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What’s involved in setting up a Czech trade licence?


A Czech trade licence allows you to work as a freelancer (self-employed person) in the Czech Republic. As a sole trader with a trade licence, you’ll have a registered Czech tax identification number and enjoy the same rights as a company registered in the country.

Types of Czech trade licences
General trade licences
Eighty common business activities can be performed with a trade licence.  These activities don’t necessarily require any special education or university degrees.  Common activities among our clients include graphic design, IT, foreign language teaching, sales, photography services, event organising, and general consulting. You may perform all eighty activities with a single trade licence and tax number.

Professional trade licences
Professional trade licences are regulated by the government. If you want to obtain a professional trade licence, you’ll need to get an official permit. Taxi drivers, for example, need a certificate confirming that they hold the appropriate qualifications.


Requirements

To be eligible for a Czech trade licence, you must be at least 18 years old. You’ll also need to submit different supporting documents depending on your status:
  1. EU citizens
You’ll need to present:
  1. Your passport or national ID card
  2. Proof of your Czech business address
Criminal clearance report is not required for EU citizens!

2.Non-EU citizens with a long-term residence permit (long-term visa for 90+ days)
You’ll need to present:
  1. Your passport
  2. Your long-term residence permit
  3. Criminal clearance report from your country of origin (affidavit for US citizens)
  4. Proof of your Czech business address**
3. Non-EU citizens with permanent residency or a “partner visa” (temporary residence as an EU citizen’s family member)
You’ll need to present:
  1. Passport
  2. Your residence permit
  3. Proof of your Czech business address**
**Your home address in the Czech Republic can double as your business address. To set this up, your landlord will need to sign this form.  If this isn’t possible, we can arrange a virtual business address for you.




Income tax
Czech income tax for trade licence holders is very reasonable. As a freelancer, you have different tax options. Income tax is 15% of your net income, and a 24,840 CZK tax deduction applies.
The “60/40” taxation method is used most often. If you adopt this approach, there’s no need to keep any payment receipts or invoices from your expenses.
Instead, a fixed 60% of your total gross income is written off as expenses while the remaining 40% is your income.

So, how much tax do you pay?
To see how this works in practice, let’s look at an example. Say your total gross income for last year was 300,000 CZK, then 60% of this figure (180,000 CZK) will be treated as fixed expenses.
The remaining 120,000 CZK will be your net income and taxed at a 15% rate. This brings the tax to 18,000 CZK. After the automatic deduction of 24,840 CZK, however, your final tax bill for the year comes to 0 CZK!
In other words, you pay no tax. This method is convenient and generally the best solution for EU citizens and their family members (partner visa holders).
Taxes are due by March 31 every following year.

Important information


1-  You can only use the 60/40 method if your annual income is less than 2 million CZK.
2-  As soon as your gross income exceeds 1 million, you must register for VAT. Your accountant will be able to help with this.
3-  For the situation and calculation which was used above, freelancer visa holders 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.

Public health insurance
Once your trade licence is active, you must register for public health insurance. In 2020, the minimum prepayment for trade licence holders is 2 352 CZK each month.
Which trade licence holders must register for public health insurance?
  1. EU citizens
  2. Expats with permanent residency in the Czech Republic
  3. Citizens of the US and some countries
People who don’t fall into any of these categories must take out private health insurance.
The public health is paid monthly for the previous month
Social security
After activating your trade licence, you must also register with the social security office.
In 2020, the minimum prepayment for trade licence holders is 2 544 CZK each month.
Social security is paid monthly for the current month

Czech Tax identification number
ICO is your Czech business ID number. Each Czech company and trade licence holder has a unique business ID number.
DIC is your Czech tax ID number. This number is issued by the tax office after you register. It usually consists of the prefix CZ + your ICO number.
Having a DIC doesn’t mean you’re registered as a full or light VAT payer. If you plan to invoice EU companies outside the Czech Republic, then you should register as a light VAT payer. This registration must take place within 15 days of the receipt of your first payment!

Trade licence as a “side job” for full-time employees


If you have a full-time job and want to earn some side income outside your employment, you should apply for a trade licence.
Since your social tax and health insurance payments are made by your employer, you won’t need to make any social tax and health insurance payments the first year. But you should request an annual statement from your employer to see if you need to settle the balance. This will depend on the main income from your employment.
If your Czech trade licence as a side business is the same activity as your main job, you should seek permission from your employer. Check your employment contract and discuss the details with your employer before applying for a trade licence


Want to avoid the hassle of setting up a Czech trade licence on your own in Prague?
PraguExpats can handle the entire process for you. Complete registration takes 24 hours!
If you’re an EU citizen who’s interested in getting a trade licence, check out our Prague Trade Licence Set-up package.