In this article we explain everything you need to know about paying taxes, social security, health care, VAT and anything else related to your Czech Trade License. Read on.
NOTE: Although this guide is pretty extensive, it does not replace tax advisory. For that we recommend speaking with your Move To Prague Immigration Specialist who helped you get the trade license or with a Tax Adviser/Accountant (we can recommend a great one if needed).
Basic Obligations after Obtaining your Czech Trade License
First, let’s look into your trade license obligations in general and dig deeper into each topic in latter parts of the article.
As explained in our Trade License Hub – Complete Guide on Czech Trade License in 2025, basically every foreigner legally residing in the Czech Republic can get a trade license. The same rules do not apply to all foreigners in regards to paying taxes, social security and health care though.
Income Tax and Social Security for your trade license
Income tax and social security must be paid by all trade license holders regardless of your nationality.
Health Care for Czech Trade license Holders
Being able to contribute to and benefit from the public health care is generally seen as a benefit for certain nationalities or specific situations. That means that not all foreigners who get the trade license have to pay into the public health insurance system. On one hand, this reduces the monthly cost associated with the trade license. On the other hand, this means you must keep your private health insurance (which usually has way lower coverage and must be paid in advance for a certain period of time).
Who pays public health insurance as Czech trade license holder
If you belong into one of these groups, you are obliged to pay towards the public health care after obtaining your trade license:
- EU citizens,
- non-EU citizens holding permanent residence permit,
- citizens of these countries regardless of their visa or residence permit type:
- Albania,
- Bosnia,
- Japan
- Montenegro,
- North Macedonia,
- Serbia,
- Tunisia,
- Turkey,
- United States of America.
SUMMARY: Simply explained, if you are an EU citizen, permanent residence permit holder or a citizen of one of the 9 countries mentioned above, you have to pay all three when you get your Czech Trade License – Income Tax, Social Security contributions and Health Care contributions. If you are none of the above, you only have to pay the Income Tax and Social Security contributions.
Let’s now take a closer look at each of the systems.
Flat Tax or 60/40 – Different Tax Systems in the Czech Republic
As a freelancer, you generally can chose from two different ways of paying the income tax, social security and health care contributions (where applies) in the Czech Republic. For the sake of simplicity, let’s call them Standard Tax and Flat Tax. The Standard Tax is the system that has been around for decades, the Flat Tax was introduced in 2021.
Tax year in the Czech Republic runs from Jan 1 to Dec 31.
Standard Tax system for freelancers in the Czech Republic
How does it work
The Standard Tax system works the way that you pay monthly social security and health care deposits. Once the tax year ends (Dec 31), you have 3 months (in case of paper submission), 4 months (in case of electronic submission) or 6 months (in case you use a Tax Adviser) to submit your annual Income Tax Return. After submitting the Tax Return, you have one month to submit your social security and health care reports.
Depending on the income you declare, you might pay lower or higher income tax, and might or might not pay something extra towards the social security and health care systems.
The minimum monthly deposit you have to pay towards the social security is determined in the registration letter you get from the social security office after your get registered with them. The monthly contributions might be a bit confusing but they look roughly like this in 2025:
Trade License as your main activity
If you only have the trade license (meaning you are not employed at the same time), your trade license is considered your main activity. If you are in your first (tax) year with trade license, the minimum monthly contribution is 3 399 CZK. If this is not your first year anymore (you have done your first tax return), the minimum monthly payment is 4 759 CZK.
These amount must be paid even if you do not have any income in some particular month. They can also increase depending on how much income you declare in your tax return.
Trade License as your secondary activity
If you combine employment and self-employment, your trade license is considered your secondary activity. That means that for the first (tax) year, you do not have to pay any monthly deposits towards the social security and health. Depending on your total income, this might change after you submit your first tax return.
Disadvantages of the Standard Tax system for freelancers
- more paperwork – the main reason authorities introduced the Flat Tax system was to reduce the amount of paperwork involved in freelancing in the Czech Republic, in case you go for the Standard Tax scheme, you have to pay towards three different systems (social security, health care, income tax), you also have to do your yearly tax return and social and health care reports.
- higher payments in some cases – this really depends on your real income and should be properly calculated for you before you decide but in some cases, you might end up paying more taxes using the standard tax mode compared to the Flat Tax mode,
- unclear how much you will actually pay at the end of the year – this is one of the biggest disadvantages of the standard tax mode – you pay monthly deposits which are either just the minimum allowed deposits (for your first year) or based on your last year’s income. If your income is significantly higher this year, you might end up owing the authorities at the end of the year.
Advantages of the Standard Tax system for freelancers
- you can actually influence how much taxes you pay – if you use a good accountant, there are various different ways to reduce your tax load such as the 60/40 method (where you can simply deduct 60% of your income as your expenses with no need to prove anything), personal tax discounts (30 840 CZK in 2025) or discounts for having wife and/or children.
- lower taxes below some income – if you stay below some income, you end up paying less total taxes and social and health contributions than in case of the flat tax,
- the simpler way of proving your monthly income – this is one of the biggest advantages of the standard tax mode – if you do your taxes properly, you will only need three documents to prove your income (to the MOI or any other authority). If you are under the flat tax, you might need to provide all your yearly invoices, all your yearly bank statements and create a special table of income.
Flat Tax system for freelancers in the Czech Republic
How does the Czech Flat Tax work
The Czech Flat Tax system basically works the way that you estimate how much you will earn yearly and based on that you pay a fixed amount of social security, health care and income tax combined. There are different variations but for a simple explanation:
- If your income is not higher than 1 000 000 CZK a year, you pay 8 716 CZK monthly.
- If your income is between 1M and 1,5M CZK a year, you pay 16 745 CZK monthly.
- If your income is between 1,5 and 2M CZK a year, you pay 27 139 CZK monthly.
The “flat” part of the Flat Tax refers to the fact that when in the Flat Tax system, the monthly payments are final. You do not do taxes at the end of the year, you do not worry about anything as long as you stay within the expected revenue range. That brings some advantages and disadvantages as we describe below.
Advantages of Czech Flat Tax system
- you do not do yearly tax returns – for many people, preparing yearly tax returns can be a major pain, when in the flat tax, you do not have to do yearly taxes,
- simpler payments – instead of making two monthly payments and then couple additional payments after you do taxes, you just pay once a month (automated payments are possible),
- generally simplified daily/monthly operation – if you combine the above mentioned advantages (no yearly tax returns, no complicated monthly/yearly payments), you can actually save a good amount of time and nerves over years.
Disadvantages of Czech Flat Tax system
- public health care payment is included – this might sound like an advantage at first glance but if you go back to the start of this article, you’ll see that not everyone can actually use the public health care system – in case you can not use the public health care system, the Flat Tax does not really make sense since you would be paying for something you can not use (+ for a private insurance on top of it anyway),
- hard to prove your income for immigration or other purposes – this is actually one of the biggest disadvantages for foreigners – if your residence permit depends on proving your income, the flat tax will actually make it a lot more complicated for you. Since you do not do taxes, you can not really prove how much you are actually making (it can be anywhere between say 0 and 1 million CZK in the first Flat Tax TIER), the same applies to getting a mortgage for example so it might be more complicated for you to get a mortgage under the Flat Tax system.
- harder to get registered – the registration process for the Flat Tax is more complicated that for the standard tax mode + you can only switch to the Flat Tax (is you are already under the standard tax mode) from Jan 1 to Jan 10.
- not financially beneficial in all situations – when under the Flat Tax, you can not use any tax discounts, your monthly payments are fixed based on the TIER you chose, in some situations (i.e. lower income, having spouse or kids), it might make more financial sense to stay under the standard mode since you can use various tax discounts there to reduce your overall taxes.
Based on the above, there is no simple answer to “Is the Flat Tax better than the standard mode” question? It depends on many factors so choosing the right approach for you should always be consulted with a professional accountant. If you do not have any, get in touch with us and we’ll be happy to recommend accountants we have been working with for years and can vouch for 100%.
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