Freelance 2023 payment calculator
This handy calculator estimates how much you’ll owe this year while self-employed. Calculate your social and health insurance payments and income tax with the click of a button!
I started freelancing and got a client. Do I need to register for a Czech trade license?
Yes, you should officially invoice your clients and declare all of the Czech self-employed income you’ve made as a freelancer. For Invoices, you can use our free invoice app.
What is the Czech light VAT?
Czech light VAT is an EU reverse charge mechanism. If you are cooperating with EU-registered companies, you should be registered for light VAT within 15 days from the day when you issue your first invoice. You should invoice your EU-registered partners without VAT. For private or individual clients from the EU, light VAT doesn’t apply.
How much tax do freelancers pay in the Czech Republic?
There are two types of Czech freelance tax rates in 2023 - 15% and 23%. So, your income tax could be at a rate of 15% on your clean income. The rate is 23% on clean income exceeding 1 935 552 CZK. Our freelancing calculator can help make this amount clear.
How much do I pay for maximum tax and contributions?
During your first year, you should pay only the social security and health insurance deposits. At the end of the year, you might need to pay a balance depending on your income. Social security is 29.2% of half of your annual clean salary, and health insurance is 13% of half of your clean income. If you are expecting a higher income, we suggest you pay higher deposits.
When should I pay health insurance and social security deposits?
Health insurance is paid for the previous month and social security is for the current month. For example, if your trade license is registered and active from January 1st, you should pay health insurance for January by the 8th of February and social security by the end of January.
What does the tax method 60/40 mean?
The 60/40 method means that you have an expense allowance for 60% of your gross income. You don’t need to provide any invoices proving your expenses. You can simply deduct 60% from your gross income and the remaining 40% is taxable. You can apply the 60/40 method only for gross income under 2 million CZK.
What can I deduct from my income tax?
You can deduct any business expenses, but in this case, you should report based on your gross income or real expenses, and then you cannot use the 60/40 method. So, it’s best to consider whether your real expenses are higher than 60% of your gross income. 60/40 is the most common tax method as it is typically more beneficial. It is affordable for freelancers who do consultancy, sales, or freelance in IT industries as they dont have high business expenses. /40 method only for gross income under 2 million CZK.
Can I deduct the car or laptop I bought from my taxes?
Car prices can be partially deducted within 5 years. So, it still depends if the yearly deductible price is higher than 60% of your gross income. If not, we recommend using 60/40 instead of deducting real business expenses. /40 method. So, it’s best to consider whether your real expenses are higher than 60% of your gross income. 60/40 is the most common tax method as it is typically more beneficial. It is affordable for freelancers who do consultancy, sales, or freelance in IT industries as they dont have high business expenses. We also do not recommend registering the car under a trade license. It is considered a business car. You will pay higher car insurance, road tax, and a 7,000 CZK parking permit instead of 1,200 CZK.
What happens if my income is over 2 million CZK?
You can use the 60/40 method for annual income up to 2 million CZK. For the amount over 2 million, you should pay 15% or 23% income tax depending on your final clean income. For example, if your gross income is 2,100,000 CZK, your income tax would be calculated as follows: 2,000,000 - 60%= 800 000 - 15% tax 100, 000 - 15% Here, you cannot deduct any expense as you already used method 60/40
When should I file Czech freelancer income taxes?
You should file your tax return for the current year next March. The 31st of March is the last day for Czech freelancers to file a tax return for the previous fiscal year.
What is the difference between a tax discount and a tax credit?
A tax discount is tax relief which can be deducted from your income tax amount. Life insurance, bank interest for mortgage, having a spouse with income under 68,000 CZK a year, and your annual tax discount can be applied as a tax discount. Tax credit is payment refunded from the financial tax offices depending on your income. If your income tax is higher than your tax discount, then tax credit can be used as a tax discount for tax deduction. The tax credit is applied for children under 21, and only one parent can claim tax credit.
Should I have Czech bank account when I invoice my clients?
You should have Czech bank account for receiving payments for your invoices. It’s also more convenient for keeping track and calculating trade license taxes, insurance, and your freelance social contributions.
Should I have a business bank account?
Your income tax return is calculated from your invoices, not from your general cash flow (for example, not the money transferred into your bank account from a spouse, friends, etc.). So, you can use your private bank account for business purposes. If you don’t want to use the 60/40 method but use gross income - your real expenses - we suggest having a different bank account due to accounting service fees.
Can I invoice in EUR or USD?
Yes, you can invoice in EUR or in USD. But you should always add on your invoice the actual exchange rate from the Czech national bank on the date the invoice is issued. For example, the text would say, “On 1.1.2022 the exchange rate of 1 EUR = 25.123 CZK.”
How many invoices can I issue monthly?
There are not any minimum or maximum limits on monthly invoices.
Should I keep my tax return documents and invoices?
You should keep at least soft copies of your invoices and tax return. In case of an audit by Czech tax authorities, they might request invoices for the previous 5 years.
Should I pay taxes and insurance if I am a student?
Students who earn less than 86,000 CZK annually don't pay any taxes and contributions.
Should I pay taxes and insurance if I have a full time job and register a trade license as a side income?
You can have a trade license as a side income. As your contributions and tax is paid by your employer, you don't need to pay health and social tax deposits the first year. At the end of the year, you should file an income tax return with full-time employment income VS freelance income and you might pay some balance of social security taxes and health insurance.
Is the Czech Republic the best country for freelancing in the EU?
The Czech Republic is a popular country for expats to come and work as freelancers. The freelance tax in the Czech Republic isn’t as high as in some other nations, and it’s possible for freelancers to make comfortable lives for themselves here. To see what you could pay as a freelancer in Prague, try our online freelancing calculator, read about the flat tax option, and check out our flat tax registration services to make the most of your earnings.
Description
As a freelancer with no employer to pay or take care of your taxes, you will manage Czech freelancing taxes on your own. If you decide to hire an accountant, tax advisor or Pexpats, you may avoid the responsibility to calculate freelancer income and taxes.
If you’re interested in the simple preview and calculation of the tax rates for a freelancer in the Czech Republic, keep reading!
Let’s meet Alex, who is a freelancer in the Czech Republic. He is a marketing consultant and his income is 600.000 CZK/year. He is willing to use a 60/40 tax calculation method.
60% from 600.000 CZK = 360.000 CZK (expenses)
40% from 600.000 CZK = 240.000 CZK (tax base)
Alex has a wife Kate who is on parental leave, because Alex and Kate have two children. Kate’s annual income didn’t pass the limit of 68.000 CZK. Alex is also paying an interest fee 50.000 CZK/annual on his mortgage.
What discounts can he claim?
Credit for a tax payer = 30 840 CZK
Wife with an income less than 68.000 CZK/annual = 24.840 CZK
First child = 15.204 CZK
Second child = 22 320 CZK
What about the interest fee on Alex‘ mortgage? This can be also deducted from the tax base!
Final tax base:
240.000 CZK – 50.000 CZK = 190.000 CZK
15 % from 190.000 CZK = 28.500 CZK final tax BEFORE discounts
(freelancer income tax)28.500 CZK – 30 840 CZK – 24.840 CZK = 0 CZK
+ tax bonus 15.204 CZK + 22 320 CZK = + 37 524 CZK
Congratulations to Alex, who will not only pay 0 tax, but will claim extra money.
Health Insurance
Alex will pay 12 x 2 627 CZK = 31 524 CZK/minimal annual deposit
For the tax calculation, he will use his tax rate 240.000 CZK and always divide by 2.
31 524 CZK is less than 120.000 CZK, so his health insurance deposit payment will be “minimal,” which is set by the health insurance office every year, and stands at 2 627 CZK for year 2022.
Social Security Tax
Alex will again use 240.000 CZK / 2 = 120.000 CZK as a tax rate.
120.000CZK x 29,2 % = 35.040 CZK
Minimal annual deposit for 2022 is 34 092 CZK (which Alex paid)
35.040 CZK – 34 092 CZK = 948 CZK (Alex shall pay as extra)
Is the Czech Republic the best country for freelancing?
For expats moving abroad, one of their top concerns is finding the best country for freelancing. The Czech Republic is popular for expats looking for work, as it is fairly easy to be approved for a freelance license and there is no limit to how much you can earn on a Czech freelancer salary.
Czech freelancing taxes are also quite low or even zero for those earning below a certain amount of money annually. Zinvo tax or Czech freelancing taxes can be tricky at first, but with some research or support from an accountant or agency, you can find why many think the Czech Republic is the best country for freelancing.
Pexpats has been assisting expats from around the world adjust to their new lives in the Czech Republic. We offer services such as obtaining temporary residency cards, registering for parking permits, arranging Czech trade licenses, as well as our free Czech trade license tax calculator.
We have the experience to take you through the processes of starting life in your new home, or updating legal statuses or visa while living in Prague. We developed an app so you can find quick answers and support at every step of the way, and will never have to navigate the bureaucracy and legal procedures alone.