4 things to sort out when you start making money on top of your salary
Lots of expats earn extra money on top of their salary every month, by giving language lessons, writing articles, selling their art and crafts, etc. If that’s your case, too, or if you’re slowly starting your own business, here are the 4 things you should address to receive such income completely legally.
(However, if you’re thinking of starting a proper business, to have it as your main income, this article won’t give you the right answers. Instead, start in our guides Becoming self-employed about setting up the license and Being self-employed about the taxes)
1] Your residence permit
Let’s start with the easiest. You can earn money on the side, even start a small business, with your current residence permit; you don’t even need to contact the Immigration office to let them know of your new activities.
This same applies even to non-EU foreigners, as long as you continue the primary purpose of your stay (e.g. employment, studies, family reunion); the Immigration office doesn’t care that you do business on top of that.
If you have an Employee Card, you don’t need to report to the Immigration office that you started a business. However, quitting the job to become self-employed only, ie. changing the purpose of stay to business, is possible only after 5 years.
2] Business permit
Depending on what you’re selling or what services you’re providing, you might need a business (trade) license, i.e. živnostenské oprávnění.
No license needed
This applies to writers, reporters, performers, artists – they simply sell their art and creations without the need for a business permit.
Trade license needed
Do you get paid for any of these activities? Programming, web design, marketing, event production, research, training and lecturing, teaching languages, translations and interpreting, photography, handicrafts, cleaning, food preparation, trading, wholesale, retail, import, export, etc. These are the so-called unqualified trades and you need to get a trade license to offer them legally. (You can see the complete list of trades here in English or a more user-friendly online version in Czech.)
Getting the trade license is quite simple, and can be done in under one week. You fill in an application, attach a clean criminal record, show your lease and pay 1 000 CZK. Read our guide Becoming self-employed for more detail instructions.
Trade license needed, plus also a certificate/diploma
If you run a bakery, or any hospitality & catering service, hairdresser’s and cosmetic services, carpentry, plumbing, forging, constructions etc., your activity belongs to the so-called vocational trades and you need to have a certificate/diploma to get your trade license.
If you offer legal, health or financial services, your trade belongs to the highly regulated permitted trades, and you need to become a member of the professional association on top of having the certificate/diploma.
As your salary, your extra income is taxed too, thought differently.
Income tax is 15% of your profit. Profit = gross income minus business expenses. You don’t need to keep track of your exact expenses, you can simply declare it to be 60% of your income (without showing a single receipt). Do the math in your head, and this means that your tax is effectively 6% of your gross income.
(There is a higher tax if your gross salary + business profit in a year was over 1 867 728 CZK.)
Next to taxes, you are required to pay other contributions to the state:
The contribution is 6,75% of your profit.
Social security payments
You don’t pay anything if the profit from your extra income in the previous year was less than 93 387 CZK (in 2022). With 60% lump sum business expenses, this translates effectively to 19 455 CZK average in your monthly invoices – if your extra income is less than that, you don’t pay any extra social security payments.
If your business income is higher than that, the social security contribution is 14,6% out of your profit, or the monthly minimum of 1 137 CZK.
The good news is that your accounting is super simple. You only need to keep track of your income throughout the year. No need for a special bank account, no need to keep receipts of your business expenses.
The bad news is that you still have to communicate with the authorities, no matter how small your profit was: the tax office, the Social Security Administration and your health insurance company. Once a year (in January/February/March), you send them a report of your profit from the previous year. It’s a report of both your business income and also your employment salary; unfortunately, your employer can no longer submit your tax report in your stead.
This is also when you pay your taxes (+ social security and health insurance contributions).
For your first tax return, we recommend you hire the help of a professional. Or you can try using online tax applications that will lead you through the process of filling out the form. We recommend some here.
Hope this list helped. If you still have questions, you can always contact our consultants.