Tradelicense.cz / Accounting Requirements
Common Question: How much of my income disappears?
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.
It shows exactly how much taxes, social- and health charges you will pay for a certain level of income for the first year.
Filing a Tax Return (Income Tax):
At the end of the year, 15% income tax needs to be paid over 60% (2010) * of the total business revenue. The income taxes are reduced by certain deductions (if you apply for them).
* The % depends on the kind of tradelicense you have, some have a higher percentage, some lower. In 2009 the percentage was 40% and 60% expense deduction. For 2010 it is the other way around, only 40% expense deduction.
This may change again during 2010.
Also, any other sources of (global) income need to be taken into account, not only the income generated in Czech Republic. Especially in the first year, you may have to still pay taxes in your home country.
Social Charges and Health Insurance may change after filing the Income Tax Return
Once your taxable income has been calculated and filed in a tax return the social- and health offices will send a correction invoice for that year, if you earned more than the minimum income. Therefore it is clever to reserve money if you know in advance your income will be substantially higher.
The second and all the following years, the social- and health charges are calculated using the income of the previous year. If this income was higher than the minimum, your social- and health charges may increase significantly.
Example: based on 750.000 CZK income the new charges are almost 9.000 CZK / month, instead of some 3.000 CZK previously
VAT Registration over 1.000.000 CZK (40.000 euro)
The basic rule is: if your invoices exceed 1.000.000 CZK within 12 months (not per calendar year, but from the moment of estimation) you are obligated to register for VAT
EU Sales List - EU VAT reporting
In case you are VAT-registered and your customer based in the EU is as well, then you are obligated to file monthly (for goods) or quarterly (for services) electronic EU Sales Lists. This is a specialized job, which you really cannot do yourself.
Why hire an Accountant:
As you understand, registration and communication with the taxoffice, social- and health charges as well as the accounting during the year (think of VAT reporting, EU sales reporting, import / export documentation, hiring people etc. etc.) and filing a tax return at the end of the year is work for a specialist.
We do not recommend doing this yourself. An entrepreneur needs to comply to many rules in Czech Republic and claiming 'that you didn't know' will not excuse you from the penalty.
Let us handle the paper side of your business for you, because doing business in a foreign country no doubt will take all of your time and energy and (almost) no entrepreneur is a specialist accountant or tax advisor. A good accountant will not only save you a lot of time, but also money and prevents you from getting in trouble with the authorities.
Why hire an Alexio.cz Accountant:
- We talk to you in plain English, no guessing what we are trying to say,
- We will help you start and run your business, registering you and your živnostenský list properly, actively helping you as your financial partner,
- We will teach you how to do business in Czech Republic and give you templates free of charge,
- In case you come to us with a problem, we will solve it quickly for you,
- We offer full service, you do not have to figure out yourself what next,
- We specialize in expats and have knowledge and experience an average accountant does not have.