Personal income tax in Czech Republic is at 15% rate. However, not all income must be taxed. For example, under certain conditions, occasional earnings are not a subject of taxation at all. Not even as a subject of social security or obligatory health insurance contributions. As long as such occasional income doesn’t exceed 30000 CZK within the given tax year, and it truly qualifies as occasional, you don’t have to declare it in any way. You simply don’t declare it in any way when you do your taxes in Czech Republic. Moreover, because this is absolutely legal, whoever pays you this money can declare it as tax deductible expenses in their accounting. If you understand Czech, check out paragraph 10, section 3a of the Income Tax Act (586/1992 Sb.) to see how the law defines this exemption.
What is considered occasional in the context of income tax in Czech Republic?
It’s simple. It is any income coming from irregular and non-reoccurring activities. A typical example would be if one day you rent out your car to someone. It doesn’t have to be your car, can be any tool or equipment. Or a friend asks you to help them run their food truck or translate their menu. Or you might want to sell extra veggies you grew in your garden, or berries you collected in the forest. In all these cases the income sources from one-off events, something you didn’t really plan for. Otherwise it cannot be classifies as occasional, especially if you purposefully seek for such opportunities. For example, if you advertise your translation services online or register your room on Airbnb, it would be seen as entrepreneurial activity and any income acquired in that way is taxable.
If you are self-employed, obviously it cannot be anything that you have a trade license for. For example, if you have a trade license for Translations and Interpreting activities (#69), you should do and tax any translation work as part of your business. At the same time, unless you also have a trade license for teaching, i.e. Extracurricular education and training, organizing courses, training, including lecturing (#72), you could agree with someone to teach them English for a month and that income would be considered occasional.
How to declare this in my tax return for income tax in Czech Republic?
If you receive such income, you don’t have to declare it in your taxes in Czech Republic in any way. So there is no need to do anything related to accounting for this. You can have many this kind of one-off gigs working for different people and businesses throughout the year. As long as such income fulfills the condition of being occasional, and the total amount you earn in the course of one fiscal year doesn’t exceed 30000 CZK, you are fine. Otherwise, you’ll have to tax it all at 15% rate and declare it as Ostatní příjmy (Other types of income) in your tax return attachment #2.
How would a business handle this with their accountant?
Let’s say you are on the business side. So, you want to “hire” someone for an occasional activity and provide them with such occasional income. You probably want to declare these expenses in your accounting and to apply deduction from your business income. In such case, your accountant will require a document proving that this was a one-off agreement. They will also require prove of the fact you actually paid for it. The easiest way to go about this is to sign a short contract of work (smlouva o dílo) with the person who you want to “hire”. Ideally, you’d also pay that person in cash and have them sign a petty cash form (výdajový pokladní doklad) for that amount.
However, a less strict accountant will probably agree to process this even if you pay via bank transfer. As long as they can see the name of the recipient matches that in the contract, you are fine. Such expenses count as deductibles when you do your taxes in Czech Republic as a business.
Weather you are going to claim these expenses with regards to income tax in Czech Republic or not, you can use this simple smlouva o dílo template which I used in the past. Download it below. It’s free. It provides a simple legal framework for your activities and shall keep the accountant happy.