17th August 2018
With its array of picturesque historic cities, romantic castles and stunning architecture, the Czech Republic deserves a place on everyone’s travel list. Its central European location also makes it a great starting point for exploring other neighbouring countries.
The destination is also a great place for contractors to work. The Organisation for Economic Co-operation and Development’s 2018 Economic Survey reveals that the Czech economy is thriving and employment is robust, but businesses are facing labour and skills shortages. As a result, unemployment in the country is the lowest in the European Union and wages are rising rapidly. This means that there are excellent opportunities for contingent professionals, with particular demand for technologists such as coders and programmers, engineering experts and individuals with expertise in business growth strategies.
Contracting in the Czech Republic: the legal bit
There’s no doubt that there are fantastic prospects for international contractors in the Czech Republic, but there are a few key things to know before working there.
Firstly, only non-EU nationals will need a work permit in order to take up a position. However, all self-employed professionals conducting business in the destination need to have a registered business address such as an office premises or apartment (which can be rented or owned). It is important to note that a hotel cannot be used. Contractors will need to provide the tax office with relevant documentation for the address – such as a rental contract or act of ownership – to prove that they are authorised to use the premises as their registered business office.
Once working, contractors are liable for income tax at a flat rate of 15%. This is payable in advance on a quarterly basis, using a calculation of projected gross earnings. At the end of the tax year, a final liability will be calculated in order to determine if further payment is needed from the contractor or whether a tax reimbursement will be given. Self-employed workers must also pay monthly social security, which equates to 29.2% of their projected gross earnings calculation and is not tax-deductible. As with income tax, a final liability will be calculated at the end of the year.
Another thing worth knowing is that contractors are eligible to apply lump sum expenses of 60% of their income, up to a maximum income of CZK 1,000,000. Therefore, the maximum expense claim that can be made is CZK 600,000.
Contingent workers should also know that they can apply deductions for children and a non-working spouse in their tax return. The rules are somewhat complicated as the amounts vary depending on the number of children being considered.
One last thing to be mindful of is that when an individual reaches the end of their contract, a letter to the tax authorities is necessary in order to de-register.
As rules for contractors in the Czech Republic can be complex, in order to ensure that you are compliant with local legislation we strongly advise partnering with a specialist international contractor management company. Contact the team today to find out how we can help you.