Czech Republic Global Payroll & Tax Information Guide
The Czech Republic is one of the most successful transition economies in terms of attracting foreign direct investment. Since 1993 more than EUR 100 billion in FDI has been recorded. Multinational companies based in Czech Republic such as 3M, Coca Cola, Johnson & Johnson, Vodafone, Cisco and Microsoft have all been successfully operating within the Czech Republic.
Key factors such as a well-educated and skilled labor force, favorable labor costs, central location in Europe and advanced infrastructure all make it an attractive location for Multinationals.
Our Czech payroll partner Fučík & partneři s.r.o. has detailed some key points companies should consider when setting up in Czech Republic from a Global Payroll prospective.
What’s new in Czech payroll
- In 2018, fathers of newborn children will have a new opportunity to take paid “father’s leave”. This is to help families cope better with their new situation.
- The Czech parliament didn’t succeed in passing the new Labor Code before parliament elections, as was planned, because of many controversial issues. And so the planned changes including, for example, new provisions on managing employees, home office provisions or annual leave changes had to be postponed.
- The minimum employee compensation granted for 2018 has already been announced by the Czech Government.
Basic facts on payroll in the Czech Republic
Employee income is subject to several levies in the Czech Republic, these are income tax, social security insurance, and health insurance. All three types of employee levies mentioned are handled by employers. Employers are obliged to deduct the employee contributions from the employees’ gross wage and transfer the amount to the particular authority. Let’s look at each of them in more detail.
Public health insurance
Public health insurance in Czechia is a solidary insurance system. This provides all participants in the PHI system with public health services in the same scope no matter how much he/she contributes to the system. It is obligatory for employees to participate in the insurance system and the insurance premium is paid partly by employer and partly by employee. Health insurance is arranged for by 7 licensed health insurance companies and each employee can choose which of them he/she wants to use.
This insurance premium, in fact, contributes to three systems: pension insurance system, illness insurance system and the state fund for employment policy. It is obligatory for employees to participate in all of them. The pension insurance ensures employee pensions, the amount of which depends on the duration of insurance and premiums paid. The illness insurance protects employees against income fall in case of illness. Again, the insurance premium is paid partly by employer and partly by employee. The social insurance is arranged for by the Czech Social Security Agency (CSSA).
This tax is calculated from gross gross income. The gross gross income is gross income plus the insurance paid by employer. Employees may be eligible for various kinds of tax relief. The basic one is applicable for nearly every employee. Further, there are tax relief on dependent children, tax relief on dependent spouse, tax relief for students under 26, and for people with a disability. Some of these reliefs are applied monthly, others once a year.
There is also additional solidary tax paid by employees with high income.
The income tax is arranged for by financial offices.
2018 Rates in Czech Republic- overview
Each employer has to register with the authorities when starting to employ people in the Czech Republic. It is also necessary to register each employee to the health insurance and social insurance system.
It is obligatory to report the insurance assessment base and premiums each month.
After the end of the calendar year there are other duties, especially settlement of employee income tax and reconciliation of the withdrawn income tax, with the financial office. The employer is also obliged to report details of the social security insurance.
For a complete list of employers’ duties when employing within the Czech Republic and international payroll services contact us today!