Czech Republic - Tax Guide for Freelance Contractors
Welcome to our guide to Czech Republic Taxation. You will find a wealth of information which will be useful if you plan to work in, or place consultants in, the Czech Republic.
Our tax guides give a general overview of the actual taxation rates and rules at the time of writing. There are of course many ways to legally reduce tax or social security burdens in the Czech Republic. Please contact us for more information or an actual breakdown of your situation, and to find out more about our range of payroll and contact management services in Czech Republic.
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Czech Republic Income Tax
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Tax residents in the Czech Republic: are liable to pay tax on their worldwide income,
Non tax residents in the Czech Republic: are liable to pay tax only on their Czech-source income.
Individuals will be regarded as tax residents:
- if they have a permanent home in the Czech Republic,
- if they stay more than 183 days in a calendar year.
Non-residents who are employed by a foreign company without a permanent establishment or a deemed place of business in the Czech Republic and who stay for less than 183 days in any 12-month period are exempt from Czech taxation.
If the individual is assigned by a foreign employer to the Czech Republic and works for and under the instruction of a Czech resident company or individual, however, he is deemed to be employed by that company, and therefore Czech income tax has to be withheld from the employment income.
Married persons are taxed separately.
Taxable income includes:
- employment income, including salaries, bonuses and other benefits,
- contributions to the mandatory Czech social security and health insurance system paid by the employer or which would be paid by the employer if the employee was in the Czech system (so-called “super-gross” salary).
Certain deductions are permissible for 2012 including:
- donations to approved educational and political organizations and Charities (the deduction has to be at least 2% of the income or CZK 1’000, but cannot be more than 10% of the income);
- mortgage interests for the main residence up to CZK 300’000 per year;
- premiums of up to CZK 12’000 paid by the employee to a private life insurance whose benefits will only be paid after 60 months and not before the employee is 60 years old;
- contributions made by the employee to a supplementary state pension fund up to a maximum of CZK 12’000 if they exceed CZK 6’000;
- contributions to the trade unions up to 1.5% of taxable income from employment, but not more than CZK 3'000;
- expenses of up to CZK 10'000, incurred in respect of examinations certifying the results of continuous education under the relevant statutory provisions, provided that they are not paid by the employer nor treated as a tax-deductible item by an individual entrepreneur.
Resident and non-resident taxpayers, (if at least 90% of their income is from Czech sources), may offset the following main tax credits against their tax liability for 2012:
- CZK 24’840 basic personal tax credit,
- CZK 24’840 for a spouse living in the same household if her/his income does not exceed CZK 68’000,
- CZK 13’404 per dependent child living in the same household. If the tax due is less than the tax credit for children, the taxpayer receives a tax bonus of the difference between the tax credit and his tax liability. The bonus can be a maximum of CZK 60’300 per year.
Income tax rate for 2012:
- 15.00% flat tax rate
Tax returns have to be made by 31 March in the year following the tax year.