Employee and freelancer tax calculator
This calculator estimates how much a full-time employee earning side income must pay in taxes for the tax year 2023. Disclaimer: Use this calculator only if your primary employment was for the entire, taxable calendar year. Also note, all calculations use only the basic taxpayer’s discount. Calculations do not take into account additional tax credits, bonuses, or relief other than the options available. If unsure about how to use this calculator or its results, see our FAQs at the bottom of the page.
I have full-time employment but want to take up a side job. How do I start?
If you have full-time employment and want to earn income on the side, you should apply for a Czech trade licence (“zivno”). However, because your employer pays your monthly social and health insurance payments, you will not make any additional payments in the first year. After the end of the first year, you must request an annual statement from your employer to see if you need to settle any remaining balance. The balance will depend on your income from employment and the tax base from your trade license.
What if my side business entails the same business activities as my main employment?
In this case, you should seek permission from your employer to begin your side job. Check the employment contract, and discuss the details with your employer before you apply for a trade license.
How are social and health insurance contributions calculated when I have employment and a side job?
If your net income from self-employed activities is higher than 96 777 CZK (the 40% remaining after applying the 60-40 method), then you start paying the balance next year. For example: the limit for social tax is CZK 96 777. If you are over this amount, you will pay the remaining balance, and you will begin paying a deposit of CZK 1 018 in the following year. If your net income is under CZK 96 777, you will have a zero balance, and have zero in deposits.
How is income tax declared when I am both employed and self-employed?
Income tax from your trade licence’s side business and the employee income tax are merged together and declared in one tax report. All tax discounts and bonuses are then applied to the full previous tax year.
What is the 60/40 method?
Using the 60/40 reporting method, you have an expense allowance of 60% of your gross income. Taxpayers simply deduct 60% from their gross income, and the remaining 40% is taxable. You will not need to provide any invoices proving your expenses. However, the 60/40 reporting method is only for earners whose gross annual income is under CZK 2 million.
Can I still apply the 60-40 reporting method to reporting my taxable income?
As a trade license holder for side income, you can still apply the 60/40 tax method. However, if you are using tax bonuses and discounts with your full-time employment, you will pay full income tax from the taxable amount.
What can I deduct on my income tax report?
Taxpayers can deduct any business expenses, but doing so isn’t always advantageous. Reporting real expenses only makes sense when they are higher than 60% of gross annual income. This is because of the 60/40 tax reporting method, which is typically more beneficial and less complicated for freelancers.
At which amount will there be zero remaining balance for social contributions?
If your net income (40% from your gross) is under CZK 93 387, there will be no remaining balance for social security.
What documents do I need to register for self-employed business activities?
EU citizens need to present: a passport or national ID card, and proof of Czech business address. Note: a criminal clearance report or temporary residence permit is not required for EU citizens. Non-EU citizens will also need to submit a long-term residence permit (long-term visa for 90+ days) with their passport and criminal clearance report. US citizens can submit an affidavit in replace of the criminal clearance report. If you’re an EU citizen who’s interested in getting a trade license, check out our Prague Trade Licence Package
What if I earn more from self-employed activities than from employment? Is my freelancing taxed as my main source of income?
When you have a full-time job, your trade license activities will always be considered as side income. Even if the income from freelancing is far more, your employer still contributes monthly to your social, health, and income tax. Thus, you will always declare any income from the trade license as side income when you also have regular employment.
I’m a full-time student with a trade license. How are my self-employed earnings taxed?
Any self-employed activities when also a full-time student are considered side income.
I am on maternity leave and will continue with parental leave afterward. Should I pay taxes if I have a trade license?
In case you are on maternity leave and intend to continue to parental leave while conducting self-employed activities on a trade license, you will not be obligated to pay additional social and health insurance. Any work done on the trade license falls under income from a side job.
What is the difference between tax credits and discounts?
Tax discounts refer to relief you can deduct from your income tax amount. These may include life insurance, bank interest on a mortgage, or having a spouse with income under CZK 68 000 per year. Tax credits refer to payment refunded from the financial tax offices based on your income. If your income tax is higher than your tax discount, then the tax credit can further reduce your tax burden. The tax credit applies only for children under 21, and only for one of the children’s parents.
When should I file Czech freelancer income taxes?
You must file a tax return for the current year in March. The 31st of March is the last day for freelancers to file a tax return for the previous fiscal year.
How does this calculator work?
This calculator estimates how much tax you should pay total for full-time employment and earning income on the side. By default, the calculator deducts 15% tax from gross annual employment income to estimate the employer’s tax payment. It also deducts the basic taxpayer’s discount available to all taxpayers for the taxable calendar year. With these, you input gross annual self-employed income, choose a tax reporting method, select relevant tax discounts, and click ‘Calculate’. The calculator will then estimate your balance remaining to pay in taxes after your primary employer’s contributions.
Are the calculator’s results always accurate?
In certain cases, the calculator’s results will not be accurate. For example, this calculator takes into account only 12 months of full-time employment. It does not account for those who worked only part of a taxable year (like 3 or 4 months) as an employee. It also does not take into account any unpaid time-off, such as for an extended period of illness. In these cases, you will need to double-check the primary employer’s annual tax confirmation. The tax confirmation is an official document that states exactly how much the employer paid in taxes for the year. This information is necessary to ensure your income tax calculations are 100% accurate.