SUPERCEDED

III.   Self Employed Individuals

III SELF-EMPLOYED INDIVIDUALS

To start a business, foreign individuals must obtain:

• a trade certificate or a trade license document,
• a Residence Permit "Green Passport" (unless they appoint a qualified representative)

A Residence Permit is issued by the Passport and Visa Department. It is granted for a limited period and can usually be extended.

TRADE LICENSING OFFICE

The general conditions which must be met by individuals for engaging in a trade are:

• a minimum age of 18 years
• legal competence
• trustworthiness

The following are required to obtain a tradesman's license ("Zivnostenské oprávnení") :

• Speak Czech (in certain cases)
• Residence Permit
• No criminal record (checked by the Central Criminal Register in Prague 4)
• Qualifications (specified by The Trade Licensing Act. Foreign qualifications must be approved by the appropriate Czech Ministry or the Chamber depending on the profession)

Unless an individual is unable to fulfill these requirements, then an authorized representative ("odpovedný zástupce") must obtain the license. That person is responsible for the conduct of the business.

BOOKKEEPING

Businesses:

• double entry bookkeeping system (required when registered in the Companies Register)
• single entry bookkeeping system
• no recording of expenses when the taxpayer claims the statutory expense deduction

The are percentage statutory exclusions for income derived from a trade and other business activities, income derived from industrial or other intellectual property and from copyrights, or for income derived from agricultural production, forestry, and water resources management. Contributions for social security and health insurance are not included and may be claimed additionally. The depreciation of fixed assets is included in the exclusion.

TAXES

Adjusted gross income is the taxable income after deducting tax allowable expenses. It excludes non-taxable income.

Expenses have to be documented as statutorily required (which is more onerous than for the Anglo-Saxon systems).

Alternatively, the statutory exemptions (in lieu of documented expenses)  may be claimed.

SOCIAL SECURITY

Social security covers:

• pension
• sickness
• government unemployment insurance

A self-employed individual is required to pay contributions for pension and government unemployment insurance, if their net income for the year exceeds the statutory amount . If the self-employment activity did not last for the entire year, the amount above is divided by 12 and multiplied by the number of months in which the activity lasted for at least part of the month in the calendar year.

If the income does not exceed the above amounts, self-employed individuals may make voluntary contributions. In such a case, the registration with the Social Security Office is required.

The sickness insurance is voluntary.

If the self-employed is required to pay the social security for the previous year (see above), they are required to pay estimated contributions, which is levied at the same rates as above on the provisional base for estimated contributions (see below).

The provisional base for estimated contributions, pensions, and unemployment insurance is the provisional base for the previous year (see above) divided by the number of months in which the activity lasted for at least part of the month in the calendar year.

In the first year of business, the self-employed individual is not required to pay estimated contributions, unless they registered for voluntary insurance (see above).

Self-employed individuals must notify the Social Security Office, that they have started business, within 8 days after the end of the calendar month in which they started business.

MEDICAL INSURANCE

Any person who either has a permanent residence in the Czech Republic or works for a firm residing in the Czech Republic must have medical insurance. Self-employed individuals pay medical insurance to the Health Insurance Office in advance premiums based on a percentage of the net income.

Self-employed individuals without a permanent establishment in the Czech Republic are not required to pay any medical insurance. They may sign up for a special insurance (with higher premiums).

NB. Medical insurance covers hospitalization, prescriptions, and doctor's fees. The sickness fund pays the "employee wages" during absence for illness.