We have prepared an overview of the basic obligations of entrepreneurs for you. Remember that there are also many other obligations imposed on entrepreneurs by special laws, such as the Trade Licensing Act. For information about the obligations of entrepreneurs following the establishment of a new company, see www.BusinessINFO.cz.
- Obligation to pay health insurance and social security advance payments
- Tax records and the obligation to pay taxes
Obligation to pay health insurance and social security advance payments
As an entrepreneur, you are obliged to pay the health insurance on your own. If you apply for a long-term visa, a long-term residence permit or for an extension of your residence permit in the Czech Republic during your stay in the Czech Republic, as a foreigner you are obliged to arrange commercial health insurance in the scope of comprehensive healthcare.
In the Czech Republic, you also have to pay social security premiums on your own. They are usually paid from the moment of commencement of the business activity in the form of monthly advance payments. They are paid to the RSSA – Regional Social Security Administration (the Czech abbreviation is OSSZ) by the end of the month for which you are making the advance payment.
If you have a residence permit for the purpose of business, you must not deregister from the RSSA, even if you have not been doing business for some time, do not have any income or are not in the Czech Republic.
The compulsory levies may also be paid in the form of a flat rate tax (see below).
Tax records and the obligation to pay taxes
Keep all receipts for the purposes of tax records during the year to be able to claim your actual expenses afterwards. It is also possible to apply a flat rate tax – in that case, you only need to keep records of receipts and invoices issued.
If you stay in the Czech Republic based on a residence permit for the purpose of business and you apply the flat rate tax, you may not meet the requirement of sufficient income for the purpose of extending your stay. Consult your steps in advance!
It is your obligation to file a tax return when the year is over. As a rule, you submit your tax return to a tax office based on the place of your business no later than by the end of March of the following year. If your tax return is filed by a tax advisor, the submission deadline is extended until the end of June.
Detailed information on filing a tax return, tax rates in the CR and other useful information can be found on businessinfo.cz.
Flat rate tax
In 2021, a flat rate tax was introduced to simplify the obligations of sole traders and reduce the administrative burden. For many of them, applying a flat rate also tax leads to financial savings. The flat rate tax covers three types of levies at a time: 1) health insurance, 2) social security, and 3) income tax. It requires a single form and by one monthly payment. Self-employed persons who choose to pay the flat tax rate do not have to submit the personal income tax return, the statement of income and expenses for the health insurance company, and the statement of income and expenses for the Social Security Administration. If you opt for the flat rate tax, you must register for it using this form.
On the website of the Ministry of Finance you can also make a calculation to see whether it is worth switching to paying the flat tax rate for you. The website is in Czech but it is quite easy to understand. The tax calculator also takes into account the savings you make thanks to no longer having to pay for your tax return preparation fee every year.
If you stay in the Czech Republic based on a residence permit for the purpose of business, consult registering for the flat rate tax before you make the registration to make sure that you will be able to prove that your income is sufficient to the Ministry of the Interior of the CR!
For detailed information about the flat rate tax, including the deadline for the registration, see the website of the Czech Tax Administration.
Updated for socio-legal content as of 8th November 2021.