Do you want to start a business without risking your steady income and putting your life in uncertainty? Find out what running a business while working means.
Business while employed (i.e., supplementary self-employed activity) is an ideal way for many people to run a business without risking their steady income and exposing their lives to uncertainty. It allows you to pursue your business ambitions and build your own business or service alongside your main job. Self-employed status serves as an additional source of income and differs primarily in terms of tax accounting, advances, and contributions. Which are they? We will explain this in this article.
What Do You Need to Register a Trade in the Czech Republic?
Registering a trade in the Czech Republic is not complicated at all, it only requires a few steps. First, you need to decide whether you want to run your business as a self-employed person or set up a company. To obtain a trade license, you simply need to fill out an application at the trade license office (either in person or online) and pay the fee. The office will report the start of your business to the tax office, the health insurance company and the and the social security administration on your behalf. You will receive an extract from the trade register and an assigned business registration number. Setting up a company can be more complicated and may require the help of professionals.
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What about Insurance and Taxes?
When you run a side business, you are required to file tax returns and pay taxes properly. Contributions for self-employed individuals consist of payments for social and health insurance. The amount of contributions depends on the income of the self-employed individual. Find out what you need to know about taxes and insurance.
Health Insurance
If you run a business while working, your employer pays the minimum health insurance for you. You don't have to pay any compulsory contributions in the first year of business. In the following years, the contributions are fixed. The amount of these advances is determined by your actual income and does not apply to the minimum levies set for your main occupation.
Social Insurance
If your income from secondary activities is less than 96,777 CZK (in 2023), you are not required to pay social insurance.However, if it exceeds this amount, you must contribute to social insurance and in subsequent years, also pay monthly advances, the amount of which will depend on your profits.
Tax Return
From your employer, you request a 'Certificate of Taxable Income,' which you submit with the tax return you must file as a self-employed person. However, unlike main self-employed workers, you cannot claim a flat-rate tax. You can claim flat rate expenses as a percentage of your income and various tax credits. As an employee earning income from self-employment, you fill out Attachment No. 1 of the tax return.
Expenses and Discounts
You can claim flat-rate expenses and various tax credits. In addition, you can deduct the non-taxable parts of the tax base under the Income Tax Act. In the case of a flat-rate expenditure, the expenditure is calculated as a percentage of your income.
How Does the Employer View Business Activities while Being Employed?
If you decide to do business while working, it is a good idea to read your employment contract. Some contracts may include clauses that restrict secondary business activities. In some cases, you may need to get written consent from your employer. It is always better to be transparent and inform the employer about your intention in advance.
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