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.
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.
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.
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.
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!
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)
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:
- Royalties and fees for professional services derived by non-residents: 15%.
- Non-resident rental income on lease-purchase contracts: 5%.
- Other non-resident rental income: 15%.
A solidarity surcharge of 7% applies to any individual with an annual income from employment or net income from self-employment exceeding CZK 1,438,992 (48 times the monthly average salary). Individuals that are subject to this solidarity surcharge must file an annual tax return.
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.
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.