BEC » I’m an Expat » Being self-employed

Being self-employed

What's your situation? Choose from below to get the right information.

Business is my main activity

Business is my extra activitity

Are you an EU or non-EU citizen?

eu and permanent residents

non-eu

Who do I have to inform of being a freelancer?

After you get the trade licence with an IČO (Identifikační číslo = Identification Number) from the Trade Licence Register, you are able to trade, but you are still not registered completely in the Czech system. You need to inform the 1) Social Security Administration office, 2) health insurance company, and possibly 3) Financial Office – if you want to register for a “flat tax” or if you are a VAT payer or identified person for VAT. And Social security office and health insurance company need to know whether your business is a main or extra activity.

When applying for a trade licence, you may

A) ask the officer at the Trade Licensing Office to fill out a single registration form (Jednotný registrační formulář) that will enable you to be automatically signed into the Social Security system, your health insurance company and the Financial Office (for flat tax). The Trade Licensing Office will then inform these institutions about the commencement of your business activities. These institutions will regard you as a business entity from that day. If the single registration is not available or the Social Security or health insurance company require more documentation from you, visit them individually:

B) visit the Social security office first to obtain your registration and use this confirmation of registration with the Social Security office to get into the public insurance company.  Visiting the offices in person has two benefits: you are given your social security number number on the spot and you get all the details about the exact payments – if and how much must be paid and to what account.

How do I report changes in my business? (address, pause, terminate, add business activity etc.)

Once you change the official address of your business, be it your home address or office space, you have to report the new address to the Trade licensing office “Živnostenský úřad“. This does not apply to foreigners with Permanent resident status who use the same address for both business and permanent residency (because once you update your address with the Immigration office, the Trade licensing office will learn about it automatically).

You can report the new address by filling out the “Change form” Změnový list (download here) in the box 9 and attaching the original or certified copy of the rental contract for the new address signed by the property owner, or consent for registering a business address on this form. You can send or drop the “change form” and the rental agreement/consent to any Trade licensing office.

There is a fee of 100,- CZK, if you want a print of the newly updated trade license (to be paid in the TL office or answering the summons to wire the fee online).

With the “Change form” you can also pause, terminate, renew, add activities to the Trade license and let the TL office inform the Social Security Administration or Health insurance company or the Financial office about such changes in case they are concerned (box 16).

You can fill out the Change form at the local Trade licensing office: Malinovského nám. 3, Brno 601 67 or submit it via your data mailbox to a7kbrrn or fill out and submit the change form online on www.rzp.cz (electronic submission possible only in the Czech version of the website!) – if you login with your data mailbox identity or your bank identity, go to the https://www.rzp.cz/jrf/cs/zmena-zivnosti/fyzicka-osoba/-/podnikatel.

Do I have to pay monthly fees to the social security administration?

Yes.

Everyone who is self-employed as the main economic activity, regardless of nationality, is required to make advance monthly contributions to the social security system (pension, unemployment). As A) a separate payment to the Social Security office or as B) a fee included in the monthly “flat tax”.

A) The amount paid is based on the individual’s income, with a minimum of 3 852 CZK/month (2024). In the first three years of the trade licence, everyone starts by paying at least the minimum social security contribution for new businesses: 3 210 CZK / month (2024).

The amount for the next year is calculated according to the business profit in the previous year. So after the end of the year, you have to send a report to the Social Security office about your business income – this is usually done by your accountant as part of the annual tax declaration.

The social security contribution must be paid within 8 days after the end of the month for which is paid (so pay for January before February 8th). Social security contributions are sent to the Social Security Administration office account with your IČO as the variable code.  Not paying the social security contribution may result in trouble when extending your residency permit. Paying in up to 30 days later (by the end of the following month) is not penalized.

B) The Social security payment is included in the “flat tax” – one fee to rule them all – 7 498 CZK/month (2024). Read more about the “flat tax” below.

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Additional social security contributions (beyond the compulsory contributions earmarked for the pension fund), called premiums, are not included in the standard social security contributions and are not required for the proper functioning of a trade licence. The premiums pay out a certain (rather modest) sum in the case of long-term illness/inability to work. They also entitle you to state support in the first phase of maternity leave, although any pay-out during the first part of maternity leave will require suspending the trade licence or delegating the business service to somebody else.

It is up to you to decide whether it is beneficial to pay the premiums at all. In most cases, the state support is so small that it makes more sense to keep your trade licence active and send out a few more invoices.

How do I calculate the social security contributions?

Depends if you pay the social security as A) a separate payment to the Social Security office or as B) a fee included in the monthly “flat tax“.

A) The amount of the social security contribution that a self-employed person pays to the Social Security administration is determined by the profit achieved in the previous year.  The social security fee is 29.2% of the 55% tax base. The tax base is your income minus business expenses – your net profit. So the fee is cca 16% of the profit, and, in most cases – where the lump sum for expenses is 60% – this effectively amounts to about 6.4% of the gross income.

When filing your income tax return for the last year, you or your accountant will calculate if the minimum social security advance payments you paid were enough to cover the income that you made that year, or whether you must pay extra.

Also, based on your income in the last year, you will be informed by the Social Security Administration of the new monthly social security contributions for the current year, or that you will continue to pay the (annually adjusted) minimum contribution.

If the actual assessment base is lower than the minimum calculation basis, then the minimum monthly advance 3 852 CZK/month (2024) must be paid. The maximum assessment base above which no additional social security contributions are paid is 2 110 416 CZK/year (2024).

Social Security Administration office in Brno:

  • Městská správa sociálního zabezpečení Brno: website
    • Veveří 5, 660 20 Brno
    • +420 541 516 111
    • posta.bm@cssz.cz
    • Pension Fund account number: 1011-7929621/0710
    • IBAN: CZ5107100010110007929621

B) The Social Security payment was included in your monthly advance payments in the “flat tax” – one fee to rule them all – 6 208 CZK/month (2023) and you don’t need to provide any report or calculate or balance the fees. Read more about the “flat tax” below.

Do I have to pay monthly fees to the health insurance?

Yes.

Contributions to public health insurance are compulsory for all EU citizens economically active in the CR.

Either as A) a separate payment to your health insurance company or as B) a fee included in the monthly “flat tax”.

A) The amount paid in contributions depends on your profit, but the minimum is 2 968 CZK/month (2024). In the first year of their trade licence, everyone starts with the minimum health care contribution, regardless of the (expected) annual income.

B) The health insurance payment is included in the “flat tax” – one fee to rule them all – 7 498 CZK/month (2024). Read more about the “flat tax” below.

How do I calculate the health insurance contributions?

Similar to the social security contributions, when your income tax return is being prepared after the end of the year, you or your accountant will also calculate whether the minimum health care contributions were enough or whether you must pay extra.

Also, based on the income from the previous year, you will be informed by your accountant of the new monthly health care contribution for the current year and you should adjust your bank order accordingly. The new amount is always applicable from January for each new calendar year.

The amount of the public health care contribution that a self-employed person pays to the insurance company is determined by the profit achieved in the previous year. The assessment base for the calculation of health insurance is 50% of the profit (gross income minus expenses equals profit). The health insurance fee is 13.5% of the assessment base. So the fee is 6.75% of the profit, and, in most cases – where the lump sum for expenses is 60% – this effectively amounts to about 2.7% of the income.

If the actual assessment base is lower than the minimum calculation basis, then the health care contribution is set at the minimum monthly advance (2 968 CZK/month in 2024).

Public health insurance must be paid before the 8th of the current month for each previous month.

The contributions must be sent to the account of the health insurance company you have selected (from a total of seven that are officially credited), with the number assigned to you by the insurance company (perhaps your “rodné číslo”) as the variable code.

Not paying for health insurance may result in troubles with the legality of your stay in the Czech Republic.

How much income tax do I have to pay?

You can A) register and then pay monthly “flat tax” or B) you must file an income tax clearance at the end of each (calendar) year.

A) If you have registered for a flat tax when starting your business, your income tax is included in the one fee to rule them all. And you don’t need to do any calculations, or any more paperwork after the end of the year. Read more about the “flat tax” below.

B) The tax clearance combines income from your business, employment, capital gains, rental income, and any other sources of local and foreign income. And, on the other hand, applies tax reliefs and tax allowances.

As a tax resident in the Czech Republic, typically if you have lived here for over six months, you have the obligation to file your global income, not just what you’ve made in the Czech Republic.

The income tax is calculated from your “tax base” – your profit – ie. your turnover minus your business expenses. Depending on the industry, in addition to the real business expenses, you can apply lump sum expenses. For example, if your trade licence is for “unqualified” trades, your business expenses can be applied in two ways: Either by listing your real income minus your real business expenses, or by following the 60/40 rule. The latter method is almost always used: it allows you to claim a 60% expense deduction on your income (even if the real percentage of expenses is much lower), with the remaining 40% being the amount that forms your tax base.

The income tax 15% (and 23% of a profit above 1 582 812 CZK in the calendar year 2024) is calculated from the tax base, which effectively – with the 60/40 rule – taxes your overall income by only 6% (or 9,2%).

 

The tax base (i.e. gross income minus business expenses) may be further lowered for “tax allowances” (gifts to charities, interest on mortgages, private pension savings, life insurance, union fees…); in this way, you then arrive at an “adjusted tax base”. Now the income tax (15%) is calculated on this “adjusted tax base”, and from the result you may make further discounts for “tax relief” (for a taxpayer, a spouse at home, children, kindergarten, studies, disability…). The tax relief for “taxpayer” is available always and for everybody and provides a discount on your taxes by 2 570 CZK per month (2024).

EXAMPLE
You can apply a fixed 60% business expense and a 40% profit. The collection of payment receipts or invoices from expenses is not necessary. For example, if the total gross income from providing services or selling products for last year was 500 000 CZK, then 500 000 – 60% business expense (lump sum expense) = 200 000 clean profit. 15% tax would be 200 000 – 15% = 30 000 income tax.
But because everybody can apply 30 840 tax relief each year (total tax relief for income from employment or business!) the final tax would amount to 0 CZK (if the tax relief was not applied to net salary from employment or other sources already).

Consult an accountant or tax adviser for the best tax optimization.

The tax return form must be submitted to the local Financial Office (determined according to your registered residence address) by the end of March.

This may be postponed to the end of July if you have given a power of attorney to a professional tax consultant to file your tax return (for this he will charge a fee). There are five Financial Offices in Brno: Brno I, Brno II, Brno III, Brno IV and Brno Venkov.

For accounting and tax consulting the Brno Expat Centre can recommend Michael Hajek, a certified, English-speaking tax advisor:

Bell Consulting

Bell Consulting provides comprehensive financial and tax services for any business. Their services include: bookkeeping, payroll, personnel administration, legal services and tax advice.

What is the "flat tax" and what are the benefits?

The flat tax “paušální daň” is one flat fee to cover it all – it includes advance payments for personal income tax, health insurance, and social security. A significant simplification for taxpayers in the flat tax regime is the fact that they pay only one payment each month and in the same amount (if the specified conditions are met throughout the tax period, see below) without the obligation to file personal income tax return or social security or health insurance reports after the end of the year.

You can qualify for the flat tax if your total (expected) income, in the respective year – January to December, is below the thresholds and if you meet other criteria.

There are three tax brackets, with three tax rates:

  1. monthly tax rate 7 498 CZK is available for annual income up to a) 1 000 000 (no matter what industry), b) 1 500 000 (for industry with 60% lump-sum expenses), c) 2 000 000 (80%)
  2. monthly tax rate 16 745 is available for annual income up to a) 1 500 000 (no matter what industry),  b) 2 000 000 (for industry with 60% lump-sum expenses)
  3. monthly tax rate 27 139 is available for annual income up to 2 000 000 (no matter what industry)

The use of the flat tax scheme is voluntary; however, quite strict criteria have been set. The flat tax regime is available only to those self-employed who are not VAT payers, partners in a general partnership, or general partners in a limited partnership and also are not debtors subject to pending insolvency proceedings.

You can not apply if:
  • You are a VAT payer (“identified person for VAT” is OK)
  • You are not a participant in the public health insurance
  • You have any other income from a full-time job or DPČ or rent or stock…
  • You are a debtor to some authority
  • You are a shareholder of any company

Advantages:

  • One fee to the Financial office instead of three payments to Tax / Social security / Health insurance
  • No tax clearance, no paperwork, no accountant
  • Government promises no controls from Tax Office

Disadvantages:

  • You cannot apply any tax reliefs and tax deductions (children, spouse, mortgage, donations…)
  • If you cannot be registered in the public health insurance (because you are nonEU citizen without a Permanent residency or EU family member, etc.), you have to keep paying the commercial health insurance on top of the flat tax

The flat tax regime is beneficial mainly to self-employed persons with gross income above cca 600 000 in a year and who apply lump sum expanses of 40% or 60% and have no applicable tax reliefs or deductions (except the tax relief for every taxpayer).

You can employ this flat tax calculator to simulate possible differences between the flat tax and regular income+social+health tax.

Another quite useful calculator and a comparison of the flat tax versus regular tax calculation.

How to register for the flat tax?

To register into the flat tax mode you have to decide right when starting your business (date you “activate” your business, not necessarily the date when you open your business license), or always at the beginning of a year, before January 10.

You can register via an online form or paper form. You can fill the online form “Oznámení o vstupu do paušálního režimu” and then print, sign and deliver it to the Tax office within five days. Or fill in the paper form, download and print pdf file,  and send it to the Tax office.

More details about how to administer the flat tax are available at the Tax office website (in Czech).

How do I issue my first invoice?

You can issue your invoice in print or send it electronically.

If you are a VAT non-payer:
Invoice has to include the serial number (of your choice), your name, address,  IC number (your business license number), a content of the sale/service, price, and date of issue. The date of the job performance/sale and the deadline for the payment can be included too. For invoice over  CZK 10 000 you have to specify details (name, address) about the client too.

If you are a VAT payer:
Invoice has to labelled “daňový doklad” and include the serial number (of your choice), your name, address,  IC number (your business license number), DIC number (your tax number), a content of the sale/service, price, tax rate, date of delivery and date of issue. The date of the job performance/sale and the deadline for the payment can be included too. For invoice over  CZK 10 000 you have to specify details (name, address) about the client and specify the price without the tax and with the tax.

Invoice template as .xls file.

If you are an “Identified Person” providing your services abroad, you need to issue an invoice as a VAT payer but without specifying the tax rate or price with/out tax (since you don’t charge that).

When and how do I have to report to the Tax office / Social Security administration / Health insurance company?

Every person with an active Trade license must report to the Financial office, Social Security Administration office and health insurance company (in case you are a member of the public health insurance system) once a year. Even if the income in the last year was zero. To avoid this, you have to cancel or interrupt the trade license.

Income tax declaration

“Daňové přiznání” is an act when you fill out the proper forms and deliver those to the Financial office before the deadline, April 1st. You fill out the figures for your last year’s total turnover, business expenses, tax allowances and tax reliefs, the income tax you already paid and you should pay. A tax declaration can be submitted at whatever office of the Financial Authority without any respect for your local affiliation. You can download the forms here and attempt to fill it out. Although only forms in Czech are accepted, you can see and compare the English translation in the instructions. To fill out a form is not an easy task and you will need help.

As a person with an active trade license, you have an obligation to file an individual tax return. Even if you were employed, your employer at this point cannot file the tax declaration for you and just gives you a report about your income and tax paid in last year (Potvrzení o zdanitelných příjmech ze závislé činnosti”) and you include this document and figures into your individual income tax declaration.

If your income from the business last year was less than 15 000 CZK (or 6 000 in case you were employed at the same time), you still have to touch the base with the Financial office and let them know that you didn’t earn enough to tax; even though you have an active trade license. In this case, you don’t need to fill out the official forms, but you can send a letter stating1 that you had no taxable income from your business.

Social Security report

“Přehled o příjmech a výdajích OSVČ” is a form in which you have to fill out figures about your last year’s total profit and how much deposits you already paid and send it to your Social Security Administration office no later than a month after you had an obligation to file your tax declaration (so the deadline is usually the beginning of May).

Health insurance report

In case you are in the public health insurance system, your insurance provider will expect to receive the report about your business income as well. The form is called the same as with the Social Security Administration “Přehled o výši daňového základu OSVČ” but each provider has a different format of the form, so contact your provider. The deadline for submitting this report is a month after you had an obligation to file your tax declaration (ie. the beginning of May).

In case you need help with filing the declaration and reports, you can ask somebody experienced or hire a professional to help you. An accountant or tax advisor can do all three reports for you in one session. See the question for Who can help me with accounting and tax declaration? below.

1.The text of the letter can be simple but has to be in Czech. Something along: “Čestně prohlašuji, že ve zdaňovacím období 2019 jsem ze samostatné činnost neměl žádné příjmy, ze kterých by vznikla povinnost podat daňové přiznání. ” And a signature.

When do I have to register and pay VAT? What is the "VAT light" version aka "identified person"?

First of all, you need to determine if you really need to be registered for VAT (Value Added Tax or DPH – Daň z přidané hodnoty), and if so, what type of VAT registration is relevant. Several indicators point to an obligation to register for VAT.

Situations determining an obligation to become a VAT Payer (full VAT registration):

  • Your income from the supply of goods or services with a place of supply in the Czech Republic is more than 2,000,000 CZK in the past 12 months (provision of B2B services abroad or exempt rental services are not counted towards the turnover).
  • You acquired a business from a VAT payer.

Situations determining an obligation to become a VAT Identified Person (identifikovaná osoba) (VAT-light registration):

  • You sell services (not goods) to clients who are business entities located in other EU countries.
  • You buy services from the EU or from the 3rd country business entities (the EU seller requires your VAT number), typically services from Google, Facebook, AirBnB, Booking, etc.
  • You buy goods from another EU country exceeding a value of 326,000 CZK per calendar year or goods with assembly and installation in the Czech Republic, or new cars, tobacco, alcohol, and fuel.

It is also possible to register voluntarily for VAT, for example, if you have not yet reached the 2,000,000 CZK income limit but have major expenses in the Czech Republic and want to claim back the Czech VAT.

VAT registration: full registration vs. “VAT-light”

A full VAT registration means that you must file the VAT report and Control statement every month (or quarter), even when you did not realize any output or input supplies. In addition, if you sell goods or services to EU business entities, you must file EC Sales List.

Suppose you have an income in the Czech Republic that is under 2,000,000 CZK and few expenses in the country (a situation in which you are not obliged to register for VAT), but you start invoicing to EU clients (which requires a VAT number) or receive a service from abroad. In that case, you must do a “VAT-light” registration.

The benefit, in this case, is that you only need to file the VAT report and EC Sales List in the months when a transaction subject to VAT declaration took place (not every month/quarter, as with a full VAT registration) and you do not have to file the Control statement.

Step-by-step guide: How to report VAT for selling your services to other EU country?

Step-by-step guide: How to report VAT for buying your services from other EU country?

The downside, however, is that you cannot claim any VAT back for local expenses and you have to declare and pay VAT for services received from abroad (from the EU or from a 3rd country). To put it simply: outside the Czech Republic, this behaves like a full VAT registration, but inside the Czech Republic, it is like not having a VAT number at all.

OSS (One Stop Shop) registration

If you sell goods (items, not services) to customers located in the EU who are non-business entities but private individuals (typically you sell goods via an e-shop) and your annual total sales to private individuals from all EU countries exceed € 10,000, you are required to register for the OSS system, where you will pay VAT according to the rules of your customer’s country. The condition for OSS registration is to be a VAT payer or a VAT-light registered person in the Czech Republic. OSS report shall be filed quarterly to the Czech Tax Office and VAT shall be paid in the same period in EUR currency also to the Czech Tax Office which further forwards the VAT to the respective countries.

How to register as a VAT Payer or as a VAT Identified Person”?

Registration for VAT must be done only electronically. Registration form is available at tax portal “Moje daně” https://adisspr.mfcr.cz/pmd/epo – select Elektronické formuláře > Registrace > Přihláška k registraci k dani z přidané hodnoty. All in Czech, use a translator 🙂

You can submit the VAT registration form using the secured electronic signature, via your “data mailbox” in xml format, or directly via the tax portal “Moje daně” authorizing the submission via your access details to your “data mailbox” or with your bank iDentity.

Registration form must be filed to the locally competent Tax Office within statutory deadlines (for full VAT registration in case of exceeding the turnover of CZK 2 mil., the registration form must be submitted within 15 days from the end of the month in which the turnover was exceeded, for VAT-light registration within 15 days of becoming VAT Identified Person).

For VAT registration you have to provide, among other information, details of bank account used for economic activity which will be published in the register of VAT payers.

Who can help me with accounting and tax reports?

The administration of your taxes, declaration, reports etc. is often a complicated task for tax advisors let alone for normal people.

Anyone who is not sure about their tax obligations can hire a professional registered tax advisor or accountant.

You have two options:

  1. hire a tax adviser for consultancy and assistance with the tax return forms, but sign the forms yourself; or
  2. sign a power of attorney in favor of the tax advisor and have them completely take over the process.

The latter option brings at least two advantages. Your deadline will be prolonged for 3 months until the end of June which gives you additional time to organize all necessary documents. Secondly, the tax advisor assumes full responsibility for the tax return and takes care of possible follow-up negotiations with the authorities.

Recommended expat-friendly services:

BELL Consulting

Certified tax consultant: founding and liquidating companies, accounting, payroll, complete financial services.

Anna Meyer Tax

tax accountant: tax return filing services, registering a new business license, consulting and processing compensation bonus and any tax related issues

CzechTaxesOnline.cz

Tax services online: a web application for Tax Return, incl. reports for insurance institutions for self-employed. In just 15 minutes, step-by-step.

Who do I have to inform of being a freelancer?

After you get the trade licence with an IČO (Identifikační číslo = Identification Number) from the Trade Licence Register, you are able to trade, but you are still not registered completely in the Czech system. You need to inform the 1) Social Security Administration office about opening the trade licence and whether your business is a main or extra activity.

In case you are in a public health insurance system (are you?), you have to inform your 2) health insurance company about starting the business. Every company has different forms, contact them directly, within 8 days from starting to provide business services.
But if you have prepaid a commercial health insurance for foreigners, you don’t inform them. Having a business is unrelated to commercial health insurance.

And possibly 3) Financial Office – if you want to register for a “flat tax” (!only if you are in public health insurance!) or if you are a VAT payer or identified person for VAT. And Social security office and health insurance company need to know whether your business is a main or extra activity.

To register with the respective offices, you have two options:

A) ask the officer at the Trade Licensing Office to fill out a single registration form (Jednotný registrační formulář) that will enable you to be automatically signed into the social security system, the Financial Office for the flat tax, your health insurance company. The Trade Licensing Office will then inform these institutions about the commencement of your business activities. These institutions will regard you as a business entity from that day. If the single registration is not available or the Social Security or health insurance company require more documentation from you, visit them individually:

B) visit the Social security office first to obtain your registration and use this confirmation of registration with the Social Security office to get into the public insurance company.  Visiting the offices in person has two benefits: you are given your registration number on the spot and you get all the details about the exact payments – if and how much must be paid and to what account.

How do I report changes in my business? (address, pause, terminate, add business activity etc.)

Once you change the official address of your business, be it your home address or office space, you have to report the new address to the Trade licensing office “Živnostenský úřad“. This does not apply to foreigners with Permanent resident status who use the same address for both business and permanent residency (because once you update your address with the Immigration office, the Trade licensing office will learn about it automatically).

You can report the new address by filling out the “Change form” Změnový list (download here) in the box 9 and attaching the original or certified copy of the rental contract for the new address signed by the property owner, or consent for registering a business address on this form. You can send or drop the “change form” and the rental agreement/consent to any Trade licensing office.

There is a fee of 100,- CZK, if you want a print of the newly updated trade license (to be paid in the TL office or answering the summons to wire the fee online).

With the “Change form” you can also pause, terminate, renew, add activities to the Trade license and let the TL office inform the Social Security Administration or Health insurance company or the Financial office about such changes in case they are concerned (box 16).

You can fill out the Change form at the local Trade licensing office: Malinovského nám. 3, Brno 601 67 or submit it via your data mailbox to a7kbrrn or fill out and submit the change form online on www.rzp.cz (electronic submission possible only in the Czech version of the website!) – if you login with your data mailbox identity or your bank identity, go to the https://www.rzp.cz/jrf/cs/zmena-zivnosti/fyzicka-osoba/-/podnikatel.

How do I extend the validity of my “zivnost” along with my visa?

It is crucial to watch the validity of both your residence permit and your trade license.

Your trade licence must be renewed before it expires – this is sometimes due even before you renew your visa, so be sure to make a note of its expiration date – never let your trade licence expire! We can’t stress this enough.

Foreigners who have a visa or long-term residence permit must always apply for renewal of the trade licence even before their visa/residence permit expires. You should be aware of the expiry dates of your trade licence and your residence permit: mark the expiration date of your trade licence in your calendar well in advance!

If the trade licence expires, you must start from scratch and reapply for a new trade licence. So, it is extremely important not to let this happen!

A) Business visa/residence permit renewal (Immigration Office)

This is a long process and one that requires more and different documents than the original business visa application. It is advisable to start the visa extension and trade licence renewal process 3 to 4 months before the expiration date of the visa/residence permit because it is quite complicated, and a lot of papers from the authorities are required. an application for a long-term residence permit renewal may be filed 4 months at the earliest and 14 days at the latest before the expiration of the old visa, or on the last day of the residence permit.

B) Trade licence renewal (Trade Licensing Office)

The application for the trade licence renewal may be filed latest on the last date of validity of the licence.  If the expiration date of your trade licence is approaching but your visa/permit renewal is still pending, you may ask the Trade Licensing Office – in the form of a simple letter of request – for a temporary extension of the licence and “waiting period” for the process of visa/permit renewal to be finished. Always visit the Trade Licensing Office before the expiration of your licence and ask them what to do next. Arriving even a day after the trade licence has expired is considered too late: you lose your license and have to apply from scratch (have to get a new extract from the criminal record, etc.).

Do I have to pay monthly fees to the social security administration?

Yes.

Everyone who is self-employed as the main economic activity, regardless of nationality, is required to make advance monthly contributions to the social security system (pension, unemployment).

The amount paid is based on the individual’s income, with a minimum of 3 852 CZK/month (2024). In the first three years of the trade licence, everyone starts by paying at least the minimum social security contribution for new businesses: 3 210 CZK / month (2024). The amount for the next year is calculated according to the business profit in the previous year. So after the end of the year, you have to send a report to the Social security office about your business income – this is usually done by your accountant as part of the annual tax declaration.

The social security contribution must be paid within 8 days after the end of the month for which is paid (so pay for January before February 8th).  Send the fee to the Social Security Administration office account with your IČO as the variable code.  Not paying the social security contribution may result in trouble when extending your residency permit. Paying up to 30 days later (by the end of the following month) is not penalized.

_

OPTION: Additional social security contributions (beyond the compulsory contributions earmarked for the pension fund), called sick insurance premiums, are not included in the standard social security contributions and are not required for the proper functioning of a trade licence. The sick insurance premiums pay out a certain (rather modest) sum in the case of long-term illness/inability to work. They also entitle you to state financial support in the first phase of maternity leave, although any pay-out during the first part of maternity leave will require suspending the trade licence or delegating the business service to somebody else.

It is up to you to decide whether it is beneficial to pay sick insurance premiums at all. In most cases, the state support is so small that it makes more sense to keep your trade licence active and send out a few more invoices.

 

How do I calculate the social security contributions?

When filing your income tax return for the last year, you or your accountant will calculate if the minimum social security contributions you paid were enough to cover the income that you made that year, or whether you must pay extra.

Also, based on your income in the last year, you will be informed by the Social Security Administration of the new monthly social security contributions for the current year, or that you will continue to pay the minimum contribution set by law.

The amount that a freelancer pays into the social security fund is determined by the profit achieved in the previous year. The social security contribution is 29,2% out of 55% of your tax base (2024).

If the actual tax base is lower than the minimum calculation basis, then the minimum monthly advance 3 852 CZK/month (2024) must be paid. The maximum assessment base above which no additional social security contributions are paid is 2 110 416 CZK/year (2024).

The social security contribution must be paid before the end of the month for which is paid. Social Security contributions are sent to the Social Security Administration office account with your IČO as the variable code.  Not paying the social security contribution may result in trouble when extending your residency permit. Paying up to 30 days later (by the end of the following month) is not penalized.

Social Security Administration office in Brno:

  • Městská správa sociálního zabezpečení Brno: website
    • Veveří 5, 660 20 Brno
    • +420 541 516 111
    • posta.bm@cssz.cz
    • Pension Fund account number: 1011-7929621/0710
    • IBAN: CZ5107100010110007929621
Do I have to pay monthly fees to the health insurance?

Depends on your nationality and whether you have a long-term or permanent residence card.

A) Contributions to public health insurance are mandatory for citizens of Albania, Algeria, Israel, Japan, Macedonia, Marocco, Montenegro, Serbia, Syria, Tunisia, Turkey, USA; as well as non-EU nationals with a permanent residence permit.

As a nonEU citizen with an active trade licence as a main economic activity, you have to register with or make monthly payments to the public health insurance system if:

  1. you have a permanent residence card
  2. you have previously worked as an employee in other EU country,
  3.  are working in the Czech Republic as an employee,
  4.  your country (the up-to-date list is here) has a bilateral agreement with the Czech Republic. In these cases, you will be included in the Czech public health care system (an change the filter at the beginning of this guide for “EU”).

If you fall into the public health insurance system, your contributions to public health insurance are the same as for EU citizens. You need to pay either as a) a separate payment to your health insurance company or as b) a fee included in the monthly “flat tax”.

a) The amount paid in contributions depends on your profit, but the minimum is 2 968 CZK/month (2024). In the first year of their trade licence, everyone starts with the minimum health care contribution, regardless of the (expected) annual income.

b) The health insurance payment is included in the “flat tax” – one fee to rule them all – 7 498 CZK/month (2024). Read more about the “flat tax” below.

B) Foreigners with a long-term visa or residence permit (long-term residence permit for the purpose of family reunification or studies or business…) cannot access public health insurance and do not pay monthly contributions, but instead prepay commercial health insurance for foreigners (with PVZP), the price of which depends on gender and age, not on income. There are no special rates on health insurance for foreigners with a trade license, you do not have to tell your commercial insurance company about your business activity. Non-EU nationals (without employment or permanent residency) need to prepay the commercial health insurance for the full period of their expected stay regardless of their actual income or profit.

See the guide on Health insurance for contacts to all officially recognized commercial insurance companies.

How much income tax do I have to pay?

You can A) register and then pay monthly “flat tax” or B) you must file an income tax clearance at the end of each (calendar) year.

A) If you have registered for a flat tax when starting your business, your income tax is included in the one fee to rule them all. And you don’t need to do any calculations, or any more paperwork after the end of the year. Read more about the “flat tax” below.

B) The tax clearance combines income from your business, employment, capital gains, rental income, and any other sources of local and foreign income. And, on the other hand, applies tax reliefs and tax allowances.

As a tax resident in the Czech Republic, typically if you have lived here for over six months, you have the obligation to file your global income, not just what you’ve made in the Czech Republic.

The income tax is calculated from your “tax base” – your profit – ie. your turnover minus your business expenses. Depending on the industry, in addition to the real business expenses, you can apply lump sum expenses. For example, if your trade licence is for “unqualified” trades, your business expenses can be applied in two ways: Either by listing your real income minus your real business expenses, or by following the 60/40 rule. The latter method is almost always used: it allows you to claim a 60% expense deduction on your income (even if the real percentage of expenses is much lower), with the remaining 40% being the amount that forms your tax base.

The income tax 15% (and 23% of a profit above 1 582 812 CZK in the calendar year 2024) is calculated from the tax base, which effectively – with the 60/40 rule – taxes your overall income by only 6% (or 9,2%).

 

The tax base (i.e. gross income minus business expenses) may be further lowered for “tax allowances” (gifts to charities, interest on mortgages, private pension savings, life insurance, union fees…); in this way, you then arrive at an “adjusted tax base”. Now the income tax (15%) is calculated on this “adjusted tax base”, and from the result you may make further discounts for “tax relief” (for a taxpayer, a spouse at home, children, kindergarten, studies, disability…). The tax relief for “taxpayer” is available always and for everybody and provides a discount on your taxes by 2 570 CZK per month (2024).

EXAMPLE
You can apply a fixed 60% business expense and a 40% profit. The collection of payment receipts or invoices from expenses is not necessary. For example, if the total gross income from providing services or selling products for last year was 500 000 CZK, then 500 000 – 60% business expense (lump sum expense) = 200 000 clean profit. 15% tax would be 200 000 – 15% = 30 000 income tax.
But because everybody can apply 30 840 tax relief each year (total tax relief for income from employment or business!) the final tax would amount to 0 CZK (if the tax relief was not applied to net salary from employment or other sources already).

Consult an accountant or tax adviser for the best tax optimization.

The tax return form must be submitted to the local Financial Office (determined according to your registered residence address) by the end of March.

This may be postponed to the end of July if you have given a power of attorney to a professional tax consultant to file your tax return (for this he will charge a fee). There are five Financial Offices in Brno: Brno I, Brno II, Brno III, Brno IV and Brno Venkov.

For accounting and tax consulting the Brno Expat Centre can recommend Michael Hajek, a certified, English-speaking tax advisor:

Bell Consulting

Bell Consulting provides comprehensive financial and tax services for any business. Their services include: bookkeeping, payroll, personnel administration, legal services and tax advice.

What is the "flat tax" and what are the benefits?

The flat tax “paušální daň” is one flat fee to cover it all – it includes advance payments for personal income tax, health insurance, and social security. A significant simplification for taxpayers in the flat tax regime is the fact that they pay only one payment each month and in the same amount (if the specified conditions are met throughout the tax period, see below) without the obligation to file personal income tax return or social security or health insurance reports after the end of the year.

You can qualify for the flat tax if business is your main activity, if your income is below the thresholds and if you are a participant in public health insurance. Most nonEU residents are not!

If you qualify for the flat tax, you can switch to the “EU” option in this guide above.

How do I issue my first invoice?

You can issue your invoice in print or send it electronically.

If you are a VAT non-payer:
Invoice has to include the serial number (of your choice), your name, address,  IC number (your business license number), a content of the sale/service, price, and date of issue. The date of the job performance/sale and the deadline for the payment can be included too. For invoice over  CZK 10 000 you have to specify details (name, address) about the client too.

If you are a VAT payer:
Invoice has to labelled “daňový doklad” and include the serial number (of your choice), your name, address,  IC number (your business license number), DIC number (your tax number), a content of the sale/service, price, tax rate, date of delivery and date of issue. The date of the job performance/sale and the deadline for the payment can be included too. For invoice over  CZK 10 000 you have to specify details (name, address) about the client and specify the price without the tax and with the tax.

Invoice template as .xls file.

If you are an “Identified Person” providing your services abroad, you need to issue an invoice as a VAT payer but without specifying the tax rate or price with/out tax (since you don’t charge that).

When and how do I have to report to the Tax office / Social Security administration / Health insurance company?

Every person with an active Trade license must report to the Financial office, Social Security Administration office and health insurance company (in case you are a member of the public health insurance system) once a year. Even if the income in the last year was zero. To avoid this, you have to cancel or interrupt the trade license.

Income tax declaration

“Daňové přiznání” is an act when you fill out the proper forms and deliver those to the Financial office before the deadline, April 1st. You fill out the figures for your last year’s total turnover, business expenses, tax allowances and tax reliefs, the income tax you already paid and you should pay. A tax declaration can be submitted at whatever office of the Financial Authority without any respect for your local affiliation. You can download the forms here and attempt to fill it out. Although only forms in Czech are accepted, you can see and compare the English translation in the instructions. To fill out a form is not an easy task and you will need help.

As a person with an active trade license, you have an obligation to file an individual tax return. Even if you were employed, your employer at this point cannot file the tax declaration for you and just gives you a report about your income and tax paid in last year (Potvrzení o zdanitelných příjmech ze závislé činnosti”) and you include this document and figures into your individual income tax declaration.

If your income from the business last year was less than 15 000 CZK (or 6 000 in case you were employed at the same time), you still have to touch the base with the Financial office and let them know that you didn’t earn enough to tax; even though you have an active trade license. In this case, you don’t need to fill out the official forms, but you can send a letter stating1 that you had no taxable income from your business.

Social Security report

“Přehled o příjmech a výdajích OSVČ” is a form in which you have to fill out figures about your last year’s total profit and how much deposits you already paid and send it to your Social Security Administration office no later than a month after you had an obligation to file your tax declaration (so the deadline is usually the beginning of May).

Health insurance report

In case you are in the public health insurance system, your insurance provider will expect to receive the report about your business income as well. The form is called the same as with the Social Security Administration “Přehled o výši daňového základu OSVČ” but each provider has a different format of the form, so contact your provider. The deadline for submitting this report is a month after you had an obligation to file your tax declaration (ie. the beginning of May).

In case you need help with filing the declaration and reports, you can ask somebody experienced or hire a professional to help you. An accountant or tax advisor can do all three reports for you in one session. See the question for Who can help me with accounting and tax declaration? below.

1.The text of the letter can be simple but has to be in Czech. Something along: “Čestně prohlašuji, že ve zdaňovacím období 2019 jsem ze samostatné činnost neměl žádné příjmy, ze kterých by vznikla povinnost podat daňové přiznání. ” And a signature.

When do I have to register and pay VAT? What is the "VAT light" version aka "identified person"?

First of all, you need to determine if you really need to be registered for VAT (Value Added Tax or DPH – Daň z přidané hodnoty), and if so, what type of VAT registration is relevant. Several indicators point to an obligation to register for VAT.

Situations determining an obligation to become a VAT Payer (full VAT registration):

  • Your income from the supply of goods or services with a place of supply in the Czech Republic is more than 2,000,000 CZK in the past 12 months (provision of B2B services abroad or exempt rental services are not counted towards the turnover).
  • You acquired a business from a VAT payer.

Situations determining an obligation to become a VAT Identified Person (identifikovaná osoba) (VAT-light registration):

  • You sell services (not goods) to clients who are business entities located in other EU countries.
  • You buy services from the EU or from the 3rd country business entities (the EU seller requires your VAT number), typically services from Google, Facebook, AirBnB, Booking, etc.
  • You buy goods from another EU country exceeding a value of 326,000 CZK per calendar year or goods with assembly and installation in the Czech Republic, or new cars, tobacco, alcohol, and fuel.

It is also possible to register voluntarily for VAT, for example, if you have not yet reached the 2,000,000 CZK income limit but have major expenses in the Czech Republic and want to claim back the Czech VAT.

VAT registration: full registration vs. “VAT-light”

A full VAT registration means that you must file the VAT report and Control statement every month (or quarter), even when you did not realize any output or input supplies. In addition, if you sell goods or services to EU business entities, you must file EC Sales List.

Suppose you have an income in the Czech Republic that is under 2,000,000 CZK and few expenses in the country (a situation in which you are not obliged to register for VAT), but you start invoicing to EU clients (which requires a VAT number) or receive a service from abroad. In that case, you must do a “VAT-light” registration.

The benefit, in this case, is that you only need to file the VAT report and EC Sales List in the months when a transaction subject to VAT declaration took place (not every month/quarter, as with a full VAT registration) and you do not have to file the Control statement.

Step-by-step guide: How to report VAT for selling your services to other EU country?

Step-by-step guide: How to report VAT for buying your services from other EU country?

The downside, however, is that you cannot claim any VAT back for local expenses and you have to declare and pay VAT for services received from abroad (from the EU or from a 3rd country). To put it simply: outside the Czech Republic, this behaves like a full VAT registration, but inside the Czech Republic, it is like not having a VAT number at all.

OSS (One Stop Shop) registration

If you sell goods (items, not services) to customers located in the EU who are non-business entities but private individuals (typically you sell goods via an e-shop) and your annual total sales to private individuals from all EU countries exceed € 10,000, you are required to register for the OSS system, where you will pay VAT according to the rules of your customer’s country. The condition for OSS registration is to be a VAT payer or a VAT-light registered person in the Czech Republic. OSS report shall be filed quarterly to the Czech Tax Office and VAT shall be paid in the same period in EUR currency also to the Czech Tax Office which further forwards the VAT to the respective countries.

How to register as a VAT Payer or as a VAT Identified Person”?

Registration for VAT must be done only electronically. Registration form is available at tax portal “Moje daně” https://adisspr.mfcr.cz/pmd/epo – select Elektronické formuláře > Registrace > Přihláška k registraci k dani z přidané hodnoty. All in Czech, use a translator 🙂

You can submit the VAT registration form using the secured electronic signature, via your “data mailbox” in xml format, or directly via the tax portal “Moje daně” authorizing the submission via your access details to your “data mailbox” or with your bank iDentity.

Registration form must be filed to the locally competent Tax Office within statutory deadlines (for full VAT registration in case of exceeding the turnover of CZK 2 mil., the registration form must be submitted within 15 days from the end of the month in which the turnover was exceeded, for VAT-light registration within 15 days of becoming VAT Identified Person).

For VAT registration you have to provide, among other information, details of bank account used for economic activity which will be published in the register of VAT payers.

Who can help me with accounting and tax reports?

The administration of your taxes, declaration, reports etc. is often a complicated task for tax advisors let alone for normal people.

Anyone who is not sure about their tax obligations can hire a professional registered tax advisor or accountant.

You have two options:

  1. hire a tax adviser for consultancy and assistance with the tax return forms, but sign the forms yourself; or
  2. sign a power of attorney in favor of the tax advisor and have them completely take over the process.

The latter option brings at least two advantages. Your deadline will be prolonged for 3 months until the end of June which gives you additional time to organize all necessary documents. Secondly, the tax advisor assumes full responsibility for the tax return and takes care of possible follow-up negotiations with the authorities.

Recommended expat-friendly services:

BELL Consulting

Certified tax consultant: founding and liquidating companies, accounting, payroll, complete financial services.

Anna Meyer Tax

tax accountant: tax return filing services, registering a new business license, consulting and processing compensation bonus and any tax related issues

CzechTaxesOnline.cz

Tax services online: a web application for Tax Return, incl. reports for insurance institutions for self-employed. In just 15 minutes, step-by-step.

Who do I have to inform of being a freelancer?

After you get the trade licence with an IČO (Identifikační číslo = Identification Number) from the Trade Licence Register, you are able to trade, but you are still not registered completely in the Czech system. You need to inform the 1) Social Security Administration office, 2) health insurance company, and possibly 3) Financial Office – if you want to register for a “flat tax” or if you are a VAT payer or identified person for VAT. And Social security office and health insurance company need to know whether your business is a main or extra activity.

When applying for a trade licence, you may

A) ask the officer at the Trade Licensing Office to fill out a single registration form (Jednotný registrační formulář) that will enable you to be automatically signed into the Social Security system, your health insurance company and the Financial Office (for flat tax). The Trade Licensing Office will then inform these institutions about the commencement of your business activities. These institutions will regard you as a business entity from that day. If the single registration is not available or the Social Security or health insurance company require more documentation from you, visit them individually:

B) visit the Social security office first to obtain your registration and use this confirmation of registration with the Social Security office to get into the public insurance company.  Visiting the offices in person has two benefits: you are given your social security number number on the spot and you get all the details about the exact payments – if and how much must be paid and to what account.

How do I report changes in my business? (address, pause, terminate, add business activity etc.)

Once you change the official address of your business, be it your home address or office space, you have to report the new address to the Trade licensing office “Živnostenský úřad“. This does not apply to foreigners with Permanent resident status who use the same address for both business and permanent residency (because once you update your address with the Immigration office, the Trade licensing office will learn about it automatically).

You can report the new address by filling out the “Change form” Změnový list (download here) in the box 9 and attaching the original or certified copy of the rental contract for the new address signed by the property owner, or consent for registering a business address on this form. You can send or drop the “change form” and the rental agreement/consent to any Trade licensing office.

There is a fee of 100,- CZK, if you want a print of the newly updated trade license (to be paid in the TL office or answering the summons to wire the fee online).

With the “Change form” you can also pause, terminate, renew, add activities to the Trade license and let the TL office inform the Social Security Administration or Health insurance company or the Financial office about such changes in case they are concerned (box 16).

You can fill out the Change form at the local Trade licensing office: Malinovského nám. 3, Brno 601 67 or submit it via your data mailbox to a7kbrrn or fill out and submit the change form online on www.rzp.cz (electronic submission possible only in the Czech version of the website!) – if you login with your data mailbox identity or your bank identity, go to the https://www.rzp.cz/jrf/cs/zmena-zivnosti/fyzicka-osoba/-/podnikatel.

Do I have to pay monthly fees to the social security administration?

Not the first year. But maybe following years yes, if your profit from self-employment was over the threshold.

If you have a job as an employee or you are a student under 26 or a pensioner or a parent collecting financial parental benefit, your employer/state is paying the social security contributions for you. You are using the trade license for a secondary income, and you are not required to pay any monthly advance payment in the first year.

For the following years, the social security contribution and monthly advance payments are calculated according to the business profit in the last year.

You will start paying the monthly deposit of 1 413 CZK once your business profit (income minus expenses) is over 105 520 CZK  in a calendar year (2024).

In any case, after the end of the year, you have to send a report to the Social Security office about your business income – this is usually done by your accountant as part of the annual tax declaration. Even if the business turnover was zero.

How do I calculate the social security contributions?

The amount of the social security contribution that a self-employed person pays to the Social Security administration is determined by the profit achieved in the previous year.  Social security fee is 29.2% of the assessment base. The assessment base for the calculation of social security is 55% of the profit (gross income – expenses = profit). So the fee is 16.06% of the profit, and, in most cases – where the lump sum for expenses is 60% – this effectively amounts to about 6.42% of the income.

If the actual profit from the business was lower than CZK 105 520  (in 2024), there is no payment. If doing business for part of the year, the threshold 105 520 is lower by (105 520 / 12) 8 793  for each month that business wasn’t active.

If the profit in a given year was higher than the threshold CZK 105 520, the social security needs to be paid, and advance payments for the new year start at minimum 1 413  (in 2024)

Social Security Administration office in Brno:

  • Městská správa sociálního zabezpečení Brno: website
    • Veveří 5, 660 20 Brno
    • +420 541 516 111
    • posta.bm@cssz.cz
    • Pension Fund account number: 1011-7929621/0710
    • IBAN: CZ5107100010110007929621
Do I have to pay monthly fees to the health insurance?

Depends.

If you have a job as an employee your employer is paying the minimum health insurance for you. You are using the trade licence for a secondary income, and you are not required to pay any monthly minimum advance payments. However, the contribution for the past year depends on the total business profit and is calculated as part of the annual tax return overview after the end of the year (before the end of March).  So your accountant or tax adviser will give you a final answer to this question. In any case, after the end of the year, you have to send a report to the health insurance company about your business income – this is usually done by your accountant as part of the annual tax declaration. Even if the business turnover was zero.

If you are a student under 26 / a pensioner / a parent receiving maternity or parental benefits or taking care of a child up to 7 years, your health insurance obligations depend on more variables and we need to look into your case individually.

How do I calculate the health insurance contributions?

*This answer applies to you if you are a member of the public health insurance (ie. all EU citizens or nonEU citizens who are included in the public health insurance because of employment or other reason – read more about where you fit here.)*

Similar to the social security contributions, when your income tax return is being prepared after the end of the year, you or your accountant will also calculate how much you need to pay to the health insurance system.

The amount of the public health insurance contribution that a self-employed person pays to the insurance company is determined by the profit achieved in the previous year. The assessment base for the calculation of health insurance is 50% of the profit (gross income minus expenses equals profit). The health insurance fee is 13.5% of the assessment base. So the fee is 6.75% of the profit, and, in most cases – where the lump sum for expenses is 60% – this effectively amounts to about 2.7% of the income.

Also, based on the income from the previous year, you might be informed by your accountant of the new monthly health insurance advance payments for the current year and you should adjust your bank order accordingly. This is not applicable if you are employed at the same time and your employer pays monthly health insurance.

How much income tax do I have to pay?

You must file an income tax return at the end of each (calendar) year.

This combines income from your business, employment, capital gains, rental income and any other sources of local and foreign income.

As a tax resident in the Czech Republic, typically if you have lived here for over six months, you have the obligation to file your global income, not just what you’ve made in the Czech Republic.

The income tax is calculated from your “tax base” – your profit – ie. your turnover minus your business expenses. Depending on the industry, in addition to the real business expenses, you can apply lump sum expenses. For example, if your trade licence is for “unqualified” trades, your business expenses can be applied in two ways: Either by listing your real income minus your real business expenses, or by following the 60/40 rule. The latter method is almost always used: it allows you to claim a 60% expense deduction on your income (even if the real percentage of expenses is much lower), with the remaining 40% being the amount that forms your tax base.

The income tax 15% (and 23% of a profit above 1 582 812 CZK in the calendar year 2024) is calculated from the tax base, which effectively – with the 60/40 rule – taxes your overall income by only 6% (or 9,2%).

The tax base (i.e. gross income minus business expenses) may be further lowered for “tax allowances” (gifts to charities, interest on mortgages, private pension savings, life insurance, union fees…); in this way, you then arrive at an “adjusted tax base”. Now the income tax (15%) is calculated on this “adjusted tax base”, and from the result you may make further discounts for “tax relief” (for a taxpayer, a spouse at home, children, kindergarten, studies, disability…). The tax relief for “taxpayer” is available always and for everybody and provides a discount on your taxes by 2 570 CZK per month (2024).

EXAMPLE
You can apply a fixed 60% business expense and a 40% profit. The collection of payment receipts or invoices from expenses is not necessary. For example, if the total gross income from the business for last year was 500 000 CZK, then 500 000 – 60% business expense (lump sum expense) = 200 000 clean profit. 15% tax would be 200 000 – 15% = 30 000 income tax.
But because everybody can apply for 30 840 tax relief each year (total tax relief for income from employment or business!) the final tax would amount to 0 CZK (if the tax relief was not applied to net salary from employment or other sources already).

Consult an accountant or tax adviser for the best tax optimization.

The tax return form must be submitted to the local Financial Office (determined according to your registered address as stated in your trade licence) by the end of March.

This may be postponed to the end of July if you have given a power of attorney to a professional tax consultant to file your tax return (for this he will charge a fee). There are five Financial Offices in Brno: Brno I, Brno II, Brno III, Brno IV and Brno Venkov.

For accounting and tax consulting the Brno Expat Centre can recommend Michael Hajek, a certified, English-speaking tax advisor:

Bell Consulting

Bell Consulting provides comprehensive financial and tax services for any business. Their services include: bookkeeping, payroll, personnel administration, legal services and tax advice.

How do I issue my first invoice?

You can issue your invoice in print or send it electronically.

If you are a VAT non-payer:
Invoice has to include the serial number (of your choice), your name, address,  IC number (your business license number), a content of the sale/service, price, and date of issue. The date of the job performance/sale and the deadline for the payment can be included too. For invoice over  CZK 10 000 you have to specify details (name, address) about the client too.

If you are a VAT payer:
Invoice has to labelled “daňový doklad” and include the serial number (of your choice), your name, address,  IC number (your business license number), DIC number (your tax number), a content of the sale/service, price, tax rate, date of delivery and date of issue. The date of the job performance/sale and the deadline for the payment can be included too. For invoice over  CZK 10 000 you have to specify details (name, address) about the client and specify the price without the tax and with the tax.

Invoice template as .xls file.

If you are an “Identified Person” providing your services abroad, you need to issue an invoice as a VAT payer but without specifying the tax rate or price with/out tax (since you don’t charge that).

When and how do I have to report to the Tax office / Social Security administration / Health insurance company?

Every person with an active Trade license must report to the Financial office, Social Security Administration office and health insurance company (in case you are a member of the public health insurance system) once a year. Even if the income in the last year was zero. To avoid this, you have to cancel or interrupt the trade license.

Income tax declaration

“Daňové přiznání” is an act when you fill out the proper forms and deliver those to the Financial office before the deadline, April 1st. You fill out the figures for your last year’s total turnover, business expenses, tax allowances and tax reliefs, the income tax you already paid and you should pay. A tax declaration can be submitted at whatever office of the Financial Authority without any respect for your local affiliation. You can download the forms here and attempt to fill it out. Although only forms in Czech are accepted, you can see and compare the English translation in the instructions. To fill out a form is not an easy task and you will need help.

As a person with an active trade license, you have an obligation to file an individual tax return. Even if you were employed, your employer at this point cannot file the tax declaration for you and just gives you a report about your income and tax paid in last year (Potvrzení o zdanitelných příjmech ze závislé činnosti”) and you include this document and figures into your individual income tax declaration.

If your income from the business last year was less than 15 000 CZK (or 6 000 in case you were employed at the same time), you still have to touch the base with the Financial office and let them know that you didn’t earn enough to tax; even though you have an active trade license. In this case, you don’t need to fill out the official forms, but you can send a letter stating1 that you had no taxable income from your business.

Social Security report

“Přehled o příjmech a výdajích OSVČ” is a form in which you have to fill out figures about your last year’s total profit and how much deposits you already paid and send it to your Social Security Administration office no later than a month after you had an obligation to file your tax declaration (so the deadline is usually the beginning of May).

Health insurance report

In case you are in the public health insurance system, your insurance provider will expect to receive the report about your business income as well. The form is called the same as with the Social Security Administration “Přehled o výši daňového základu OSVČ” but each provider has a different format of the form, so contact your provider. The deadline for submitting this report is a month after you had an obligation to file your tax declaration (ie. the beginning of May).

In case you need help with filing the declaration and reports, you can ask somebody experienced or hire a professional to help you. An accountant or tax advisor can do all three reports for you in one session. See the question for Who can help me with accounting and tax declaration? below.

1.The text of the letter can be simple but has to be in Czech. Something along: “Čestně prohlašuji, že ve zdaňovacím období 2019 jsem ze samostatné činnost neměl žádné příjmy, ze kterých by vznikla povinnost podat daňové přiznání. ” And a signature.

When do I have to register and pay VAT? What is the "VAT light" version aka "identified person"?

First of all, you need to determine if you really need to be registered for VAT (Value Added Tax or DPH – Daň z přidané hodnoty), and if so, what type of VAT registration is relevant. Several indicators point to an obligation to register for VAT.

Situations determining an obligation to become a VAT Payer (full VAT registration):

  • Your income from the supply of goods or services with a place of supply in the Czech Republic is more than 2,000,000 CZK in the past 12 months (provision of B2B services abroad or exempt rental services are not counted towards the turnover).
  • You acquired a business from a VAT payer.

Situations determining an obligation to become a VAT Identified Person (identifikovaná osoba) (VAT-light registration):

  • You sell services (not goods) to clients who are business entities located in other EU countries.
  • You buy services from the EU or from the 3rd country business entities (the EU seller requires your VAT number), typically services from Google, Facebook, AirBnB, Booking, etc.
  • You buy goods from another EU country exceeding a value of 326,000 CZK per calendar year or goods with assembly and installation in the Czech Republic, or new cars, tobacco, alcohol, and fuel.

It is also possible to register voluntarily for VAT, for example, if you have not yet reached the 2,000,000 CZK income limit but have major expenses in the Czech Republic and want to claim back the Czech VAT.

VAT registration: full registration vs. “VAT-light”

A full VAT registration means that you must file the VAT report and Control statement every month (or quarter), even when you did not realize any output or input supplies. In addition, if you sell goods or services to EU business entities, you must file EC Sales List.

Suppose you have an income in the Czech Republic that is under 2,000,000 CZK and few expenses in the country (a situation in which you are not obliged to register for VAT), but you start invoicing to EU clients (which requires a VAT number) or receive a service from abroad. In that case, you must do a “VAT-light” registration.

The benefit, in this case, is that you only need to file the VAT report and EC Sales List in the months when a transaction subject to VAT declaration took place (not every month/quarter, as with a full VAT registration) and you do not have to file the Control statement.

Step-by-step guide: How to report VAT for selling your services to other EU country?

Step-by-step guide: How to report VAT for buying your services from other EU country?

The downside, however, is that you cannot claim any VAT back for local expenses and you have to declare and pay VAT for services received from abroad (from the EU or from a 3rd country). To put it simply: outside the Czech Republic, this behaves like a full VAT registration, but inside the Czech Republic, it is like not having a VAT number at all.

OSS (One Stop Shop) registration

If you sell goods (items, not services) to customers located in the EU who are non-business entities but private individuals (typically you sell goods via an e-shop) and your annual total sales to private individuals from all EU countries exceed € 10,000, you are required to register for the OSS system, where you will pay VAT according to the rules of your customer’s country. The condition for OSS registration is to be a VAT payer or a VAT-light registered person in the Czech Republic. OSS report shall be filed quarterly to the Czech Tax Office and VAT shall be paid in the same period in EUR currency also to the Czech Tax Office which further forwards the VAT to the respective countries.

How to register as a VAT Payer or as a VAT Identified Person”?

Registration for VAT must be done only electronically. Registration form is available at tax portal “Moje daně” https://adisspr.mfcr.cz/pmd/epo – select Elektronické formuláře > Registrace > Přihláška k registraci k dani z přidané hodnoty. All in Czech, use a translator 🙂

You can submit the VAT registration form using the secured electronic signature, via your “data mailbox” in xml format, or directly via the tax portal “Moje daně” authorizing the submission via your access details to your “data mailbox” or with your bank iDentity.

Registration form must be filed to the locally competent Tax Office within statutory deadlines (for full VAT registration in case of exceeding the turnover of CZK 2 mil., the registration form must be submitted within 15 days from the end of the month in which the turnover was exceeded, for VAT-light registration within 15 days of becoming VAT Identified Person).

For VAT registration you have to provide, among other information, details of bank account used for economic activity which will be published in the register of VAT payers.

Who can help me with accounting and tax reports?

The administration of your taxes, declaration, reports etc. is often a complicated task for tax advisors let alone for normal people.

Anyone who is not sure about their tax obligations can hire a professional registered tax advisor or accountant.

You have two options:

  1. hire a tax adviser for consultancy and assistance with the tax return forms, but sign the forms yourself; or
  2. sign a power of attorney in favor of the tax advisor and have them completely take over the process.

The latter option brings at least two advantages. Your deadline will be prolonged for 3 months until the end of June which gives you additional time to organize all necessary documents. Secondly, the tax advisor assumes full responsibility for the tax return and takes care of possible follow-up negotiations with the authorities.

Recommended expat-friendly services:

BELL Consulting

Certified tax consultant: founding and liquidating companies, accounting, payroll, complete financial services.

Anna Meyer Tax

tax accountant: tax return filing services, registering a new business license, consulting and processing compensation bonus and any tax related issues

CzechTaxesOnline.cz

Tax services online: a web application for Tax Return, incl. reports for insurance institutions for self-employed. In just 15 minutes, step-by-step.

Who do I have to inform of being a freelancer?

After you get the trade licence with an IČO (Identifikační číslo = Identification Number) from the Trade Licence Register, you are able to trade, but you are still not registered completely in the Czech system. You need to inform the 1) Social Security Administration office about opening the trade licence and whether your business is a main or extra activity.

In case you are in a public health insurance system (are you?), you have to inform your 2) health insurance company about starting the business. Every company has different forms, contact them directly, within 8 days from starting to provide business services.
But if you have prepaid a commercial health insurance for foreigners, you don’t inform them. Having a business is unrelated to commercial health insurance.

And possibly 3) Financial Office – if you want to register for a “flat tax” (!only if you are in public health insurance!) or if you are a VAT payer or identified person for VAT. And Social security office and health insurance company need to know whether your business is a main or extra activity.

To register with the respective offices, you have two options:

A) ask the officer at the Trade Licensing Office to fill out a single registration form (Jednotný registrační formulář) that will enable you to be automatically signed into the social security system, the Financial Office for the flat tax, your health insurance company. The Trade Licensing Office will then inform these institutions about the commencement of your business activities. These institutions will regard you as a business entity from that day. If the single registration is not available or the Social Security or health insurance company require more documentation from you, visit them individually:

B) visit the Social security office first to obtain your registration and use this confirmation of registration with the Social Security office to get into the public insurance company.  Visiting the offices in person has two benefits: you are given your registration number on the spot and you get all the details about the exact payments – if and how much must be paid and to what account.

How do I report changes in my business? (address, pause, terminate, add business activity etc.)

Once you change the official address of your business, be it your home address or office space, you have to report the new address to the Trade licensing office “Živnostenský úřad“. This does not apply to foreigners with Permanent resident status who use the same address for both business and permanent residency (because once you update your address with the Immigration office, the Trade licensing office will learn about it automatically).

You can report the new address by filling out the “Change form” Změnový list (download here) in the box 9 and attaching the original or certified copy of the rental contract for the new address signed by the property owner, or consent for registering a business address on this form. You can send or drop the “change form” and the rental agreement/consent to any Trade licensing office.

There is a fee of 100,- CZK, if you want a print of the newly updated trade license (to be paid in the TL office or answering the summons to wire the fee online).

With the “Change form” you can also pause, terminate, renew, add activities to the Trade license and let the TL office inform the Social Security Administration or Health insurance company or the Financial office about such changes in case they are concerned (box 16).

You can fill out the Change form at the local Trade licensing office: Malinovského nám. 3, Brno 601 67 or submit it via your data mailbox to a7kbrrn or fill out and submit the change form online on www.rzp.cz (electronic submission possible only in the Czech version of the website!) – if you login with your data mailbox identity or your bank identity, go to the https://www.rzp.cz/jrf/cs/zmena-zivnosti/fyzicka-osoba/-/podnikatel.

How do I extend the validity of my “zivnost” along with my visa?

It is crucial to watch the validity of both your residence permit and your trade license.

Your trade licence must be renewed before it expires – this is sometimes due even before you renew your visa, so be sure to make a note of its expiration date – never let your trade licence expire! We can’t stress this enough.

Foreigners who have a visa or long-term residence permit must always apply for renewal of the trade licence even before their visa/residence permit expires. You should be aware of the expiry dates of your trade licence and your residence permit: mark the expiration date of your trade licence in your calendar well in advance!

If the trade licence expires, you must start from scratch and reapply for a new trade licence. So, it is extremely important not to let this happen!

A) Business visa/residence permit renewal (Immigration Office)

This is a long process and one that requires more and different documents than the original business visa application. It is advisable to start the visa extension and trade licence renewal process 3 to 4 months before the expiration date of the visa/residence permit because it is quite complicated, and a lot of papers from the authorities are required. an application for a long-term residence permit renewal may be filed 4 months at the earliest and 14 days at the latest before the expiration of the old visa, or on the last day of the residence permit.

B) Trade licence renewal (Trade Licensing Office)

The application for the trade licence renewal may be filed latest on the last date of validity of the licence.  If the expiration date of your trade licence is approaching but your visa/permit renewal is still pending, you may ask the Trade Licensing Office – in the form of a simple letter of request – for a temporary extension of the licence and “waiting period” for the process of visa/permit renewal to be finished. Always visit the Trade Licensing Office before the expiration of your licence and ask them what to do next. Arriving even a day after the trade licence has expired is considered too late: you lose your license and have to apply from scratch (have to get a new extract from the criminal record, etc.).

Do I have to pay monthly fees to the social security administration?

Not the first year. But maybe following years yes, if your profit from self-employment was over the threshold.

If you have a job as an employee or you are a student under 26 or a pensioner or a parent collecting financial parental benefit, your employer/state is paying the social security contributions for you. You are using the trade license for a secondary income, and you are not required to pay any monthly advance payment in the first year.

For the following years, the social security contribution and monthly advance payments are calculated according to the business profit in the last year.

You will start paying the monthly deposit of 1 413 CZK once your business profit (income minus expenses) is over 105 520 CZK  in a calendar year (2024).

In any case, after the end of the year, you have to send a report to the Social Security office about your business income – this is usually done by your accountant as part of the annual tax declaration. Even if the business turnover was zero.

How do I calculate the social security contributions?

The amount of the social security contribution that a self-employed person pays to the Social Security administration is determined by the profit achieved in the previous year.  Social security fee is 29.2% of the assessment base. The assessment base for the calculation of social security is 55% of the profit (gross income – expenses = profit). So the fee is 16.06% of the profit, and, in most cases – where the lump sum for expenses is 60% – this effectively amounts to about 6.42% of the income.

If the actual profit from the business was lower than CZK 105 520  (in 2024), there is no payment. If doing business for part of the year, the threshold 105 520 is lower by (105 520 / 12) 8 793  for each month that business wasn’t active.

If the profit in a given year was higher than the threshold CZK 105 520, the social security needs to be paid, and advance payments for the new year start at minimum 1 413  (in 2024)

Social Security Administration office in Brno:

  • Městská správa sociálního zabezpečení Brno: website
    • Veveří 5, 660 20 Brno
    • +420 541 516 111
    • posta.bm@cssz.cz
    • Pension Fund account number: 1011-7929621/0710
    • IBAN: CZ5107100010110007929621
Do I have to pay monthly fees to the health insurance?

Depends.

If you have a job as an employee your employer is paying the minimum health insurance for you. You are using the trade licence for a secondary income, and you are not required to pay any monthly minimum advance payments. However, the contribution for the past year depends on the total business profit and is calculated as part of the annual tax return overview after the end of the year (before the end of March).  So your accountant or tax adviser will give you a final answer to this question. In any case, after the end of the year, you have to send a report to the health insurance company about your business income – this is usually done by your accountant as part of the annual tax declaration. Even if the business turnover was zero.

If you are a student under 26 / a pensioner / a parent receiving maternity or parental benefits or taking care of a child up to 7 years, your health insurance obligations depend on more variables and we need to look into your case individually.

How do I calculate the health insurance contributions?

*This answer applies to you if you are a member of the public health insurance (ie. all EU citizens or nonEU citizens who are included in the public health insurance because of employment or other reason – read more about where you fit here.)*

Similar to the social security contributions, when your income tax return is being prepared after the end of the year, you or your accountant will also calculate how much you need to pay to the health insurance system.

The amount of the public health insurance contribution that a self-employed person pays to the insurance company is determined by the profit achieved in the previous year. The assessment base for the calculation of health insurance is 50% of the profit (gross income minus expenses equals profit). The health insurance fee is 13.5% of the assessment base. So the fee is 6.75% of the profit, and, in most cases – where the lump sum for expenses is 60% – this effectively amounts to about 2.7% of the income.

Also, based on the income from the previous year, you might be informed by your accountant of the new monthly health insurance advance payments for the current year and you should adjust your bank order accordingly. This is not applicable if you are employed at the same time and your employer pays monthly health insurance.

How much income tax do I have to pay?

You must file an income tax return at the end of each (calendar) year.

This combines income from your business, employment, capital gains, rental income and any other sources of local and foreign income.

As a tax resident in the Czech Republic, typically if you have lived here for over six months, you have the obligation to file your global income, not just what you’ve made in the Czech Republic.

The income tax is calculated from your “tax base” – your profit – ie. your turnover minus your business expenses. Depending on the industry, in addition to the real business expenses, you can apply lump sum expenses. For example, if your trade licence is for “unqualified” trades, your business expenses can be applied in two ways: Either by listing your real income minus your real business expenses, or by following the 60/40 rule. The latter method is almost always used: it allows you to claim a 60% expense deduction on your income (even if the real percentage of expenses is much lower), with the remaining 40% being the amount that forms your tax base.

The income tax 15% (and 23% of a profit above 1 582 812 CZK in the calendar year 2024) is calculated from the tax base, which effectively – with the 60/40 rule – taxes your overall income by only 6% (or 9,2%).

The tax base (i.e. gross income minus business expenses) may be further lowered for “tax allowances” (gifts to charities, interest on mortgages, private pension savings, life insurance, union fees…); in this way, you then arrive at an “adjusted tax base”. Now the income tax (15%) is calculated on this “adjusted tax base”, and from the result you may make further discounts for “tax relief” (for a taxpayer, a spouse at home, children, kindergarten, studies, disability…). The tax relief for “taxpayer” is available always and for everybody and provides a discount on your taxes by 2 570 CZK per month (2024).

EXAMPLE
You can apply a fixed 60% business expense and a 40% profit. The collection of payment receipts or invoices from expenses is not necessary. For example, if the total gross income from the business for last year was 500 000 CZK, then 500 000 – 60% business expense (lump sum expense) = 200 000 clean profit. 15% tax would be 200 000 – 15% = 30 000 income tax.
But because everybody can apply for 30 840 tax relief each year (total tax relief for income from employment or business!) the final tax would amount to 0 CZK (if the tax relief was not applied to net salary from employment or other sources already).

Consult an accountant or tax adviser for the best tax optimization.

The tax return form must be submitted to the local Financial Office (determined according to your registered address as stated in your trade licence) by the end of March.

This may be postponed to the end of July if you have given a power of attorney to a professional tax consultant to file your tax return (for this he will charge a fee). There are five Financial Offices in Brno: Brno I, Brno II, Brno III, Brno IV and Brno Venkov.

For accounting and tax consulting the Brno Expat Centre can recommend Michael Hajek, a certified, English-speaking tax advisor:

Bell Consulting

Bell Consulting provides comprehensive financial and tax services for any business. Their services include: bookkeeping, payroll, personnel administration, legal services and tax advice.

How do I issue my first invoice?

You can issue your invoice in print or send it electronically.

If you are a VAT non-payer:
Invoice has to include the serial number (of your choice), your name, address,  IC number (your business license number), a content of the sale/service, price, and date of issue. The date of the job performance/sale and the deadline for the payment can be included too. For invoice over  CZK 10 000 you have to specify details (name, address) about the client too.

If you are a VAT payer:
Invoice has to labelled “daňový doklad” and include the serial number (of your choice), your name, address,  IC number (your business license number), DIC number (your tax number), a content of the sale/service, price, tax rate, date of delivery and date of issue. The date of the job performance/sale and the deadline for the payment can be included too. For invoice over  CZK 10 000 you have to specify details (name, address) about the client and specify the price without the tax and with the tax.

Invoice template as .xls file.

If you are an “Identified Person” providing your services abroad, you need to issue an invoice as a VAT payer but without specifying the tax rate or price with/out tax (since you don’t charge that).

When and how do I have to report to the Tax office / Social Security administration / Health insurance company?

Every person with an active Trade license must report to the Financial office, Social Security Administration office and health insurance company (in case you are a member of the public health insurance system) once a year. Even if the income in the last year was zero. To avoid this, you have to cancel or interrupt the trade license.

Income tax declaration

“Daňové přiznání” is an act when you fill out the proper forms and deliver those to the Financial office before the deadline, April 1st. You fill out the figures for your last year’s total turnover, business expenses, tax allowances and tax reliefs, the income tax you already paid and you should pay. A tax declaration can be submitted at whatever office of the Financial Authority without any respect for your local affiliation. You can download the forms here and attempt to fill it out. Although only forms in Czech are accepted, you can see and compare the English translation in the instructions. To fill out a form is not an easy task and you will need help.

As a person with an active trade license, you have an obligation to file an individual tax return. Even if you were employed, your employer at this point cannot file the tax declaration for you and just gives you a report about your income and tax paid in last year (Potvrzení o zdanitelných příjmech ze závislé činnosti”) and you include this document and figures into your individual income tax declaration.

If your income from the business last year was less than 15 000 CZK (or 6 000 in case you were employed at the same time), you still have to touch the base with the Financial office and let them know that you didn’t earn enough to tax; even though you have an active trade license. In this case, you don’t need to fill out the official forms, but you can send a letter stating1 that you had no taxable income from your business.

Social Security report

“Přehled o příjmech a výdajích OSVČ” is a form in which you have to fill out figures about your last year’s total profit and how much deposits you already paid and send it to your Social Security Administration office no later than a month after you had an obligation to file your tax declaration (so the deadline is usually the beginning of May).

Health insurance report

In case you are in the public health insurance system, your insurance provider will expect to receive the report about your business income as well. The form is called the same as with the Social Security Administration “Přehled o výši daňového základu OSVČ” but each provider has a different format of the form, so contact your provider. The deadline for submitting this report is a month after you had an obligation to file your tax declaration (ie. the beginning of May).

In case you need help with filing the declaration and reports, you can ask somebody experienced or hire a professional to help you. An accountant or tax advisor can do all three reports for you in one session. See the question for Who can help me with accounting and tax declaration? below.

1.The text of the letter can be simple but has to be in Czech. Something along: “Čestně prohlašuji, že ve zdaňovacím období 2019 jsem ze samostatné činnost neměl žádné příjmy, ze kterých by vznikla povinnost podat daňové přiznání. ” And a signature.

When do I have to register and pay VAT? What is the "VAT light" version aka "identified person"?

First of all, you need to determine if you really need to be registered for VAT (Value Added Tax or DPH – Daň z přidané hodnoty), and if so, what type of VAT registration is relevant. Several indicators point to an obligation to register for VAT.

Situations determining an obligation to become a VAT Payer (full VAT registration):

  • Your income from the supply of goods or services with a place of supply in the Czech Republic is more than 2,000,000 CZK in the past 12 months (provision of B2B services abroad or exempt rental services are not counted towards the turnover).
  • You acquired a business from a VAT payer.

Situations determining an obligation to become a VAT Identified Person (identifikovaná osoba) (VAT-light registration):

  • You sell services (not goods) to clients who are business entities located in other EU countries.
  • You buy services from the EU or from the 3rd country business entities (the EU seller requires your VAT number), typically services from Google, Facebook, AirBnB, Booking, etc.
  • You buy goods from another EU country exceeding a value of 326,000 CZK per calendar year or goods with assembly and installation in the Czech Republic, or new cars, tobacco, alcohol, and fuel.

It is also possible to register voluntarily for VAT, for example, if you have not yet reached the 2,000,000 CZK income limit but have major expenses in the Czech Republic and want to claim back the Czech VAT.

VAT registration: full registration vs. “VAT-light”

A full VAT registration means that you must file the VAT report and Control statement every month (or quarter), even when you did not realize any output or input supplies. In addition, if you sell goods or services to EU business entities, you must file EC Sales List.

Suppose you have an income in the Czech Republic that is under 2,000,000 CZK and few expenses in the country (a situation in which you are not obliged to register for VAT), but you start invoicing to EU clients (which requires a VAT number) or receive a service from abroad. In that case, you must do a “VAT-light” registration.

The benefit, in this case, is that you only need to file the VAT report and EC Sales List in the months when a transaction subject to VAT declaration took place (not every month/quarter, as with a full VAT registration) and you do not have to file the Control statement.

Step-by-step guide: How to report VAT for selling your services to other EU country?

Step-by-step guide: How to report VAT for buying your services from other EU country?

The downside, however, is that you cannot claim any VAT back for local expenses and you have to declare and pay VAT for services received from abroad (from the EU or from a 3rd country). To put it simply: outside the Czech Republic, this behaves like a full VAT registration, but inside the Czech Republic, it is like not having a VAT number at all.

OSS (One Stop Shop) registration

If you sell goods (items, not services) to customers located in the EU who are non-business entities but private individuals (typically you sell goods via an e-shop) and your annual total sales to private individuals from all EU countries exceed € 10,000, you are required to register for the OSS system, where you will pay VAT according to the rules of your customer’s country. The condition for OSS registration is to be a VAT payer or a VAT-light registered person in the Czech Republic. OSS report shall be filed quarterly to the Czech Tax Office and VAT shall be paid in the same period in EUR currency also to the Czech Tax Office which further forwards the VAT to the respective countries.

How to register as a VAT Payer or as a VAT Identified Person”?

Registration for VAT must be done only electronically. Registration form is available at tax portal “Moje daně” https://adisspr.mfcr.cz/pmd/epo – select Elektronické formuláře > Registrace > Přihláška k registraci k dani z přidané hodnoty. All in Czech, use a translator 🙂

You can submit the VAT registration form using the secured electronic signature, via your “data mailbox” in xml format, or directly via the tax portal “Moje daně” authorizing the submission via your access details to your “data mailbox” or with your bank iDentity.

Registration form must be filed to the locally competent Tax Office within statutory deadlines (for full VAT registration in case of exceeding the turnover of CZK 2 mil., the registration form must be submitted within 15 days from the end of the month in which the turnover was exceeded, for VAT-light registration within 15 days of becoming VAT Identified Person).

For VAT registration you have to provide, among other information, details of bank account used for economic activity which will be published in the register of VAT payers.

Who can help me with accounting and tax reports?

The administration of your taxes, declaration, reports etc. is often a complicated task for tax advisors let alone for normal people.

Anyone who is not sure about their tax obligations can hire a professional registered tax advisor or accountant.

You have two options:

  1. hire a tax adviser for consultancy and assistance with the tax return forms, but sign the forms yourself; or
  2. sign a power of attorney in favor of the tax advisor and have them completely take over the process.

The latter option brings at least two advantages. Your deadline will be prolonged for 3 months until the end of June which gives you additional time to organize all necessary documents. Secondly, the tax advisor assumes full responsibility for the tax return and takes care of possible follow-up negotiations with the authorities.

Recommended expat-friendly services:

BELL Consulting

Certified tax consultant: founding and liquidating companies, accounting, payroll, complete financial services.

Anna Meyer Tax

tax accountant: tax return filing services, registering a new business license, consulting and processing compensation bonus and any tax related issues

CzechTaxesOnline.cz

Tax services online: a web application for Tax Return, incl. reports for insurance institutions for self-employed. In just 15 minutes, step-by-step.

General info

When you are self-employed, with or without a  trade license, you can issue invoices and receive money but you have also a number of legal obligations. Sole proprietors (also called self-employed people = freelancers = business people) must pay:

  • income tax,
  • social security contributions,
  • and health insurance.

This guide explains your obligations relating to the Trade Licensing Office, Immigration Office, Social Security Administration, a health insurance company, and Financial Office.

Whether you have to pay any monthly minimum fees and how much depends on whether the business is your main economic activity or extra activity. The business can be your “extra activity” only if:

  • you are employed and your employer pays your social security and health insurance
  • you are taking care of a child up to 4 years – a day before 4th birthday (for social security)
  • you are taking care of a child up to 7 years (or two children up to 15y) who attends kindergarten for less than 4 hours a day (for health insurance)
  • you are a student under 26 years of age (excluding the Czech language preparatory studies)
  • you are a retired pensioner

In such cases, it is your employer or the Czech government that covers your minimum social security or health insurance each month, and you only pay that if your profit (and income) is above a certain level.

If the income from your business is the main source of money and nobody is paying health insurance and social security fees for you – business is your main activity and there are monthly minimum fees to be paid.

In either situation, being self-employed as a main or extra activity, you have an obligation each year to file an individual report to the tax office, social security, health insurance (if you are in the public health insurance system), even if you had zero income from the business activity.

*In the context of this guide, we use the term “EU citizens” to include all citizens of the EU, EEA, and EFTA countries, and foreigners from outside of EU with permanent residence status.

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In case you don’t want to read anything and just want to have your taxes done by a professional, feel free to contact expat friendly services:

BELL Consulting

Certified tax consultant: founding and liquidating companies, accounting, payroll, complete financial services.

Anna Meyer Tax

tax accountant: tax return filing services, registering a new business license, consulting and processing compensation bonus and any tax-related issues

Jana Střelická

Jana Střelická from AUDITOR can assist you with tax issues relating to your employment and all accounting and tax issues relating to setting up and running your business as an individual or legal entity.

 

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