Payroll in Czech Republic
What tax considerations are there?
Personal Income Tax
Tax residents in the Czech Republic are taxed on worldwide income, whereas non-residents are only taxed on income from within the Czech Republic. Income tax is set at a standard rate of 15%, regardless of salary. Employees must also make social security contributions which cover pensions, unemployment benefits, and sick pay. The amount payable depends on each individual’s situation.
Tax payments from employees are withheld by employers at the time of pay. Individuals are responsible for filing their own tax return forms annually, however, and the deadline for this is April 1st on the following year.
Corporate Income Tax (CIT)
Any resident companies in Czech must pay CIT on all income, however foreign companies need only pay tax on income derived from within the Czech Republic. Corporate Income Tax is 19%.
Businesses can choose between using the calendar year, or their own accounting year for tax purposes. Either way, tax returns and payment is due within three months of the end of the period. In the Czech Republic, companies must pay tax advances either quarterly or six-monthly – these payments are based on the tax liability of the previous year. After these payments, the amount due at the time of the tax return is whatever is outstanding. In the event of overpayment, there will either be a refund or a tax credit for the following year.
HR in the Czech Republic
What are the regular working hours in the Czech Republic?
In the Czech Republic the normal working week is 40 hours. No more than an additional 8 hours can be worked and these must be treated as overtime. The working week is Monday to Friday, and hours are usually within 8am and 6pm. Employees are entitled to a minimum of 30 minutes rest after 6 hours.
Vacation, maternity and sickness
After having worked for 60 days, employees are entitled to 4 weeks of holiday annually. The dates this can be taken is up to the employer’s discretion, however employees are entitled to at least two consecutive weeks. In addition to this there are 14 days of public holidays during which employees are not expected to work. Those who do work are entitled to extra pay according to Czech law.
Pregnant employees are entitled to maternity leave of up to 28 weeks for one birth, and up to 37 weeks for multiple births. Maternity pay is paid to women who have worked for a minimum of 270 days in the preceding two years. This is paid between 6 week prior to the birth and 6 months after the birth, and is 70% of an employee’s normal salary.
Employees in the Czech Republic are allowed up to 14 days of sick leave. Employers must pay employees 60% of their average earnings during this time.
Both employees and employers must give a minimum of two months notice to terminate the contract. Employers cannot give such notice during ‘protective periods’ such as pregnancy or maternity leave.
Under ordinary circumstances, if an employee is let go they are entitled to severance pay. The amount of this will depend on how long they have been employed; one month’s worth of salary if they have been employed for up to one year, two month’s salary for between one and two years, and three month’s salary for anything over two years of employment.