Czech Trade license of freelancer and information about taxes
The Czech trade license of a freelancer is the business status of a self-employed person with the ability to do several business activities. The person with a trade license will have a registered tax number and the same rights as the company registered in the Czech Republic.
There are 80 common activities that fall under one trade license. These activities don’t require any special education or university degrees. The most common activities for our clients include graphic design, IT and general consulting, foreign language teacher, sales, photography services, and event organizer. The trade license holder can participate in all 80 activities under one trade license and under tax number.
The most important conditions of obtaining the trade license are a criminal clearance report from the home country if the foreigner doesn’t have permanent residency in the Czech Republic. The full registration process takes 7 days.
Criminal clearance report
A criminal clearance report or temporary residency are not required for EU citizens.
A criminal clearance report form doesn’t exist in the US. So US citizens must provide an affidavit confirming you have not committed any crime. This is an affidavit that must be signed at the US embassy. Make an appointment online to visit the US embassy in the Czech Republic. They will provide the proper form to fill out and sign in person. The charge is 50 USD – https://cz.usembassy.gov/. For those who are still in the US, arrange an affidavit form at the nearest Czech embassy.
A Canadian criminal clearance report should be translated into the Czech language. Here is a list of official translators in Canada (Link) and it should have a super legalization stamp at the Czech embassy. Please check the link. For Canadians who are already living in the Czech Republic, please contact the Canadian embassy.
Citizens of Australia, Brazil, and South Africa
Criminal clearance reports should be translated into the Czech language and must have an Apostille stamp. Legal translations can be done for an additional fee in Prague.
Consent with the business address
Each trade license holders should have a business address. Renting an office is not necessary. It can be a so-called virtual or remote office. For those who already rent an apartment, the home address can be used as the business address. Ask permission from the landlord. Download the form which the landlord should sign here: Consent with business address It is convenient and free, but most owners in Prague don’t want to give permission. Additionally, we can offer business addresses from our virtual business provider for 5.200 CZK per year.
Social Tax and Health Insurance
EU citizens are registered at public health insurance and social tax after registration and activation of trade licenses. Other nationalities’ trade license is activated and registered at social tax after they collect their Czech visas at the Czech embassy. Since May 2016, US citizens must be registered with public health insurance. Other Non-EU nationalities should buy commercial health insurance according to the future period of stay. We are an official commercial health insurance provider of AXA.
Social Tax for trade license holders is 2.544 CZK monthly which is minimum and it’s only for the first year. Public health insurance of VZP for trade license holders is a minimum of 2.352 CZK monthly, also only for the first year. You might pay a difference after the calculation of your final income for the previous year. The final calculation comes from your monthly clean income. Social insurance 29.2%, from clean monthly income. Health insurance 13.5% from clean monthly income.
Czech flat tax from 2021
The Czech financial tax offices came with a new solution from 2021. From 1.1.2021 The Czech trade license holders can use method Czech flat tax amount of 5 469 CZK monthly
Monthly Czech flat tax amount 5 469 CZK covers the health insurance, social tax and income tax, and no tax paperwork.
Only the condition of using the method Czech flat tax is the annual income amount should be less than 1 000 000 CZK.
Income tax or Annual tax report
Income tax for trade license holders is fair. The Czech trade license holders can choose various types of tax options. Income tax is 15% from net income and there is a 24.840 CZK tax discount. Method 60/40 is the most common. The collection of payment receipts or invoices from expenses is not necessary It means a fixed 60% cost allowance and a 40% income. For example, if the total gross income for last year was 300.000 CZK, then 300.000 – 60% cost allowance( fixed expenses) = 120.000 clean income. 15% tax will be paid from 120.000 which means 120.000 - 15%= 18 000 (tax amount) - 24.840 (tax discount) = 0 CZK (final tax amount). It is not possible to use Method 60/40 if your income is higher than 2 million.
In this example, taxes will not be paid. This method is convenient and the best solution for EU citizens and EU family members(partner visa) We don’t recommend this method for other nationalities who need to renew their visas or residency permits in the future because income proof if required if they don’t have at least 500.000 CZK. For the situation and calculation which was used above, other nationalities should use the method tax from the full amount for avoiding visa renewal rejections due to insufficient funds.
Please check more information about income proof calculation of MOI offices here.
Our services and fees are as follows:
Our complete service fee is 7.100 CZK.
Trade license registration including registration fees
Trade license activation
Registration with the financial tax office
Registration with the social tax office
Registration with Public health insurance
Non-EU and non-US clients may have translation fees of criminal reports Trade license for Third-country nationalities has expiration dates.
Additional information about taxes :
Czech Solidarity tax starts from 1.5 million CZK. If your income is 2 million, you will additionally pay 7% from 500.000 CZK (2 million – 1.5 million). You will become a VAT payer if your income (money you receive) is over 1 million in the last 12 months.
You will become a VAT payer if your income exceeds 1 million in the last 12 consecutive months.
If you are invoicing Non-Czech companies, you should be registered for Light VAT. You should apply light VAT statements monthly. Please contact us for the accounting service packages.