Typical freelance work
- Consulting, often in IT, finance or telecom
- Programming, web design and SEO
- Marketing and advertising
- Teaching English (a TEFL certificate helps)
All of these are free trades: no diploma or permit needed. See free trades. Anything with food, restaurants, alcohol, cosmetics or massage needs a special trade license and permits: you cannot just start a food truck. It is much easier to start with a free trade, certainly while you are still abroad, and add other trades later.
Working for one Czech client: the švarc system
If you work full-time for one Czech client, in the same way as an employee but on invoices, the authorities can call it disguised employment (the "švarc system"). Then your client risks a fine and having to pay your social security and health insurance as if you had been employed from the start. You risk a fine too.
In practice, many freelancers work on one project for months or even years. You lower the risk by having more than one client, your own equipment and working hours, and a contract for a result rather than for your time.
One client abroad is no problem at all: the švarc system is about Czech employers avoiding Czech contributions.
Salary or invoice: what to charge
An employee keeps roughly three quarters of their gross salary. The employer pays about 34% on top of the gross salary for social security and health insurance. So an employee costs the company almost twice what they take home.
When you move from a job to invoicing the same kind of work, charge at least the gross salary. For the company that is still cheaper than employing you, and you need the margin: as a freelancer you pay your own social security and health insurance, and have no paid holidays or sick pay.
Practical tips
- Put money aside: keep about 15% of every invoice for tax, social security and health insurance. In your first year, the bill comes all at once, the spring after.
- Online platforms mean VAT-light: Upwork, Fiverr, Airbnb, Etsy and app stores charge their fees from another EU country. From the first fee you need a VAT-light registration, even if all your clients are outside the EU.
- Check your EU client's VAT number in the EU's VIES database before you invoice with reverse charge, and keep a screenshot.
- Invoice correctly from day one: your IČO, the line "zapsán v živnostenském rejstříku", consecutive invoice numbers and the taxable supply date (DUZP). Our free invoice generator does this for you.
- Invoices in euro are fine. For your tax return they are converted at the ČNB exchange rate.
- Keep your issued invoices for 10 years. With the 60/40 method you do not need receipts for your costs.
- Report changes: a new address or name goes to the trade license office, which passes it on. Check that social security and your health insurer really have it.
- Pause instead of cancel: taking a job, a long break or leaving for a while? Suspending your trade license (přerušení) stops the social and health advances, and restarting is easy. A new registration is not.
- Turn on data box notifications: letters count as delivered after 10 days, whether you read them or not. See the data box.
- Check your advances every January: the minimums change every year, and many people keep paying the old amount by standing order.
- Have a written contract, even a short one in English. It helps when a client pays late, and against the švarc system.
- Consider professional liability insurance for IT and consulting work. Larger clients often ask for it.
- You probably do not need a business bank account. A personal account is fine for most freelancers. Opening an online or fintech account has become stricter anyway: expect to show proof of address and business documents.
Digital nomads and foreign companies
- Travelling all the time does not make you tax resident nowhere. Usually you are still tax resident somewhere, and have to pay tax there. See tax residency.
- An Estonian company pays its tax in Estonia, but when you take the profit out, you pay dividend tax where you are tax resident, so for example here. Estonian e-residency is useful in Estonia, not outside it.
- Georgia's 1% tax is the same story: you only benefit if you actually live there.
- Check your health insurance: most regular health insurance does not cover long stays abroad.
Watch out for fake "official" letters
Some companies scan the public trade license register and write to new registrations, especially foreigners. The letter looks like an official document from a government office, but it is not: in the small print, it is an order for a listing in an unknown business directory.
- The first payment is usually 1,200 to 3,500 CZK.
- By paying, you agree to a yearly listing. The next year's invoice can be 30,000 CZK, followed by threats to sue.
- The text is written so that it is legal, and even Czech speakers fall for it.
Never pay a letter you are not sure about. The trade license office and the authorities do not send invoices like this. Not sure? Send us a scan of the letter and the envelope, and we tell you what it is, free of charge.
