How can an Umbrella Company Help with Contracting in Czech Republic?
Most freelance workers aren’t superheroes who successfully tackle these issues all on their own. There are companies who specialise in helping workers make the most out of their contracts.
They’re called Umbrella Companies (or, contractor management companies).
Basically, an Umbrella Company acts as your full-time employer, even though you maintain your independence as a contractor. They collect and filter payments from your clients, filtering out the necessary social security and fees. You send them your timesheets, and they send you payments.
Because they act as your “employer,’ they can sponsor you and provide a single work permit for multiple contracts in Czech Republic. Even better, most are experts in Czech Republic and expat tax law, meaning they’ll also help you optimise your earnings in Czech Republic.
Although the Umbrella Company is technically your “employer,” you’re essentially freeing yourself to work even more independently. You still dictate your contracts, your hours, your schedule. The Umbrella Company simply filters out the time-consuming admin and immigration issues, allowing you to focus on your new contract.
Can I Organise My Taxes and Work Permit Myself?
Generally, you need to have an employer sponsor in order to secure the appropriate work permit and work visa for Czech Republic.
If you’re working independently, it can be difficult to find clients willing to sponsor you. Moreover, even if your client can do this, you’ll need a new sponsor each time you decide to take on a new contract. Of course, every new sponsor will mean more paperwork.
Also, are you familiar with the intricacies of the tax system in Czech Republic, as well as your own country’s laws on overseas earnings? If so, good on you!
However, if you’re like the rest of us, figuring out (much less reducing) your tax liability in Czech Republic and your home country can seem like full-time work in itself.
A Contractor’s Guide to Taxes in Czech Republic
One of the most consistently challenging aspects of contracting in Czech Republic is complying with the country’s tax system. As well as paying tax in Czech Republic, you might also still be eligible to pay some tax in your home country, and understanding the legislation behind this can be a challenge.
How do I calculate my taxable income in Czech Republic
If you’re working in Czech Republic under a permanent contract, many employers will handle your tax under the PAYE (pay-as-you-earn) system. This means that they calculate and process your taxes in Czech Republic for you and then send you a net wage. Your income tax, public health insurance, social security and other deductions will all be covered by this payment. This is the easiest way to handle your income tax in Czech Republic, but contractors may not be offered this service because of their short stay with each employer.
Anybody who can’t pay their tax in Czech Republic through PAYE is left with the prospect of doing everything themselves.
Do you know much about Czech Republic Tax Law? Does Czech Republic have a tax treaty with your home country? You will need to find out or find someone who can help! Income tax in Czech Republic is 15 percent, but certain types of income are subject to withholding tax and a solidarity surcharge of 7 percent applies to certain high income earners.
Tax Filing as a Contractor in Czech Republic
|When Do You Need to Lodge Your Tax Return?||The tax year is the calendar year (ending 1 December).|
|Tax Filing Deadline||1 April is the tax filing deadline. Extensions may be granted until 1 July. Individuals who have foreign-source income included in their Czech tax return may have their deadline further extended until 1 November.|
|Can you file it online?||Yes, https://adisspr.mfcr.cz/adistc/adis/idpr_pub/dpr/uvod.faces|
How to File Taxes in Czech Republic as a Contractor
The process for filing taxes in the Czech Republic involves:
Step 1: Attain a Czech Republic Tax Identification Number.
Step 2: Enter here(link is external) to access the database of forms. The personal income tax form is number 25 5405. Click ‘zobrazit’ to access the filing portal.
Step 3: Click ‘Průvodce’ which launches a form guide that you can electronically complete based on the sources of income and deductions relevant to you.
Step 4: Follow the steps and enter the values for each income source and deduction that is relevant to you. Deductions may include:
Donations – minimum of 2% of personal income tax base or CZK 1,000, maximum of 15% of personal income tax base.
Interests from a loan from building society, paid during tax period – maximum of CZK 300,000
Private pension insurance – except for first CZK 12,000, maximum of CZK 24,000.
Private life insurance – maximum of CZK 24,000.
Step 5: Attach any files that are required. You can also import documents from other applications. To do this, enter the tax portal(link is external) and click ‘Dokumentace’ (Documentation).
Step 6: Submit the tax return. On the next page you will see “Potvrzení o podání písemnosti)” (Certificate of filing) which provides important information about your submission as well as a confirmation file.
Database of tax forms in Czech: https://www.financnisprava.cz/cs/danove-tiskopisy/databaze-aktualnich-danovych-tiskopisu(link is external)
Sample income tax form in English: https://www.financnisprava.cz/assets/en/attachments/tf-tax-forms/5405-AJ_21.pdf(link is external)
Tax Figures in Czech Republic
|Currency||Czech Koruna (CZK)|
|Tax-free Threshold in Czech Republic||None|
Personal inome tax
Taxable income of residents and non-residents, other than income subject to withholding tax, is taxed at a flat rate of 15%. The following are sources of income subject to withholding taxes:
A solidarity surcharge of 7% applies to any individual with an annual income from employment or net income from self-employment exceeding CZK 130,800 per month (48 times the monthly average salary). Individuals that are subject to this solidarity surcharge must file an annual tax return.
Tax Residency in Czech Republic
When do you become a tax resident in Czech Republic
You become a tax resident in Czech Republic when:
You become a tax resident in Czech if:
You resided in Czech Republic for at least 183 days within a calendar year, OR
You have a residence (permanent home) in the Czech Republic.
Does the 183 day rule apply in Czech Republic
Am I taxed on my global income in Czech Republic
Yes, if you are a resident. Non-residents are subject to tax on their Czech-source income, except for certain types of income. Employment income received by a non-resident in Czech Republic whose residence does not exceed 183 during a 12 month period, is exempt from tax in the Czech Republic if it is paid by a foreign entity that does not have a permanent establishment in the Czech Republic and no economic activity in the Czech Republic exists.
Can you set up your own Limited Company in Czech Republic?
|How long does it take to set up||24.5 days|
|How much does it cost||CZK,4300 for a simple limited liability company. For all other limited liability companies: 37000 + notary fee of up to 2% based on the amount of start-up capital.|
|Is it easy?||Starting a Business Rank: 81, https://www.doingbusiness.org/data/exploreeconomies/czech-republic|
Tax Calculator in Czech Republic
If you are a contractor and want a calculation on your tax and net retention in Czech Republic, we can supply it to you free of charge.
Using an Umbrella Company for Income Tax in Czech Republic
Contractors in Czech Republic are faced with masses of paperwork and numerous wasted hours filing a tax return unless they find an alternative option. A Czech umbrella company can act as your employer during your stay in the country whilst still allowing you the freedom of a contractor. The only difference is that you submit your timesheets to them; they’ll calculate and pay your taxes as you earn, and then you receive a net wage (as well as documentation for your records).
The companies are experts in Czech taxation, and they’ll ensure that you keep the largest proportion of your earnings whilst complying with local laws. They can deal with any issues with the Czech tax office or tax department directly including processing your tax refund if you are eligible.
How We Can Help You with Tax in Czech Republic
We work with numerous umbrella companies in Czech Republic, many of whom are experts in tax and immigration laws. If you have any questions about tax in Czech Republic, we’ll get the answers from them directly so you can rest assured you’ll be getting accurate information. We have comprehensive knowledge of the different services they provide, and can help you find the right company to handle your income tax. We help oil and gas workers, software developers, IT project managers, testers, business analysts and telecommunications contractors get tax efficient payments and sponsorship for their Czech Republic work permit.
Our advice is 100 percent free, and comes with no obligations. You will be paying taxes in Czech Republic but without the overhead of directly dealing with the Czech Republic tax authorities. Get in touch with us today for some reliable advice on tax in Czech Republic!
A Contractor’s Guide to Work Permits in Czech Republic
Immigration is one of the primary concerns for any contractor hoping to start working in Czech Republic. Permanent employees will find it easy to get their Czech Republic work permit because they’ll receive “sponsorship” for their entire stay from their prospective employer.
The Czech Republic work permit, known more commonly as the Type D visa, is dependent on this sponsorship because it confirms that you’ll be earning money during your stay in the country. Contracting in Czech Republic is more difficult because the work permit is tied to one employer, so you have to change it to suit each new contract. Thankfully, umbrella companies provide a convenient and effective solution to this issue.
How Does an Umbrella Company Work?
Most people want to do their work, earn their money and enjoy their spare time without taking on loads of admin in a new country. That is why an umbrella company can help.
When you’re working through an Umbrella Company, you’ll essentially be outsourcing the admin and tax issues to specialists.
While the umbrella company will charge a fee, you’ll likely end up saving more money in the long run: you’ll be able to focus on your work, expertly reduce your tax liability, and comply with all laws and regulations in Czech Republic (which means avoiding fees, fines, or even worse penalties).
How Can We Help You?
There’s a huge variety of Umbrella Companies with different specialities and advantages in Czech Republic. How do you find the right one for your circumstances?
We work closely with Umbrella Companies all throughout Czech Republic and match contractors with the right company for them. If you’ve already secured a contract in Czech Republic, we can help you find your best match (for free). Or, we can simply give you feedback on your situation (for free).