Basics for freelancers in CZ
Let's have a look at the most common group of self-employed individuals in the Czech Republic, the freelancers (OSVČ).
Freelancers determine whether their business is classified as main or secondary based on the amount of income sources. Main activity represents a sole source of income. The secondary activity represents an additional income, often another source of income during employment, or while studying,etc. The social security administration provides an overview of allowed reasons for secondary activity and the documents they require to be provided for each reason.
Foreign freelancers need to register for mandatory social and health insurance in CZ and obtain a personnel ID from the authorities. There is a different ID for each insurance. If a person was employed in CZ before, the authorities already issued their insurance ID’s which can be used for freelancers. In case the person was not employed in CZ, it is necessary to contact the respective authorities in the country of origin and consult with them on the best approach.
Before obtaining a trade license, freelancers need to decide which type of trade is suitable for their business. The basic criteria for operating any trade are: Reaching the age of 18, full legal capacity, proof of a clean criminal record from the country of origin not older than 90 days, and being debt-free towards social and health insurance companies, and the CZ state. NON-EU citizens also need to provide a document confirming legal residence in CZ such as visa or residency permit.
There are two types of trades:
1) Notifiable trades, which are further divided into:
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Craft trades – these typically involve manual activities that require proof of professional competence (e.g. apprenticeship certificate, experience in the field). The list of trades is provided in the appendices to the Trade Licensing Act, with craft trades listed in Appendix No. 1.
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Regulated trades – these typically involve expert activities that require proof of professional competence (e.g. university degree, professional certification) and, in some cases, state authorization. The list of trades is provided in Appendix No. 2.
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Unregulated trades – these involve activities for which the state does not require proof of competence, unlike craft and regulated trades. The person must meet the basic criteria. The list of trades is provided in Appendix No. 4.
2) Licensed trades:
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these typically involve activities related to strategic resources such as water, heat, or ammunition,
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for this type of trade, it is always necessary to apply for permission – a license. To obtain a license from the state administration, professional competence and other conditions need to be met,
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the list of trades is provided in Appendix No. 3.
If you do not meet the conditions for professional competence, you can choose a responsible representative, i.e. a guarantor of the trade, who is responsible for the proper and safe operation of the business. If a responsible representative is used, the trade office must be provided with a statement from the representative agreeing to perform the function, and proof of their professional competence.
The notification of a trade
First, the registered office in CZ needs to be secured. It can be a virtual address, the address of a business premise, or a permanent residence address. The place where the business activities are being carried out may differ from the registered office. The main requirement for the registered office is that the freelancer must be reachable at this address at least by receiving mai. The name, surname, and identification number (IČO) must be visible at the address.
Next, the Unified Registration Form needs to be filled that notifies the trade office, tax authorities, social security authorities, and health insurance company about the start of the business, and contains all required details. Documents that need to be submitted with the form:
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Documents proving professional or special competence for the craft, regulated, and licensed trades – apprenticeship certificate, high school diploma, proof of practice from an employer, etc.
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Written owners’ consent allowing the registered office in the premises. This is not required if the registered office address is the same as the permanent residence address. The consent must be officially verified, which can be arranged through a notary or via government contact place Czech POINT.
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Proof of payment of the administrative fee for the notification of the trade in the amount of CZK 1,000 (CZK 800 for electronic submission through the portal – the office will ask you to pay the fee and provide you with the necessary payment details). You pay only one fee even if you notify multiple trades at once. The fee for another trade notification is CZK 500 (CZK 400 for electronic submission through the portal).
The form can be filled in person with the staff of the municipal trade office, or sent to the office by mail. It can also be filled at Czech POINT (there is an administrative fee of CZK 50 for receiving the submission).
The form can also be submitted electronically, by email with an electronic signature, via a data box, through the Citizen Portal, or through the trade licensing portal, where log in using Citizen Identity is required, all of which represent possible ways of electronic communication with the authorities. It is necessary to perform an authorized conversion of paper documents (professional competence, use of premises) to electronic form for electronic submission, which can be arranged at Czech POINT. The conversion fee is CZK 30 per page.
We don’t cover licensed trades in detail in this article as licenses from the state administration have to be obtained under specific rules for each license.
Commence of the business
For notifiable trades, you can start your business from the day of notification, i.e. the day the Unified Registration Form is submitted. For licensed trades, you can start your business from the day the license becomes legally effective. The authorities automatically create a mandatory data box used for electronic communication with the government, and send login details to the registered office by mail.
There is an obligation to pay minimum advances on social and health insurance for the main business that arises from the day of notification. The minimum advances for 2024 are: CZK 3,852 per month for social insurance, and CZK 2,968 per month for (health insurance. The amount of the minimum advances usually changes at the beginning of each year.
The health insurance advances are not obligated for a secondary business. Social insurance payments become obligatory if the income gained exceeds CZK 105,520 per year (for 2024). This is the so-called decisive amount for mandatory participation in social insurance. After exceeding the decisive amount, the obligation to pay a monthly advance on social insurance in the amount of CZK 1,413 (for 2024) arises. The decisive amount and the related advances usually change at the beginning of each year.
The freelancer is obliged to submit an income and expense overview to the social security authority and health insurance company every year. The amount of advances for the following year is determined based on the income achieved in the previous year.
From the Day of notification, the freelancer is obliged to keep tax evidence, which serves as a record of assets, liabilities, income, and expenses, or they can voluntarily decide to keep accounting. The obligation to keep accounting arises for freelancers only if their turnover exceeded CZK 25 million in the previous year or if required by a special legal regulation.
The freelancer must submit a personal income tax return to the tax authorities every year. The freelancer has an option to register for the so-called flat tax, which we will cover in one of our next articles.
We are happy to assist with the tax evidence or accounting, allowing our clients to fully focus on the growth and development of their business.
Šárka Houžvicová
+420 602 755 855