Umbrella Company in Czech Republic

Independent contracting in Czech Republic isn’t always straightforward. You’ve got immigration issues, tax difficulties, and mountains of complex admin work. Even worse, missteps can cost you serious money, or even land you in legal trouble.

Before you consider taking a contract in Czech Republic, you should be aware of what you’re getting into – and how you can make it simpler.

Difficulties of Contracting in Czech Republic

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.

How Umbrella Companies Work

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.

Why Use an Umbrella Company in Czech Republic

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 We Can 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).

A Contractor’s Guide to Taxes in Czech Republic

One of the most consistently challenging aspects of contracting in the Czech Republic is complying with the country’s tax system. As well as paying tax in the 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 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

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.

Additional Information

• 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)