Personal Income Tax
Income Tax on Self-Employment in Czech RepublicThe Tax year is equal to the calendar year in Czech Republic. For limited companies (sros) the Corporate Income Tax is 19%. For private individuals the Personal Income Tax is either 15% or 23% (up to cca. 1.9M CZK Tax Base it is 15%, anything over that so-called solidarity limit is taxed at 23%), and self-employed persons make in addition to Income Tax contributions to Social Security and Public Health Care (in case they are eligable to register).
There are various accouting methods to file income from self-employment (see this eleborate article on the 3 accounting methods), but by far the most popular system was the 60/40 method, where (for Revenue between cca 600.000 CZK and 2M CZK) the effective percentage of Income Tax + Social Security + Health Care is about 12% of the Revenue (not counting any tax benefits or tax deductions).
2023 will bring big changes to the Paušální Daň method. The limit is now 2M CZK, but at the same time there are now 2 possible 'bands' to pay in. As a result the total for Income Tax + Social Security + Health Care can be anywhere between 5 and 30% of your Revenue, depending on your Revenue and Band.
Which of the methods is best for you can not be said in a few words. It is really necessary to calculate your situation exactly and compare the methods. Choosing the wrong method can cost you 10.000s of CZK (not an exaggeration!). Please read the article and book a consultation.
More useful information here: Czech Tax Residency, Tax Return, Tax Benefits and here: Personal Tax Return
VAT RegistrationAnother topic that never fails to raise questions is VAT registration.
Starting 2023, the limit for 'Full VAT' registration is 2M CZK (before 2023 it was 1M CZK) in 12 consecutive months from Czech sources. For invoicing business in the EU however, a 'VAT-Light' registration is sufficient and for invoicing businesses outside EU no VAT registration of any kind is required.
Read this elaborate article on VAT in Czech Republic for more information.
For more information on Income Tax and VAT Book a Consultation by ZOOM / Skype / Whatsapp / Phone or email.
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