Basic Information on the Živnostenský list (Trade license)
This page contains basic information about the financial side of a trade license.
For registering a živnostenský list or applying for a Business Visa, see
Expenses Deduction
With a trade license you are able to deduct much more work-related expenses than an employee. In many cases, when filing taxes, a simple calculation is used: 40% of the trade licenses' revenue is considered expense, whether you make them or not, and the remaining 60% is the basis on which income tax, social- and health charges are calculated. (In 2009, it was the other way around: 60% expense, 40% income base - and it could change again during 2010)Financial Side: Taxes / Social- and Health Charges
Being self-employed, basically you are obligated to pay 3 things:- income taxes (15 %) - at the end of the year,
- social charges (29.2 %) - monthly minimum charges of 1731 CZK in advance *,
- health insurance (13.5 %) - monthly minimum charges of 1601 CZK in advance **
* 3rd-Country Nationals (US citizens especially) who are able to show that they pay social charges in their home country do not have to pay the social charges in CZ.
** 3rd-Country Nationals who do not have a Permanent Residence Permit do not have to pay the health charges (because they already paid for health insurance for the duration of their stay).
With a zivnostensky list, 60% (used to be 40% in 2009, and 50% before) of the total revenue is taken as base for the income tax of 15%. The total income tax is then reduced by certain tax benefits.
Half of the base is taken as base for calculating annual social- and health charge totals. From these totals the monthly advances are deducted, and the remaining sum you will still have to pay at the end of the year. Alexio recommends reserving a realistic sum of money during the year if your income is above the minimum, because you will need to pay all of sudden 10's of 1000's at once (!)
An often-heard question is how much all these tax, social and health charges are going to reduce the earned income. For this purpose we have made this Excel Živnostenský List cost calculation sheet, which you can download here.
In short, in most cases the total charges (income tax, social charges, health insurance) will be around 15% of your total revenue, so about 85% of what you have earned you will have at your disposal.
VAT registration - EU Sales List
If your expected turnover in 12 consecutive months is over 1.000.000 CZK, you are obligated to register for VAT. This means that every month / quarter you will have to file VAT reports and all your invoices need to include VAT.If your turnover is small, you can choose to voluntarily register for VAT, either at the start or when you -after a couple of months- expect to hit the 1.000.000 CZK.
Bear in mind that VAT can not be claimed back on expenses before the VAT registration date, except for business startup costs. (restrictions apply With invoices to customers in the EU, you will have to file monthly / quarterly EU Sales lists, see