Written by David Creighton
As well as sorting out tax and healthcare, social security is another issue foreigners settling in the Czech Republic have to consider. Here is a basic outline of some of the factors to take into consideration. Please note that this article is intended as an overview and not as a detailed guide: for expert advice you should always consult your local social security office or an accountant/tax adviser.
Do I pay social security contributions in the Czech Republic?
First of all there is the complex issue of whether you should pay social security contributions. If you are an EU citizen then you are obliged to pay (with certain exceptions – see below) because the Czech Republic is now an EU member and part of an EU-wide reciprocal system. This means for example, that if you have worked in the UK and then move to the Czech Republic and live there until you retire you could draw a pension here. But what if you´re already paying contributions in your home country? I recently contacted the UK social security agency about this and they couldn´t give me a definitive answer, although they advised me that the situation should be clarified in the future. In theory, given the fact that I pay contributions somewhere in the EU, i.e. the Czech Republic, that should be sufficient, but for the time being I am paying in the UK and the Czech Republic.
If you are non-EU citizen it may be the case that you don´t need to pay social security contributions because your home country doesn´t have a social security arrangement with the Czech Republic. If you are not sure about this consult the local branch of the Czech social security authority (Česká správa sociálního zabezpečení) (see below) or a tax adviser.
Bear in mind that if you are self-employed but working in certain sectors not covered by a trade licence you are not obliged to pay social security contributions. For example, if you are a self-employed artist, journalist or musician. In such cases you are not obliged to pay social security contributions, although you can choose to inform the social security office and arrange payments if you wish. If you choose not to pay though you will not be entitled to certain benefits, e.g. a pension, if you are entitled to receive one. For further information contact your local social security or a tax adviser.
Registering with the Social Security Office
Assuming that you have an obligation to pay social security payments, here is an overview of the process.
If you are working solely as an employee the social security arrangements are fairly simple because everything will be taken care of for you. Your company will inform the relevant authorities and you will be registered to pay social security, with contributions being automatically deducted from your salary. Obviously, there will be a certain level of paperwork at the beginning, and when you start a job you´ll be asked to fill out a form with all the usual details: name, address etc. But once this has been done there shouldn´t be much more bureaucracy to deal with.
If you are working as a sole trader, i.e. on the basis of a trade licence, the situation is more complicated because you have to arrange your contributions yourself.
Once obtaining your trade licence you should inform the local social security office and it will set up all the arrangements for you. Remember to take all the relevant documents, such as your trade licence, residence permit, passport etc. Once everything has been arranged you will be issued with a social security number, basically an eight-digit ‘variabilní symbol´, one of the numbers you often have to fill out when paying contributions at the bank and the number you need when paying social security contributions at the bank or elsewhere.
If you are an employee and you start to work on the basis of a trade licence too then you should register with the social security office as soon as possible. The office will then make the necessary arrangements for you and advise you of the correct procedure. Bear in mind that a key issue for the social security office is whether your income from freelance work is your main source of revenue. If, on the other hand, you are self-employed and you then become an employee (while continuing to work on a freelance basis) you should inform your employer about this change of situation as well as the relevant security office, as soon as possible. Again, they will explain the necessary arrangements and tell you what to do.
Contributions are paid on the basis of the previous year, so the final amount due for 2005 will be determined this year. The payment is calculated on the basis of a social security declaration (Přehled za rok XXXX, or Social Security Survey for XXXX). You should have your completed tax declaration for the previous year to hand in order to fill in the form: some of the information entered on your tax declaration form needs to be entered on the social security declaration.
Bear in mind that if you are an EU citizen and working on a freelance basis you should be paying monthly contributions anyway (assuming you have to pay them) to the local social security office. Then, when you submit the declaration you will pay up the difference between the contributions paid and the final amount due (doplatek) or be entitled to a refund because you have paid more than the amount due (přeplatek). The monthly contribution is basically a deposit, with the full amount you are due to pay being decided on the basis of the social security declaration.
If you are a non-EU citizen you will pay all your contributions for the previous year at once, on the basis of the declaration, with the amount being either a doplatek or přeplatek. And whether you are an EU citizen or not you should submit the declaration, together with the due amount, by 30 April or 30 June at the latest. If you submit after these dates a fine will be incurred. If you intend to pay in June you must produce power of attorney (plná moc) from a registered tax adviser, stating that your social security declaration will be submitted with the contribution by 30 June, and you must submit this power of attorney to the social security office by 30 April. This statement must have the round stamp of the tax adviser. The declaration form will be automatically posted to you, although you can pick up a copy at your local social security office also. It´s not as complex as the tax declaration but it can be complicated enough so as with the tax declaration it´s a good idea to enlist the services of a tax adviser/accountant.
In Prague you should go to the office for the district where you live, e.g. Prague 4. For contact details of the offices in Prague and the whole country see below
Finding your local social security office:
See www.cssz.cz Click on ‘Kontatky´ (or ‘Contacts´ in the English version and then select Prague or the relevant region (kraj)
The big four accountancy firms. (Deloitte, Ernst & Young, KPMG and PriceWaterhouseCoopers) all provide help tax services. The Chamber of Tax Advisers (Komora daňových poradců) also can also help. It has a list of registered tax advisers.