Two-thirds of the Czech population do not know what a long-term investment product, known as DIP, is. This is according to a survey by the research agency STEM/MARK, which involved nearly 800 respondents aged 18 to 64. Alongside pension savings, it is a state-supported retirement savings scheme designed to motivate people to prepare financially for retirement and ease the burden on the pension system.

What is a Long-Term Investment Product (DIP)?

A Long-Term Investment Product (DIP) is a tool focused on long-term savings (minimum 10 years), the main purpose of which is to provide financial security for retirement. This product is supported by the state through tax relief. Employees and self-employed individuals can deduct up to 48,000 CZK (€1,920) per year (i.e., up to 4,000 CZK (€160) per month) from their taxable income. At a 15% income tax rate, this results in a tax saving of 7,200 CZK (€288).

An employer’s contribution can be up to 50,000 CZK (€2,000) per year; it is exempt from social security and health insurance contributions as well as personal income tax.

How Does DIP Work?

The principle of DIP is simple – you make regular contributions that are invested in assets of your choice, such as stocks, bonds, or mutual funds. A key aspect is the effect of compound interest, meaning that returns are reinvested, thus increasing the total value of your capital.

Who is the Long-Term Investment Product Suitable For?

DIP is suitable for all economically active people who want to secure their financial future while benefiting from favorable tax relief:

1. Employees: Attractive thanks to tax advantages. Regular contributions to DIP reduce the taxable base, meaning you save on taxes.

2. Self-Employed (OSVČ): Can also benefit from tax relief, allowing them to save effectively for retirement while reducing their tax burden.

3. Business Owners: If you own a business and have any employment contract, you can contribute to your own DIP and benefit from tax advantages. Employer contributions for employees are tax-deductible up to €2,000 per year and exempt from social and health insurance and personal income tax.

4. Millionaires: DIP is also interesting for those with greater financial means, who can invest in a wide range of financial instruments (stocks, bonds, alternative investments) while enjoying tax relief.

Tax Advantages of DIP – Lower Taxation on Withdrawal than Pension Savings

One of the key advantages of DIP is its tax benefits. Regular contributions reduce tax liability for both employees and entrepreneurs. In addition, the taxation of returns at withdrawal (most often at age 60) is lower than with traditional pension savings, making DIP even more attractive for long-term financial security.

Why Consider DIP?

The current pension system is under increasing pressure, and relying solely on a state pension may not be sufficient in the future. DIP represents a unique opportunity to secure your own financially stable future while enjoying state-supported benefits.

A professional financial advisor will consult with you on:

• How to take advantage of tax benefits.

• How to set up DIP correctly and choose an investment strategy.

• How to reduce often high entry and management fees.

 Note: Fixed rate used: 1 EUR = 25 CZK.