The Czech Republic’s GDP is projected to rise by 3.6% in 2018, matching the rates of Hungary and Israel and just behind the projected rates of Poland and Luxembourg. Following the outstanding performance of 2017 associated with the recovery of investment, growth in 2018 is expected to settle at a level in line with potential but will remain hampered by the shortage of a local workforce due to low unemployment (2.7% in October 2017). The quality of life in the country is of a high standard. The society is quite tolerant, secular and the security level is ranked the 6th highest in the world. WHAT ARE THE BENEFITS OF WORKING IN THE CZECH Republic?
- Central geographic location at the heart of Europe
- Tightly integrated with the international, especially German, production chain
- The popular destination for foreign direct investments in Central Europe
- Significant industrial potential
- Robust public finances and banking system
- Low reliance on external energy
MAXIMUM SALARY RETENTION IS IMPORTANT TO ME; HOW MUCH WILL I TAKE HOME? The Czechs expect you to pay taxes from the first day of your work in the country. The net retention depends on the solution that you opt for, the income level and the tax credits/ reliefs. When your income from employment or self-employment is below a certain threshold, then the applicable tax rate is 15%, one of the lowest in Europe.WHAT ARE THE LEVELS OF TAXATION IN THE CZECH REPUBLIC? Income tax in the Czech Republic is a flat rate of 15% on income up to CZK 1,438,992 per annum (amount applicable for 2018). Above this amount, a tax rate of 22% applies. can i pay my taxes back at home if i reside in the czech republic for less than 183 days?
IF YOU WORK IN THE CZECH REPUBLIC FOR UP TO 183 DAYS, THEN YOU ARE CZECH NON-RESIDENT FOR TAX PURPOSES AND SUBJECT TO TAX ONLY ON INCOME FROM CZECH SOURCES.
IF YOU HAVE A PERMANENT HOME (RESIDENTIAL ADDRESS) IN THE COUNTRY THEN YOU ARE A CZECH RESIDENT EVEN IF YOU STAY FOR LESS THAN 183 DAYS IN THE CZECH REPUBLIC.
WHAT ARE THE SOCIAL SECURITY REQUIREMENTS? A self-employed person must make social security contributions which cover health, occupational disability, old-age pension and unemployment insurance. The contribution base for self-employed social security contributions is based on the contractor’s taxable income. The annual contributions for the self-employed individuals are as follows:
- Health Insurance is calculated at 6.75% of the taxable income
- Pension Insurance is calculated at 14% of the taxable income, subject to an annual ceiling i.e. CZK 1,438,992.
- Unemployment Insurance is calculated at 0.60% of the taxable income, subject to an annual ceiling i.e. CZK 1,438,992.
- Social insurance is paid monthly and annually the final insurance liability is calculated and the remaining part is paid.
Note: The only essential insurance for a self-employed person is the social security insurance, which includes the health insurance and pension. HOW DO I REGISTER LOCALLY IN THE CZECH Republic? EU/EFTA nationals who wish to stay in the Czech Republic for more than 30 days, must report at the Aliens Police within 30 days of their entry into the country. If they wish to stay longer than 90 days, they must apply for a residence permit at a regional office of the Ministry of the Interior (Department for Asylum and Migration Policy). The following documents are needed:
- valid passport or another valid travel document;
- proof of health insurance;
- document proving the purpose of stay (work contract).
The EU/EFTA national intending to work in the Czech Republic must apply for, and obtain a Trade License. An application for a licence may be made in-person at any local Trades Licensing Office – Central Registration Point (CRP), by post or by e-mail (with a verified electronic signature) or at an office of the public service (Czech POINT). WHAT TAX CREDITS CAN I GET IN THE CZECH REPUBLIC? Resident and non-resident individuals may set off against their income tax liability a basic personal tax credit of CZK 24,840. The following credits are also granted to resident individuals and to non-resident individuals earning at least 90% of their income from sources in the Czech Republic:
- CZK 24,840 for a spouse living in the taxpayer’s household, if the spouse’s annual income does not exceed CZK 68,000 (double if the spouse is severely disabled);
- CZK 2,520 if the taxpayer is entitled to a partial disability pension;
- CZK 5,040 if the taxpayer is entitled to a full disability pension;
- CZK 16,140 if the taxpayer is severely disabled;
- CZK 4,020 if the taxpayer is studying and not older than 26 years (28 years in case of doctoral studies).
- CZK 15,208 for the first child, CZK 19,044 for the second child and CZK 24,204 for the third and every subsequent child.
- CZK 12,200 for expenses for placing a child in the pre-school institution.
CAN’T I JUST USE MY OWN COMPANY? It is possible to use your own Personal Services Company in the Czech Republic and it is a perfectly valid method for a Czech contractor to use his or her own Czech company. However, the strict practice of creating a permanent establishment by a foreign PSC and the Czech RepublicTax Authority’s resistance to this method of working by foreign workers means that for more foreigners this is a bureaucratic and not very financially rewarding route to take. WHAT ABOUT EMPLOYMENT IN THE CZECH Republic? In this case, the contractor will be locally employed and will pay his social security and salary taxes in the country. Employment laws must be obeyed and the contractor will be liable for both employer’s and employee’s social security contributions. GET IN TOUCH Hopefully, this answers all of your questions about contracting in Czech Republic, but get in touch if you would like to discuss your eligibility or other requirements with one of our consultants. We are always available to tailor solutions to your individual situation.