Self-employment

Becoming Self-Employed

The self-employed natural person (=FO, fyzická osoba, is most often referred to as OSVČ (=osoba samostatně výdělečně činná, ie. literally “a person with independent earnings activities”), an entrepreneur (= podnikatel) or less frequently as “živnostník” (= licenced trade owner). There are many self-employed individuals in the Czech Republic, a great deal of them carrying out activities alongside their main employment (= vedlejší činnost).

General overview

So if you want to become self-employed, maybe you have a clear business plan in mind, maybe you are just thinking about leaving your job and working by yourself. In any case, you have to deal with mandatory administration first. There are two ways how to start your own business: one option is to apply for a Trade Licence and become a self-employed natural person (=fyzická osoba, or OSVČ = osoba samostatně výdělečně činná) The other option is to set up a company, e.g. a limited liability company (see below in a special section) and to become a Legal Person (=PO, právnická osoba).  The very best source of information is on the Ministry of Industry and Trade (MPO) website.

Here we present a general overview. For particular questions or if in doubt, please contact us.

Licensed Trades and the Trade Licence

Before going to the Trades Licensing Office, you should be more or less clear in what area you want to do your business. Not all business activities are trades. For example, artists who exploit the results of their intellectual creative activities do not need to be authorized to do so, neither do small farmers. However, there are a number of Trades to choose from. The full list of the licensed trades can be downloaded from the MPO website in English.

Basically there are two main types of the Licensed Trades, the first of which has three sub-types:

With only reporting obligation
  1. Free, or Unqualified Trade (Volná živnost) – only the general conditions must be met (see below). These include eg. sales, exports, imports, manufacture of textiles, administrative services, marketing and consulting (with the exception of financial and tax consulting), teaching, etc. You can register/notify several free trades at a time. The administration fee for the first notification of the trades is 1,000 CZK and 500 CZK for any subsequent notification. 
  2. Professional Trade (=Vázaná živnost) – you must prove professional competence for the activity. These include accountants, driving school owners, but also mountain guides or masseurs. If you do not have the right qualifications, you can hire an authorised representative. 
  3. Vocational Trade (=Řemeslná živnost) – you are required to provide an apprenticeship certificate, graduation certificate, diploma or six years’ experience in the field. These include e.g. bakers, blacksmiths and hairdressers.
With concession obligation

Permitted Trade, or Special licence/Concession (=Koncesovaná živnost) – you must prove your professional competence and gain the permission of the relevant state administration body. These trades include, for example, freight transport, travel agencies or funeral services.

Getting the Trade Licence

We have prepared a Step-by-step video of procedure for the self-employment. Video by Zita Řezáčová, the contact person at the Trade Licence Office, Ostrava Municipality. Please, follow information under the video, or check presentation.

What are the requirements?

The Licenced Trade (=živnost) is “a systematic activity carried out independently in its own name, under its own responsibility, in order to make a profit and under the conditions set forth in the ‘Trade Licensing Act’. In other words, you can apply for a Trade Licence if you:

  • are older than 18 years,
  • have no tax overdues/debts at the tax office and overdues/debts of social and health insurance,
  • are eligible for legal acts (evidenced by an identity card*),
  • are an impeccable person (documented by an extract from the criminal record),
  • meet the qualification requirements for a given type of business (see the types of trade above).

*For EU-citizens: European ID is requested

*For non-EU subjects: long-term visa or permanent residence is required. If you first need the trade license in order to apply for the long-term visa, you can get a temporary trade license for the purpose of the application.

Where to apply?

Trade License Office in Ostrava is located in the building of the City Hall (address: Prokešovo nám. 1803/8, 729 30 Ostrava), phone: +420 599 443 080 (English: office 118), +420 599 443 075 (German: office 114), e-mail: jkm@ostrava.cz At the automatic call-out system please choose „Výdej dokumentů“ and then choose: Zita Řezáčová. When entering the building it is the left wing entrance. The clerk will also offer you advice as to how to proceed with the next steps at the office.

List of the required documents
  1. Passport/ID.
  2. Single Registration Form” (download here) – there is no need to bring the document as it will be filled by you electronically on the spot.
  3. Criminal record from your home country or the state of the most recent staying (in case you have temporary/permanent residence in the Czech Republic, the criminal record will not be requested). It can be obtained for EU countries (except for HU, IT, PT, NL and FI) via most Czech Post Offices at the CzechPoint counters. Ask for the Criminal Record (= ‘výpis z rejstříku trestů s přílohou’). There is a CzechPoint counter close to the main central entrance to the City Hall. This process may take up to 25 working days and the fee is 100 CZK. For non-EU citizens, please, contact your Embassy to get the Criminal Record. More guidance on this topic.
  4. Proof that the owner of the real estate where you want to have the seat of your business agrees with Seat Placement – „Souhlas s umístěním sídla“ (Form: “Consent to the Seat Placement” – Natural person, Legal person). If there are more owners, such as the real estate is owned by a married couple, you have to bring a separately filled in and signed form from each of the owners.
  5. Documents proving your professional qualifications (if needed depending on the type of Trade Licence).
  6. Service fee 1,000 CZK.

NB. If you are still staying in a hotel or your landlord does not agree that the seat of your Trade Licence activities is at the premises you are renting, you can rent an office in an office building, or make a ‘virtual seat’. The choice is wide covering various services and it is recommended to choose a good address along with a package of services that will influence the price, eg OFIGO in Ostrava Zábřeh.

What to do after registering at the Trade Licence Office?
  1. You will receive further instructions at the Trade Licence Office. They will send your registration directly to the Financial Authority and Social Security Office (OSSZ = Okresní správa sociálního zabezpečení). It is also recommended to visit the OSSZ  in person, while the Health Insurance Companies usually directly require a visit in person to clarify if it is your main or secondary activity. The OSSZ and Health insurance company will then inform you of when and how to pay the advances for the social and health insurance. These are calculated according to whether the business is your main or secondary activity.
  2. After completing all the requirements, the Trade Licence Office will give you your Identification Number (=Identifikační číslo, IČ, or IČO) and an Extract from the Trade Register.  There is actually no fixed “trade licence” in a printed format. The Extract from the Trade Register serves as proof of all your business activities and it can be downloaded from the Trade Register. 
  3. An important further step is to visit a bank and open a new business bank account in your name and Identification Number. (This should be used only for business purposes and later  reported in your tax files.) After you have done all the above steps you can start invoicing your first customers.
  4. After notifying the Trade and obtaining the Trade Licence, you will automatically be registered as an income taxpayer using the single registration form. You will then file a personal income tax return once a year and at the same time pay the tax: at the latest, by the end of March of the following year. 
  5. You can also volunteer as a VAT payer. If your revenue exceeds a million crowns in the last 12 months, the VAT registration becomes compulsory. The tax authority will assign you your unique tax identification number (=DIČ, daňové identifikační číslo) for communication with the tax authority. It usually starts with ‘CZ’.
  6. For social security and health insurance payment please scroll down.

Self-employment also means that you have 100% liability with all your property including your private property. So an adequate Commercial Insurance of your business activities is vital for some of the Licenced Trades.

Regular payments

You are obliged to pay monthly fees for the social security and for your health insurance.

A) Social security

  • The minimum advances (social security) for 2020 are 2,544 CZK for the self-employed (if it is your main activity). For the secondary activity (parallel with employment where less income is achieved from the trade licence activity) the minimum advances are 1,018 CZK. The advances are changing slightly every year. For the Social Insurance you will be assigned a special number. In the first year of the Trade Licence, everyone starts off by paying the minimum social security contribution. The amount for the next year is calculated according to the business profit in the previous tax year.
  • If the business based on the Trade Licence is your secondary activity, you do not have to pay any advance payments for the first year. And if your annual income does not exceed the so-called decisive amount (for 2020 it is 83,603 CZK), you do not have to pay any social insurance at all. 
  • Also, consider if you want to pay “sickness insurance”. It’s not your legal duty. If you want to pay it then the sickness insurance is paid in the amount of 2.1% of the monthly assessment base. The minimum amount is CZK 126 and it is also transferred to the District Social Security Authority (=OSSZ) account. Sickness insurance makes you eligible for sickness benefits and leave, and for the maternity leave. The sickness insurance starts to be paid only much later after an entrepreneur falls ill (usually even several weeks later), so it rather really covers serious illnesses and many entrepreneurs choose to pay a commercial insurance or put some money aside.
  • For the sake of possible future maternity leave it is very important to start paying the sickness insurance long enough in advance (the whole pregnancy and even sooner) and it definitely pays-off. Precise numbers are to be derived from the income and are worth consulting with specialised social workers.

B) Health insurance

  • The amount paid in contributions depends on your profit (it amounts to about 2.7% of profit), but the minimum is 2,352 CZK/month (2020). In the first year of their trade licence, everyone starts with the minimum health care contribution.
  • The health insurance house will let you know their account number. You will be sending advance payments for health insurance. The identification number is usually the Birth Number (=rodné číslo, r.č.) which is used as the Variable Symbol. As a foreigner, please ask for the variable symbol.
What if Self-Employment is only my secondary activity?

If your income from the Trade Licence activities is low, the advance payments will also be low. You do not have to pay any advance payments in the first year of activities. After filing the taxes the next year the surcharge is carried out and new advances set up. Even if your income is not too high, it is advisable to hire the one-off service of an accountant beforehand in February (the tax files are due at end of March) to help you fill in the forms.

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