If you are a Czech citizen or have permanent residency in the Czech Republic, you have to pay tax on your income earned inside the Czech Republic and abroad. If you are a foreign resident and you are employed in the Czech Republic, you only have to pay tax on the income you earned in the the Czech Republic.
Income tax for employees
If you are an employee, your employer is obliged to deduct the appropriate taxes directly from your salary on a monthly basis. All the paperwork will be done for you. Obviously, there are some registration papers you need to sign when you first start your work. However, your employer will provide all the necessary information on that for you.
Income tax for self-employees
If you are self-employed the situation is more tricky. Within 30 days of receiving your trade licence you should inform the relevant financial office (finanční úřad). They will set up all the arrangements for you. (Find your appropriate financial office at: www.statnisprava.cz, click on Finanční úřady).
This registration process may take quite some time, so be prepared to wait. As soon as everything has been arranged you will be issued a tax identification number (daňové identifikační číslo). It always starts with CZ and is followed by a 10-digit number consisting of your birth registration number and a general registration number (identifikační číslo).
As a self-employee you will have to pay your income tax in advance. The advances are determined on the basis of the previous year's tax return. If you are starting a new business the prepayments are calculated on the basis of your expected income. Therefore, it is important to keep all documents concerning your earnings, as they are needed in your tax declaration.
The income tax declaration along with your tax payment has to be submitted by March 31 each year. It is also possible to submit the declaration by June 30, but only with a special statement by a tax adviser, the plná moc, specifically saying that you are going to submit all documents by the end of June. If you miss any of these deadlines a fine will be incurred.
Since the tax declaration is very complicated to fill in, it is recommended to ask a tax adviser for help. The Chamber of Tax Advisers (Komora daňových poradců) can provide a list of registered tax advisers.
For more information on taxes in the Czech Republic, see our Money section.