Personal Income Tax
Income Tax on Self-Employment in Czech Republic
The Tax year is equal to the calendar year in Czech Republic. For limited companies (sros) the Corporate Income Tax is 21%. For private individuals the Personal Income Tax is either 15% or 23% (up to cca. 1.7M CZK Tax Base (*not Revenue!) 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).The 60/40 system
There are various accouting methods to file income from self-employment, but by far the most popular system is the 60/40 method, where (for Revenue between cca 700.000 CZK and 2M CZK) the effective percentage of Income Tax + Social Security + Health Care is about 14% of the Revenue (not counting any tax benefits or tax deductions).The Paušální Daň (Flat Tax) system
A number of years ago, a new system for paying Income Tax, and Social Security / Public Health Care contributions was introduced: the paušální daň system. It consist of 1 monthly payment combining all 3 - contrary to popular belief it is not always beneficial and there are also restrictions / requirements that need to be considered.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.
See this article for details on all 3 accounting methods for trade licenses
More useful information on Czech Personal Income Tax here: Czech Tax Residency, Tax Return, Tax Benefits and here: Personal Tax Return
VAT Registration
Another topic that never fails to raise questions is VAT registration.Starting 2025, the limit for 'Full VAT' registration is no longer calculated using 12 consecutive months, but instead it is per calendar year, and again the limit has gone up (2.54 M CZK - an equivalent of 100.000 EUR) Prior to 2025, for 2023 and 2024, the limit for 'Full VAT' registration was 2M CZK. Before 2023 it was 1M CZK in 12 consecutive months from Czech sources.
If your Revenue is over 2.54 M CZK, but not from Czech sources, it is still not possible to register for 'Full VAT'. For invoicing businesses in the EU however, a 'VAT-Light' registration is required. 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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