.
- Employer contributions: Your employer can contribute up to 50,000 CZK per year to your DIP, DPS, or life insurance, tax-free for you and tax-deductible for the employer. Both the employee and employer save on social and health contributions on this amount.
These are additive. You can have both at the same time, fully utilized, on the same retirement product. That is where the 98,000 CZK total comes from: 48,000 CZK in personal contributions deducted from your tax, plus 50,000 CZK in tax-free employer contributions.
Most expats have heard about one of these envelopes but not the other, or they assume the limits are shared (they are not, except in the sense that your total contribution is the sum of both). When people do not get employer contributions, the simplest fix is usually to ask. Many Czech employers will set up a contribution arrangement when an employee asks, even if they do not advertise it as a benefit. The employer cost is often offset by the social and health contribution savings, making it cheaper than a salary increase of the same amount.
The most under-asked employer benefit in Czechia. Many Czech HR departments will set up DIP or pension contributions when an employee specifically asks, even if it is not in the standard package. The cost to the employer is typically lower than an equivalent salary increase because of the tax efficiency. If you have not asked your manager about this, that is one of the most useful conversations you can have at work this year.
What the full 98,000 CZK setup looks like
Putting it all together, here is what an optimized retirement-savings stack looks like for a Czech tax resident at the 23 percent tax bracket:
- Open a DPS account with a licensed pension company. Contribute 1,700 CZK per month to capture full state matching of 4,080 CZK per year.
- Open a DIP account with a brokerage offering globally diversified ETFs at low fees. Contribute the remainder of your personal allowance (2,300 CZK per month, totaling 28,000 CZK per year) to reach the 48,000 CZK personal limit including DPS contributions.
- Negotiate with your employer to contribute up to 50,000 CZK per year to your DIP. Most employers can do this even if they do not advertise the benefit.
- Total annual flow into retirement: 98,000 CZK in tax-advantaged contributions, plus 4,080 CZK in state matching, totaling 102,080 CZK.
- Direct annual tax saving (at 23 percent): roughly 11,040 CZK from your personal deduction. Plus the tax-free treatment of the 50,000 CZK employer contribution, which would otherwise be taxed as salary at roughly 35 percent combined, saving another 17,500 CZK in implicit value.
Compounded over a 20 to 30 year career, this stack builds a substantial retirement nest egg that is largely funded by tax savings rather than out-of-pocket sacrifice. The setup takes a few hours of paperwork and one conversation with your employer. After that, it runs in the background.
For expats not yet using DIP or DPS, the catch-up move is simple: open the accounts, set up the contributions, and have the employer conversation. For expats already using DPS, the next step is layering DIP on top. For expats already using both, the next step is the employer contribution conversation. Each step takes you closer to the full 98,000 CZK shelter.
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Let's TalkAbout the author: Nicolas Griss is the co-founder of Profi Expats, a team of CNB-registered financial advisors helping expats in Czech Republic since 2017. He specializes in pension planning, investments, and mortgages for the international community in Prague.