Social insurance and health insurance for individual entrepreneurs in 2021 in the Czech Republic
And what will be your expenses during the first year of doing business? You will have 3 mandatory payments: social security contributions and a health insurance company in the form of advances, plus income tax. Like every year, this year, compared to the previous year, the minimum monthly advances for social and medical insurance have increased.
- Minimum social insurance advance: CZK 2,588 (CZK) per month (in 2020 it was CZK 2,544). If working as an SOLE PROPRIETOR will not be your main place of work, i.e. you have a main place of work, and as an individual entrepreneur you only earn extra money, then you can earn up to 85,058 CZK in 2021, without you having to transfer money to social insurance every month.
- Minimum advance for health insurance: CZK 2,393 per month (in 2020 it was CZK 2,352). If working as an SOLE PROPRIETOR will not be your main place of work, i.e. you have a main place of work, and as an individual entrepreneur you only earn extra money, then during the first year you do not have to pay advances on health insurance at all.
Income tax for individual entrepreneurs: 15% of the taxable base, the amount of which is calculated when filing a tax return as the difference between income and expenses. As expenses, you can deduct the real costs necessary to secure income, or a fixed interest rate. In the case of documenting real costs, it is necessary to record all documents for the purchase of goods and services necessary for your business. Since this is a relatively complex and time-consuming process, most sole proprietors prefer to apply a fixed interest rate.
Fixed interest rate: when is it appropriate to use it?
To calculate the taxable base of an individual entrepreneur, you can use a fixed interest rate of 30%, 40%, 60% or 80%, depending on the type of activity.
- 80% of income from agricultural production, forestry and water management, and income from craft activities; the maximum amount of declared expenses is CZK 1,600,000.
- 60% of income from licensed activities (the so-called free, related and licensed activities); the maximum amount of declared expenses is CZK 1,200,000.
- 40% from other activities (author’s work and liberal professions); the maximum amount of declared expenses is CZK 800,000.
- 30% of income from the rental of property included in commercial property and from income from the rental of real estate or apartments; the maximum amount of declared expenses is CZK 600,000.
The undeniable advantage of using a fixed interest rate is practically zero administration during the year and much easier tax return preparation. But if your real expenses exceed the flat rate, choose to document your real expenses, otherwise you will pay more in taxes than you should.
Registration of a private enterprise in the Czech Republic can be performed by our company, if you have any questions, write or call us.