Secondary self-employment

Secondary self-employment – what is it?

Your economical activity is considered a secondary, if you are:

• An employee receiving at least a minimum wage (in the year 2020 it is 14 600 CZK) and participating on sickness insurance (through your employer).
• A pensioner (any pension is ok).
• A parent who receives parental allowance or maternity benefit.
• A caretaker taking care of a child younger than 10 y.o., that depends on the other person.
• Army or civil servants
• A student up to 26 y.o., who is “preparing for the future job”.

Trade license along with employment

If a person is self-employed and is not employed for part of the year (e.g. a monthly gap between employers), they have no legal reason to consider the activity as secondary. In that case self-employment becomes the principal activity for this period. Czech Social Security Administration and the relevant health insurance company must be notified of this fact within eight days.

Do you want to do business in the same field as your employer? Then you need their written consent. However keep in mind, that employer can withdraw his consent at any time. Then you have to close your business as soon as possible. You must also take into account employers with whom you have signed a non-competition clause. In this case, you may not work in the same field for another year after your activity has ended.

Taxes

Every self-employed person, who has income for more than 6 000 CZK per year from both secondary and principal activity, must file a tax return at the end of the year. In addition to your business income, you must include your employment income in your tax return. Therefore, you need a taxable income confirmation from your employer. In terms of costs, you can apply expenses as a percentage of your income (lump sum), depending on your business. So you don’t have to keep a record of your expenses, but simply deduct them as a percentage from your revenue. However, if your business costs are higher than your percentage revenue calculation, we recommend that you apply actual costs. Read more about lump sum and real expenses here.

Social insurance

1st year of business. When you have secondary self-employment, you do not have to pay monthly social security advances in the first year. By the end of April in the year following the first year of business, you will submit an overview of income and expenditure to the relevant social security office. You will make a one-time payment according to your profits.

If your gross profit (total income minus expenses) falls under the limit (for 2020 it is 83 603 CZK), you are not obliged to pay social insurance at all. If you do business for only a part of the year, the limit is reduced by one twelfth for each month that you have not done business.

Other years of business. In the following years, you will be paying monthly advances, which the Social Security Administration will calculate based on the profits of the previous year. The minimum amount of advances for 2020 is 1 018 CZK. Then, each April, you will submit an Overview that will give you an overpayment or underpayment.

Health insurance

You never have to pay advances for health insurance. You will pay it at the same time as submitting an overview of income and expenditure to the insurance company. The total amount is calculated as 13.5% of half of the gross profit for the past year. It applies to you only if you participate in state health insurance in Czech Republic.

Is your activity subject to EET?

Be sure to verify if your business is subject to the Electronic Sales Register Act. You are subject to EET if you operate in accommodation or catering services retail or wholesale. However, only cash payments are registered. If you do not want to deal with EET, only accept cashless payments. The cash invoice is usually subject to the EET.