Self-employment
As a freelancer in the Czech Republic, you are not obliged to a double entry bookkeeping system. You will need to keep the evidence of your income based on the date of received payment. You will need to watch out for the VAT treshold (currently 2.000.000 CZK, roughly 80.000 EUR). For the expenses, you can choose from three different modes. You can read through some of the basic information below but we would strongly advise you to get in touch with us to find out the best match for you.
Real expenses
You will need to keep the evidence of your real expenses based on the payment date. This would be kept in a cash book (in Czech referred to as "Penezni denik"). A simple table with payment date, amount (net, gross) and some identification of transactions would be sufficient. This mode would be suitable for a freelancer working with low margin (e.g. resale or high input costs).
Flat % rate expenses
In case of flat rate expenses, you only need to watch your income. Expenses are calculated by percentage rate from the income. The rate is dependent on the type of business licence. Currently, there are three different flat rate expenses in the Czech Republic: 40%, 60% and 80%.
Sample: An IT consultant can use flat rate expenses of 60%. His income is 100.000 CZK so his flat rate expenses would be 60.000 CZK, his taxable income would be 40.000 CZK.
Flat tax including health and social security
From 2020, freelancers can also apply for one single payment of flat tax rate that includes health and social security. The basic idea is to simplify administration to a minimum. However, as this has been set up as one single payment, it is only optimal for freelancers with a turnover somewhere between 700.000 and 1.499.999 CZK. With lower turnover, it would usually be much better to use real expenses or flat rate. Quite often, this mode would be inappropriate as you cannot claim other tax benefits. The best thing about it would be the fact, that you are no longer obliged to do a bookkeeping (! but you still need to be able to prove that your turnover does not exceed the maximum threshold of 2.000.000 CZK). This mode is currently undergoing changes and is likely to be changed.
Your right tax partner
Leave your taxes to professionals who can save you a lot of money and hassle. We will make sure that you will receive all tax advantages. Choose the right partner from the beginning. Together we will set everything up in the most favourable way.
FREELANCE TAX AND ACCOUNTING BRNO
Our colleagues work across the entire Czech Republic. Our main accounting office in Brno supports our partners. In our accounting office, we process and archive all your documents. Feel free to visit us. We look forward to meeting you!
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