Czech self-employed: how to pay for health and social insurance?

As a sole trader, you have to ensure that you pay your levies properly yourself. However, it is easy to get lost in the flood of regulations. That's why we've prepared an overview of the basic obligations.

Compulsory levies in a nutshell

All sole traders are obliged to pay not only taxes, but also health and often social insurance. In addition, every entrepreneur (with the exception of those in the flat-rate tax regime) has to report their income and expenses to their health insurance company and the Czech Social Security Administration (ČSSZ) once a year.

The rules differ, among other things, depending on whether you are running a main or a secondary business. How do you know?

• If your business is your only/dominant source of income, it is usually your main activity.
• If you run a business while you are working, studying, on maternity leave or retired, your business is usually considered secondary.

Let's now look at how levies work in practice.

Health insurance

Health insurance is paid by every entrepreneur (self-employed for both main and secondary activities).

However, the type of activity determines the principles for calculating the premiums. If you have a main activity, you are obliged to pay at least the minimum monthly contribution (see overview table).

In the case of secondary activities, you are not subject to the minimum advance payments - the premiums are always calculated according to your actual income. If you are an employed entrepreneur, you do not have to make monthly payments at all and you pay the insurance premiums once a year after submitting your income and expenditure statement.

If you are a state insured business (while studying, on maternity leave or retired), you also do not pay monthly advances in the first year of your business and you pay the premium for the whole year after you submit your income statement. For the next period, the insurance company will determine the monthly advance payments, which it will calculate on the basis of your statement. For details, see the summary for  self-employed persons for secondary activities.

Calculation of insurance premiums

Self-employed persons are obliged to pay 13.5 % of the assessment base to their health insurer.

The assessment base for the self-employed person's health insurance premium is calculated as 50 % of the tax base. The tax base, or more precisely the partial tax base for self-employment income, is the difference between your business income and the related expenses.

The law also determines the minimum assessment base, from which the minimum monthly contributions are based. Entrepreneurs must pay at least this minimum for their main activity, even if the formula gives a lower amount.

Health insurance premiums for self-employed persons

When to pay the advance payment for health insurance?

Advance payments are due from the 1st day of the calendar month for which you pay the premium until the 8th day of the following month.

Example.

If you pay minimum health insurance premiums, which increase each year, you must pay the new amount from the start of the new year (i.e. by 8 February for January) - so make sure you change your standing order in time. Do the same if you are currently making calculated contributions below the minimum for 2024.

Social insurance

The rules for social insurance are a little more complicated. They are governed by several pieces of legislation, in particular the Social Security Contributions Act and the Pension and Sickness Insurance Acts. So how does social insurance for self-employed workers work?

While the pension insurance and the state employment policy contribution are compulsory, the sickness insurance is paid voluntarily by the self-employed.

Other rules for paying social insurance depend on whether you are in a main or secondary occupation and on the amount of your income.

Main activity

If you have a main occupation, social insurance is compulsory regardless of how much you earn. You also have to pay at least the minimum amount of social insurance to the Social Insurance Institution every month (see the table below).

Secondary activity

You are only obliged to pay social insurance for your secondary activity if your gross annual profit (the difference between your income and your business expenses) exceeds a certain amount - for 2023, the threshold is CZK 96 777, and CZK 105 521 is planned for 2024. You can also register for social insurance voluntarily.

If you pay insurance for your secondary activity, you are also subject to the minimum monthly advance payments, but at a reduced rate (see the overview table).

Calculation of insurance premiums

The amount of the social insurance premium for self-employed persons is calculated as a percentage of the assessment base. Similarly to health insurance, this is set at 50 % of the tax base (from 2024, this will increase to 55 %, but the higher percentage applies only to contributions on income earned in 2024). Again, the law specifies a minimum assessment base.

The annual premium is then set at 29.2 % of the assessment base (28% for pension insurance, 1.2 % for state employment policy).

If you also voluntarily pay sickness insurance, you will pay an extra 2.1 % of the assessment base (from 2024 onwards, this will be 2.7 %).

Social insurance contributions for self-employed persons

Note: The government's consolidation package is to change the way the minimum assessment base is calculated from 2024. Therefore, the amount of minimum advances will increase significantly from 2024.

When to pay the social insurance advance?

You should always pay your pension and sickness insurance contributions by the end of the month for which you are paying.

Example.

What about the next period? From January onwards, you must always pay at least the minimum social security contribution for the year.

• So if you are making the minimum advance payments in 2023, adjust your standing order to the new minimum from January 2024 as shown in the table above.
• Do the same if you are currently making calculated contributions below the minimum for 2024.
• However, if you are paying a calculated advance above the 2024 minimum, you should continue to make payments and start paying the new calculated amount from the month you submit your income and expenditure statement for the previous year (i.e. if you submit the statement in May, you pay the new amount from May).

Overview of income and expenditure

Every entrepreneur who does not use the flat-rate tax regime must submit a statement of income and expenses after the end of the tax period. This is done twice - once for the health insurance company and once for ČSSZ.

The income and expenditure statement is basically an annual statement of accounts with the insurance company and the CSSA, in which you calculate how much you have paid in advances during the year and how much you need to pay back, depending on your income. The calculation also tells you how much you will pay in advance in the following year - again, you must pay at least the minimum for the year.

Example. He uses a 60% flat-rate expenditure and earned CZK 1.5 million in 2023. In his summary, he has calculated that, with this income, the annual premium comes to CZK 40 500. He has therefore incurred an underpayment of CZK 7 836 in health insurance.

He files his tax return electronically with a deadline of 2 May 2024. He submits it on 30 April, so he sends the statement to the insurance company by 30 May and pays the arrears within 8 days of filing.

Flat-rate tax deductions

Sole traders can also voluntarily enter the flat tax scheme. This combines compulsory levies and income tax payments - so the entrepreneur pays a flat amount per month according to his tax bracket. If you comply with the conditions of the flat-rate scheme throughout the year, you do not have to file tax returns or reports.

Although flat-rate tax means less administration, it is not always more cost-effective than standard levies. See our article on flat-rate tax for details.

We will deal with the administration for you.

Are all these rules making your head spin? You're not alone. We'll be happy to help you with your tax and levies. We will prepare your tax returns and statutory reports for you. Leave us a message in the form below to discuss the details.