Discover how international students work and study at the same time in Czechia on a free trade license (“živnostenský list”).
Freelancing and Study in Czechia
Many international students in Czechia study and work at the same time by registering a trade license (“živnostenský list”). Commonly referred to as “Zivno” by foreigners and Czechs alike, the free trade license certifies someone for certain business activities.
In total, the Zivno enables freelancers to conduct 83 different free trade business activities on the labor market. These are jobs which require no proof of qualification or diplomas. Anybody holding a valid visa or residency can apply for the trade license, including students.
Registered freelancers are then legally able to work multiple jobs simultaneously while also studying. Usually, for students, this is part-time work in sectors like IT, sales, marketing, UX / UI design, and more. Open positions are common in startups as much as corporations and SMBs.
However, in order to start freelancing, it’s important to first understand the legal obligations that come with the trade. These include filing annual income tax reports, as well as registering for and paying into health insurance and social security.
1 - The Czech Trade License
The Trade License (Zivno) is issued by the Czech Trade Office, and any student on a visa can apply. In fact, it’s even easier for students on a type 23 visa to get a Zivno than for many other visa holders. This is in part because there is no criminal background requirement for both EU and non-EU students on type 23 visas.
To start freelancing, applicants register with the Financial Tax Office, and sign up for mandatory health insurance and social security contributions.
After registration, the freelancer receives an IČO (‘identifikační číslo osoby’ in Czech). The IČO is a unique, eight-digit identification number for doing business in the Czech Republic.
With it, freelancers can legally invoice clients, record insurance contributions, and file income taxes.
Trade license holders must then file taxes once per year, proving their taxable income, and fulfillment of mandatory insurance contributions.
Popular freelance jobs for students
The Czech labor market has experienced a recent boom in local companies opening part-time and freelance positions. And it’s not only the corporations hiring here; it’s equally startups, SMBs, organizations, and educational facilities.
Many positions open for specific projects, or when companies simply need temporary help. This opens the doors for students who have junior to senior level experience in numerous sectors. Usually, it’s jobs like coding, programming, sales, marketing, graphic design, and more.
Other common freelance jobs for students range from teaching and consultations services, to driving for Uber and Wolt. There is also work on various online platforms which open up to students with a registered trade license.
2 - Taxation
Next, how much is the tax on student freelancers? Taxation for students working on a trade license is the same as it is for full-time freelancers. Any registered freelancer must file an income tax report at the end of a taxable calendar year. When filing taxes, they must declare taxable income from the previous year, insurance contributions, and pay income tax (if any).
Note: Students do not receive tax forgiveness, however they can claim a deduction in certain cases. Also, in regard to income tax, there are significant advantages to working on a trade license. All trade license holders can report their taxable income using the 60/40 method.
The 60/40 method gives you an expense allowance of 60% from your gross income. This is advantageous particularly in fields most commonly occupied by students, who do not generate that amount in expenses. Nevertheless, they deduct 60% from their gross income, and only the remaining 40% is taxable. Of this net income, they then pay 15% income tax.
In this way, student freelancers often significantly reduce their tax burden. This is especially true for student jobs and part-time work, which usually results in receiving money back after filing. Further, there are no requirements on income, so if you don’t generate any, it’s no problem.
When do students pay income tax?
The deadline for students to file income taxes in the Czech Republic is the same as for any freelancer. According to the Tax Code, this is no later than 3 months after the end of the tax period. Tax periods conclude with the calendar year, meaning in most cases you should file taxes by the end of March.
Any freelancer who conducted business over the previous year must file, even if they worked only for a limited time. They then pay income tax on taxable net income, taking into account tax relief, discounts, and credits.
For students, they can often further reduce their tax burden by claiming various tax discounts and tax credits. These are available in certain cases, and students are eligible to claim multiple discounts and credits at one time.
What student tax discounts and credits exist?
Students working on a Czech trade license are eligible to claim both the standard taxpayer’s discount, and the student tax credit.
- The standard taxpayer’s discount - This discount reduces a freelancer’s tax burden by a certain amount for the tax period. For the period of 2023, the standard taxpayer’s discount is CZK 30 840.
- The student tax credit - The student tax credit reduces a working student’s tax burden. In 2023, the student tax credit is CZK 4 200 per year.
For example, when filing taxes, a student freelancer can first use the 60/40 method to determine taxable net income. They then calculate income tax at 15% of net income, and apply tax discounts and credits to income tax owed.
Note: Only students under the age of 26 are eligible for the student tax credit when filing taxes as a freelancer.
Tax relief and other deductibles for students
Now, are student freelancers eligible for tax relief in the Czech Republic? The short answer is yes. However, it depends on the freelancer’s annual net income. In 2023, freelancers must declare over CZK 103 800 annual net income to be eligible for tax relief. If the freelancer meets this requirement, they are then eligible to claim various forms of Czech tax relief and discounts.
Note: Tax relief refers to expenses you can deduct from your taxable income (the tax base). For example, if using the 60/40 method, tax relief applies to the 40% base you pay taxes on.
Common deductibles from taxable income include:
- Voluntary blood, plasma, or organ donations
- Mortgage interest rates
- Pension and retirement funds
- Life insurance
- Continuing education exam fees
- Research
- Supporting professional education, and more
Common tax discounts students may also be eligible to claim are:
- The standard taxpayer’s discount
- Tax discounts for an unemployed spouse
- Tax discounts for students under 26 (or students under 28 pursuing a doctorate)
- Tax discounts for kindergarten fees (only eligible for one of the parents)
3 - Health Insurance
Do students need to pay public health insurance while studying and also freelancing in Czechia? The answer here depends on your nationality.
Any student freelancer holding an EU passport will register for and pay into public health insurance. In fact, this is one advantage to registering a trade license, as it gives some nationalities access to public healthcare like VZP and others.
Other countries in agreement with the Czech Republic on provision of healthcare for freelancers include:
- Albania
- Israel
- Tunisia
- Turkey
- Northern Macedonia
- Serbia
- Syria
- Ukraine
- Montenegro
- USA
- Japan
Students from these countries who hold a trade license can register for and pay into public health insurance. They will then be responsible to make annual insurance payments when filing their income tax report.
How much is health insurance for student freelancers?
When freelancing on a trade license, any amount a student earns is technically ‘side income’. This means that you will not qualify for monthly health insurance deposits. However, it does not amount to healthcare free of charge.
Instead, student freelancers pay health insurance when filing their income tax report at the end of the year. How much they pay for the full previous year then depends on net income, and is calculated as follows.
- Say you earn CZK 220 000 gross annual income.
- Using the 60/40 method, net income for the year equals CZK 88 000.
- Health insurance equals net income divided by 2 multiplied by a 13.5% insurance rate.
- (88 000 / 2) * 13.5% = CZK 5 940 owed to health insurance for the previous year.
4 - Social Security
Another common question is how much do student freelancers need to pay into social security? And moreover, where and how do you pay? Similar to health insurance contributions, student freelancers calculate required payments into social security in their annual tax declaration. Again, this is because anything a student earns from freelancing is technically ‘side income’.
However, calculating social security contributions with side income becomes a bit tricky for freelancers. This is due to an annual net income limit that determines if you have to pay anything into social security. In 2023, this limit is CZK 96 777. Any freelancer with side income below this amount will have no obligation to pay into social security.
Example social security calculation
Let’s look at another example, again using CZK 220 000 gross annual income:
- CZK 220 000 - 60% = 88 000 net income
- (88 000 / 2) * 29.2% (social security rate) = CZK 12 848 owed (if there was no limit)
- However, because CZK 88 000 is less than the limit of CZK 96 777, the taxpayer owes zero to social security.
Note: If net income is above the limit, the calculation becomes:
- (net income over the limit / 2) * 29.2% = social security owed for the year.
5 - Immigration Rules and Visas
Finally, if freelancing on a student visa, it’s important to know the immigration and visa rules. For one, the trade license always expires with your student visa. Thus, always be sure to extend your trade license along with any visa or residency renewals.
Further, it is not possible to change a student visa for a freelancer visa before graduating from university. This rule applies specifically to holders of the student visa type 23 - “studies”. The rule allows students of an accredited Czech university program to change to a freelancer visa upon graduation via a Job Seeker visa.
Note: Graduates on a student visa for non-accredited programs cannot change to a freelancer visa without first staying 5 years in the country.
Nonetheless, in either case, there will be no requirement for a sponsorship or employment visa. You also won’t need to move to a different country if you find online freelance work. You’ll be able to work from the dorm if you want, and invoice globally while studying in Czechia.
Final Considerations for Student Freelancers
Keep in mind that registering a trade license entails legal responsibilities and tax obligations that can change year-to-year. It’s important to stay up-to-date on any changes to the tax laws and to maintain accurate records to file Czech income taxes. It’s even more so when invoicing clients outside of Czechia, such as EU-registered business clients. In this case, freelancers should also register for Light VAT, which entails additional responsibilities.
Need professional assistance with any of the above, from trade license registration to filing taxes and Light VAT reporting? You’re in the right place. Get in touch below to let us know how Pexpats can help get your freelance business off the ground!