Guide to the duties after setting up a self-employed trade

*Starting in 2025, new self-employed individuals will pay reduced social security advance payments. This relief applies during the first three years of business (the year of commencement plus the following two years), provided you have never been self-employed in the previous 20 years.

When and how should you pay your contributions correctly?

Self-Employed Individuals Engaged in a Secondary Activity

A secondary activity is considered a form of supplementary income, so you do not pay contributions during the first year of business. Most often, people engage in a secondary activity while employed or as individuals for whom the state pays insurance (e.g., retirees, students under 26, people on parental leave, etc.).

• Health Insurance: As a self-employed person who is also employed, you do not pay advance payments to the health insurance company. You will pay them in a lump sum only if an underpayment is determined after you file your annual income statement. Other self-employed individuals engaged in a secondary activity pay advance payments starting in the second year, which they calculate based on their annual income statement.
• Social Security: If applicable, your social security contributions may be assessed retroactively, and starting the following year, you will pay monthly advance payments at the minimum rate (for 2026, the amount for a secondary activity is 1,574 CZK). However, this applies only if your gross profit (i.e., income minus related expenses) exceeds the threshold amount (which is 117,521 Kč in 2026).

Consider whether the flat-rate tax is right for you

In addition to separate insurance premium payments, you can opt for the so-called flat-rate tax. Under this system, you pay a fixed amount each month (9,162 CZK in 2026) regardless of how much you actually earn. This amount covers social security, health insurance, and income tax.

The advantage is that you do not have to file a tax return (provided you meet the conditions for the flat-rate tax). However, it may not be worthwhile for self-employed individuals with low incomes—for example, with an annual income of 200,000 CZK, you’ll pay 109,944 CZK in flat-rate tax in 2026, which represents more than half of your income. It is particularly beneficial for those with an annual income between 700,000 and 2,000,000 CZK who take advantage of minimal tax credits.

You must opt in for the flat-rate tax either when you first register your business or by January 10 of the given year. You’ll then determine the specific payment amount after being placed in one of three brackets based on your revenue.

Get Familiar with Taxes and Accounting

As a self-employed individual (who does not use the flat-rate tax regime), you are required to pay income tax. Think ahead about how you will calculate your expenses.

What are the methods of taxation for self-employed individuals?

Depending on the nature of your business and your financial situation, when you start your business you’ll likely choose between the first two methods of self-employed taxation listed below, which are governed by the Income Tax Act:

How do you calculate income tax and file a tax return?

The basic personal income tax rate is 15% and is calculated based on profit (the difference between income and expenses). However, if your income exceeds 1,762,812 CZK per year (i.e., 36 times the average wage for 2026), you will be subject to a higher tax rate—23%.

Every self-employed individual is required to file a tax return that summarizes all income and expenses for the past year and is used to calculate income tax. The tax return must be filed electronically via the Moje daně portal or a data box by May 2 of each year. At the same time, any outstanding tax balance must be paid.

If you find an error in your original tax return, you can file an “amended return.” However, if the tax office discovers the error, you’ll have to file a supplemental return.

Did you know that self-employed individuals used to have to register for income tax with the tax office? Today, this obligation applies only to legal entities. Self-employed individuals fulfill their legal obligations to the tax office by filing a tax return.

Is it worth it for you to become a VAT payer?

You can become a VAT payer voluntarily or mandatorily —if your annual revenue exceeds 2 million CZK. Although the administrative burden of being a VAT payer is more complex, it may be more advantageous for you to become a voluntary VAT payer in situations such as these :

• You purchase most of your goods or services from VAT payers.
• Your customers are predominantly VAT payers.
• You also do business abroad.
• You purchase goods or services at the standard VAT rate but sell them at the reduced rate of 12%.
• You plan to purchase high-value assets.

A special type of VAT payer is the so-called “identified person”. Under certain conditions, a business owner who conducts business abroad becomes an identified person. This could be, for example, the owner of an e-shop selling goods abroad, or a freelance graphic designer who pays for ads on Instagram or uses a license for a foreign software program.

Learn How to Issue Invoices Correctly

Whether you’re a VAT payer or not, issuing invoices is an integral part of running a business. The main difference lies in the scope of information that must be included on the invoice.

What information must be included on invoices?

VAT payers most commonly issue two types of documents:

A simplified tax document may be issued for amounts up to 10,000 CZK, including VAT, whether the payment is made in cash or in advance. It must include:

• the seller’s identification,
• the seller’s VAT ID number,
• the document reference number,
• a description of the goods or services provided,
• the date the receipt was issued and the date of the taxable transaction,
• unit price excluding tax and any discount,
• price including VAT and the VAT rate.

In addition,a standard tax document must include the buyer’s identification, including the tax ID number, the VAT base, the VAT amount rounded to the nearest crown, the unit price excluding VAT, and any discount not included in the unit price

What are the options for issuing invoices?

There are several methods and tools you can use to issue an invoice:

• Manual invoicing —suitable if you issue only a small number of invoices. The downside is that it is time-consuming and prone to errors.
• Online invoicing apps —invoicing apps allow you to issue invoices from anywhere. You can usually integrate them with your accounting and banking systems, so you have all your documents neatly organized in one place (e.g., Fakturoid, mPohoda…).
• Accounting software – provides a comprehensive solution for bookkeeping, with the ability to issue invoices being just one of many features. For sole proprietors, accounting software is usually unnecessary.