google review img of selected blog image

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 82 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 organizing. The trade license holder can participate in all 82 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 2 days.

Criminal clearance report

EU citizens
A criminal clearance report or temporary residency is not required for EU citizens.

Ukrainian citizens with protection visa
A criminal clearance report is not required from Ukrainian citizens with a Czech protection visa or foreign police registration.

British Citizens after Brexit

After Brexit, British citizens are considered third-country nationals, and for obtaining a Trade license in the Czech Republic you must obtain a Criminal Clearance Report from the UK and a Temporary residency permit. You can apply online here. UK citizens who didn't obtain temporary residency under the Brexit protection, should apply for a freelancer visa.

US citizens
A criminal clearance report form doesn’t exist in the US. So US citizens must provide an affidavit confirming they 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. For those who are still in the US, arrange an affidavit form at the nearest Czech embassy.

Canadian citizens
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 holder 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 7 300 CZK per year.

Social Tax and Health Insurance in 2023

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.

Since 1.1.2015 maximum amount for health insurance was canceled and there is no maximum amount limit for Czech insurance from the Czech trade license income.
Social Tax for trade license holders in 2023 is 2 944 CZK monthly which is the minimum deposit and it’s only for the first year. Public health insurance of VZP for trade license holders is a minimum of 2 722 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 yearly clean income.  Social Security tax is 29.2%, from half of the net and taxable income. Health insurance is 13.5% of half of the net and taxable income.

Social security tax has a limit and is taxable up to 1 935 552 CZK clean income. Over this amount of income, social security is not taxable.

Czech flat tax from 2023

The Czech financial tax offices came up with a new solution in 2021. From 1.1.2021 Czech trade license holders can use the method Czech flat tax amount of 5 995 CZK monthly.
The monthly Czech flat tax amount 6 208 CZK covers 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 in 2022 and from 1.1.2023 the flat tax limit condition is increased to 2 000 000 CZK and it has 3 bands depending on gross income level

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% of net income and there is a 30 840 CZK tax discount. The Income-tax will be 23% for the amount over 1 935 552CZK.
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) - 30 840 (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 is 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 10 900 CZK.
It includes:

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.

Please check the service page for more information!

Additional information about taxes:

Solidarity tax

Czech Solidarity tax starts from 1 672 080 CZK. If your income is 2 million, you will additionally pay 7% from 327 920 CZK (2 million – 1 672 080 million).  You will become a VAT payer if your income (money you receive) is over 2 million in the last 12 months.
Solidarity tax was canceled from 01.01.2021.

Income tax 2023

The income tax amount is increased to 23% for income above 1 935 552 CZK.

For example, Your gross income is 3 500 000 CZK and your Czech income tax from freelancing in 2023 would be the following.

Using the 60/40 method up to 2 000 000/60% = 800 000

1 500 000 + 800 000 = 2 300 000 CZK is your tax base

2 300 000 CZK - 1 935 552 = 364 448 CZK.
1 935 552 - 15%= 290 333 CZK.
364 448 - 23% = 83 823 CZK.

So the total amount of income tax from 3 500 000 CZK is 374 146 CZK (290 333 CZK + 83 823 CZK).

Tax relief

Tax relief refers to expenses deductible from taxable income (your tax base). For example, if using the 60-40 reporting method, tax relief applies to the 40% base you will pay taxes on. Tax reliefs are applicable if the freelancer's annual clean income is over 91 200 CZK.

Deductible expenses from taxable income in the Czech Republic include:

Voluntary Blood, Plasma, or Organ Donor Relief (for voluntary blood, plasma, or organ donors who opt not to get paid)
  • 3 000 CZK for voluntary blood donors
  • 3 000 CZK for voluntary plasma donors
  • 20 000 CZK for voluntarily organ donors

Mortgage Interest Rates Relief (for the months which you have an active trade license while also paying on a mortgage)
  • Up to a maximum deductible amount of 150 000 CZK

Pension and Retirement Funds (for private pension savings within the non-government sector)
  • Up to a maximum deductible amount of 24 000 CZK from private pension savings investments

Life insurance
  • Up to a maximum deductible amount of 24 000 CZK for life insurance payments

Continuing Education Examination Fees (for examination fees to certify an improved / progressing level of education)
  • Up to a maximum deductible amount of 10 000 CZK

Research (for implementation of public research and development
  • No limit to the deductible amount

Supporting Professional Education (for any related expenses to support the education of another person: tuition, exam fees, etc)
  • No limit to the deductible amount

Tax discounts

Tax discounts are deductions to the total tax amount (not the tax base). In the Czech Republic, tax discounts include:

Annual tax discount for freelancers (available for everyone, no matter if your trade license has been active for the full year, or only one month of the last tax year) : 30 840 CZK
  • The discount applies to income from self-employment, regardless of whether it is your main source of income, or it is side income (together with full-time employment)

Tax discount for an unemployed spouse (or a spouse with income under 68 000 CZK for a full year: 28 840 CZK)
  • Note: the income of the spouse is considered the spouse’s net income

Tax discount for students under 26 years old, or for students under 28 pursuing a doctorate degree
  • 350 CZK per month, up to a maximum of 4 200 CZK for a full year of studies

Tax discount on fees for kindergarten (only applicable to one of the child’s parents)
  • 15 200 CZK per kid per year

Tax bonuses

A tax bonus is an amount which the taxpayer can claim back from the tax office due to overpayment after deductions. This amount includes bonuses for parents of one, two, or more children:
  • Up to a maximum bonus of 15 204 CZK for a first child
  • Up to a maximum bonus of 22 320 CZK for a second child
  • Up to a maximum bonus of 27 840 CZK for three or more children
Note: Only one of the parents may claim a tax bonus for children. Further, the maximum bonus amount is calculated based on how many months of the taxable year the parent’s trade license was active.

Czech VAT

The Czech VAT limit amount is increased to 2 000 000 CZK from 1.1.2023. You will become a Czech national VAT payer if your income exceeds 2 million CZK in the last 12 consecutive months from your Czech source of income. For example, you have income from Czech registered business 200 000 CZK and from Companies that are registered out of the Czech Republic of 2 000 000 CZK. You are not eligible for Czech VAT registration because your Czech sources of income didn't exceed over 2 million CZK in the last 12 months.

Czech VAT rates and charging The VAT

The Czech Republic has 3 VAT rates

  1. The basic rate of VAT - is 21%,
  2. The first reduced VAT rate - 15%,
  3. The second reduced the VAT rate - 10%.
Examples of Charging VAT for Czech registered businesses while invoicing out of the Czech Republic for the services provided from the Czech Republic.

1. Invoicing as Czech VAT Registered business

a) Invoicing for services from Czech registered businesses to EU registered businesses, 0% VAT - EU reverse charge
b) Invoicing for services from Czech registered businesses to individual clients, 21 % VAT
c) Invoicing for services from Czech registered businesses to out-of-EU registered businesses, 0% VAT

2. Invoicing as Czech Light VAT Registered business

a) Invoicing for services from Czech registered businesses to EU registered businesses, 0% VAT - EU reverse charge
b) Invoicing for services from Czech registered businesses to individual clients, 21 % VAT
c) Invoicing for services from Czech registered businesses to out-of-EU registered businesses, 0% VAT

3. Accepting services from companies registered out of the Czech republic

If you receive services from companies registered out of the Czech Republic( google/Facebook ads, Airbnb, etc) you should pay 21% VAT in the Czech Republic.
For example, you promote your business on Facebook and Facebook ads are running in the Czech Republic. Since Facebook is not a Czech-registered business, you should pay a 21% VAT on top of the Facebook ads fee.

Light VAT

Light VAT is needed if you invoice EU-registered companies that are registered out of the Czech Republic. You should apply light VAT statements monthly. Please contact us for the accounting service packages.

Contact us and we will help you to understand the tax system in the Czech Republic!

Czech trade license as a side income

In the first year of side business who have full-time employment, you don’t need to pay social security and health insurance payments.

Social security and Health Insurance balance
​​If your clean income from your trade license is higher than 96 777 CZK ( your 40% when you use the 60/40 tax method) then you start paying the deposit next year. So the limit for social tax is 96 777 CZK. If you are over this amount you will pay some balance and start paying a deposit of 1 018 CZK next year, if your clean income for the full year is under 96 777 CZK, then you pay 0 CZK balance and 0 CZK deposits.

Health insurance is calculated in this way 0,135 x 0,50 x your clean income (40%): months of your trade license last year.

For example, as a side income trade license, you earned 103 500 CZK last year. You used 60/40. So your clean income (40%) is 41 400.

Social Tax you don’t pay any balance or deposit because 41 400 < 96 777 CZK.

Health Insurance
0,135 x 0,50 x 41 400 (your clean income): 12 months = 233 CZK. That is what you should pay for your Health insurance balance.

Income tax

Income tax of side business trade license and employee tax are merged and declared in one tax report with all tax discounts and bonuses for the full previous tax year.

Czech online tax calculator

Now you have an opportunity to monitor your finances by using our Czech Tax calculator. Click below and check your income after taxes.

blog image

Get in Touch

Please fill the form as accurate as possible, our team is ready to help you make your stay in the Czech Republic a breeze!

Select Your
Citizenship Status