Contracting in Czech Republic
Introduction
The Czech Republic also known as Czechia is a landlocked country in central Europe. It is bordered by Austria, Germany, Poland and Slovakia.
As expected from a landlocked country various territorial and religious wars shaped its early history and the modern day Czech Republic only came into existence in 1993. The first Czechoslovak Republic came into existence after the Austro-Hungarian Empire collapsed in the wake of World War I at which point it was the only democracy in Central Europe. It however became a communist state under soviet influence post World War II and democracy was only restored in 1989 after revolution. Czechoslovakia was peacefully dissolved in 1993 and became the Czech Republic and Slovakia.
Despite its turbulent beginnings the Czech Republic is now a developed country and is a member of NATO, the European Union, the OECD, the United Nations, the OSCE and the Council of Europe.
The Czech Republic ranks very well in the UN Inequality-adjusted Human Development and the World Bank Human Capital Index, it evens surpasses countries like the US, the UK and France and performs well on democratic governance and is the eleventh safest and most peaceful country.
It has a high income social market economy and is a welfare state offering universal health care and tuition free university education. Although it is a member of the EU and participates in the European Single Market, the Czech Republic retained its own currency, the Czech Koruna. The Czech Republic has been described as one of Europe’s most flourishing economies.
Its current safety and democratic reputation along with its vast economic opportunities especially in the industrial field combined with its ease of travel in the European area makes the Czech Republic an exciting option for international contractors and freelancers. Here at Chesterfield we have vast experience with all aspects of payroll solutions across a wide variety of Europe countries and are more than happy to advise if you are thinking of contracting in the Czech Republic.
Registry/Registration
The Czech Republic is described as having one of the most beautiful capital cities in the world and its economy is strong. Therefore this attracts a lot of individuals looking to relocate there for work purposes. As a member of the European Union it means that individuals from the European Union and also Norway, Switzerland, Iceland and Lichtenstein do not need a residence permit to live in the Czech Republic although they are advised to notify the local police if they intend to stay for more than once month. They can also apply for a temporary residence certificate, but this is voluntary. If you are from anywhere else then you will need to look into the visa requirements, you will also need a residence permit. It should be noted that these are issued depending on specific purposes and if that purpose were to cease they will no longer be valid.
If you intend to work in the Czech Republic as a self-employed contractor or freelancer then you must get a trade license regardless of your nationality. In order to obtain this you must fill out an application form and file it at the Trade Licence Office. You must be over eighteen and not be involved in any criminal activities of a serious nature. Depending on you field of work you may also need to evidence qualifications and/or experience. Once you have your trade licence then you must register at your local Social Security and Tax Office. EU citizens will be advised which insurance company to register with whilst if you are not from the EU then you will be required to have valid health insurance.
Income Tax
If you have a permanent residential address in the Czech Republic then you may qualify as Czech resident even if you stay less than 183 days per year as opposed to the rest of Europe, whereby you are not considered resident if you are in the country for less than this period.
The Czech income tax however is only 15% on income up to CZK1,438,992 and 22% on anything above and so is one of the lowest and simplest rates in the European Union.
Self-employed professionals can also benefit from numerous tax-deductible expenses and so it is worth getting advise in this area to see what deductions are applicable to you.
Social Security
Even if you are self-employed you must make social security payments in the Czech Republic. This includes health insurance which you can expect to pay around 6.75% of your taxable income. There is also pension insurance at 14% and unemployment insurance at 0.6% of your taxable income respectively, but these are capped up to annual earnings of CZK1,438,992.
Regardless of your nationality you must apply for a trade licence if you intend to work as a self-employed professional in the Czech Republic upon receipt of which you will be expected to register immediately for social security.
Employment Rules
As we have already covered self-employed professionals working in the Czech Republic generally go under a trade licence and therefore it is easy for the Czech officials to identify your working arrangement. There is also the possibility to go under a payroll scheme whereby there will be a contract for the hiring out of labour in which case you would be considered as an employee of the Czech company and therefore all general employment laws concerning employees would be applicable.
The Czech Republic is a progressive democracy and as such its specific laws are always evolving to accommodate developments. For instance it is moving towards a more electronic platform with regards to business. This does affect freelancers, for instance you should keep electronic records of any sales.
As an EU country the general labour laws in the Czech Republic do not differ to any great extent to the rest of Europe and are generally designed to protect the employee.
Banks
Debit and Credit cards are widely accepted in the Czech Republic, although if you intend to stay there you will need a bank account in order to be able to pay cash in the smaller shops and restaurants. Banks in the Czech Republic charge fees for the majority of actions and as such sometimes have special rates in order to attract new customers and therefore it may be worth your while looking into a particular banks fees in light of your banking requirements prior to making a decision as to where to open. You may also need to take into account which banks have English options.
Opening a bank account in the Czech Republic is relatively straightforward even for foreigners, you are usually only required to produce ID such as your passport. You can make applications online, but you will still need to visit the bank to sign the contract. It should be noted that there is normally minimum initial deposit in order to properly activate and open the account.
As a foreigner you will most likely encounter difficulties when applying for credit cards unless you have had permanent residence and been a customer for some time or are able to demonstrate an abundance of funds.
Corporate Structures
Self-employed professionals require a trade licence in order to engage in services in the Czech Republic. Here at Chesterfield we can provide assistance with the licence application and ongoing self-employed payroll services. We can also further provide support with regards to all local accounting and tax liabilities. If required we can also offer establishment of your own company and can structure the invoicing to your particular needs.
Chesterfield and Contracting in the Czech Republic
Since its break from communism the Czech Republic has shown itself to be one of the fastest growing economies in Europe, this combined with its increasing reputation for its beautiful cities and safety record make it an interesting option when considering freelancing abroad. Chesterfield deals with a number of international contractors who take positions and a wide variety of European cities and therefore we are ideally experience to assist with all aspects of the contract. Furthermore Chesterfield prides itself on its boutique charm offering a dedicated member of staff for a more personal and individual orientated experience.
