Starting with a Czech trade license as a secondary source of income (on top of employment, maternity leave, or as a student) means understanding first-year tax obligations. This guide explains Czech self-employed taxes, including social tax, health insurance, and income tax specifically for secondary income from a Czech trade license.
Types of Income for Czech Trade License Holders
- Secondary Income from a Trade License: This applies if you’re self-employed with a trade license while also receiving a salary, maternity leave, or studying in the Czech Republic.
- Main Income: This applies if your Czech trade license income is your only source of income, meaning you’re not employed, on maternity leave, or a student.
This guide is about Czech tax obligations for secondary income only. For the main income, please, check here
Czech Social Tax for Secondary Income
Social Tax Registration: When you register for a Czech trade license as a side income, you’ll receive a letter from the social tax office confirming 0 CZK monthly deposits in your first year. This registration is important; without it, the social office may expect monthly payments which could result in penalties or debts.
Pexpats clients receive this registration as part of the trade license setup.
No Monthly Social Tax Payments: No monthly social tax deposits are paid in the first year. However, this doesn’t mean the government or employer pays this tax.
One-Time Payment After Tax Filing: After filing your Czech income tax for the previous year, a one-time social tax payment will be calculated and paid based on your income.
Second-Year Social Tax Payments: In the second year, monthly social tax deposits may be required. Based on the income declared, the Czech Social Tax office sets up monthly deposits.
Czech Health Insurance for Secondary Income
Health Insurance Registration: Register your trade license for health insurance and receive a letter confirming 0 CZK monthly health deposits for the first year. This registration is important to avoid penalties or payment requests from the health insurance office as they might be expecting monthly payments.
Pexpats clients get this health insurance registration during trade license setup.
No Monthly Health Insurance Payments: In the first year, Czech self-employed freelancers with secondary income do not pay monthly health insurance payments
One-Time Payment Based on Income: After your Czech income tax filing for the previous tax year, you’ll make a one-time health insurance payment based on your total income for the previous tax year.
Second-Year Health Insurance Payments: After your first year, the Health Insurance office sets up monthly deposits and you will start paying monthly health insurance deposits.
Czech Income Tax for Self-Employed with Secondary Income
Income Tax Registration: After registering your trade license and ICO, register for income tax and get a Czech DIC number (tax identification number). This number is important l for reporting and paying income tax.
Pexpats clients get income tax registration during trade license setup.
No Monthly Income Tax Payments: There are no monthly income tax deposits required in the first year. You’ll only pay income tax once per year after declaring tax from the previous tax year.
Second-Year Monthly Payments: Starting in the second year, you may need to make income tax deposits, depending on the income amount declared in the previous year.
Czech Light VAT Registration for EU Clients
If you’re invoicing companies within the EU but outside the Czech Republic, light VAT registration is necessary. Register within 8 days after issuing your first EU-bound invoice. Typically, VAT is 0% for consultancy or service-based work, but monthly VAT reports are mandatory.
Common Misunderstandings About Czech Trade License for Side Income
A common misunderstanding is that Czech employees don’t need to declare side income from a trade license. However, all side income from a trade license must be declared and taxed, even if you’re employed or on maternity leave.
Get Help with Czech Taxes from Pexpats
Pexpats can help with business registration, tax setup, VAT services, and more. Reach out for assistance in managing your Czech self-employed tax obligations.