More and more people work from home in the Czech Republic for a company abroad. The company often assumes that its own payroll covers it. For someone who lives and works here, that is usually not the case: Czech social security, health insurance and income tax apply to work physically done in the Czech Republic, whatever the employer's address.
This guide is written for the company. For the employee's side, see working remotely for a foreign employer while living in Czechia.
Which country's insurance applies
Employer in the EU, EEA or Switzerland: the EU rules (Regulation 883/2004) decide which one country's social security applies. Someone who lives and works only in the Czech Republic is insured here. Someone who works for a significant part (25% or more) in the country where they live is also insured there. Only a temporary posting from abroad keeps the employee in the home system, with an A1 certificate.
Employer outside the EU: the Czech Republic has social security agreements with some countries, among them the United States, Canada, Japan, Korea, Australia, India and Israel. Without an agreement, Czech insurance applies to work done here.
What the foreign employer must do
A foreign employer that employs someone insured in the Czech Republic has, in principle, the same duties as a Czech employer:
- register as an employer with the Czech Social Security Administration (ČSSZ) and report the employee, from 1 July 2026 at the latest the day before they start;
- report the employee to their Czech health insurance company;
- pay social security (24.8% employer, 7.1% employee) and health insurance (9% employer, 4.5% employee) every month by the 20th;
- file the unified monthly employer report (jednotné měsíční hlášení zaměstnavatele, JMHZ) since 2026, and the monthly overviews for the health insurer;
- keep Czech payroll records.
An employer from another EU country can agree with the employee that the employee takes over these duties and pays both shares himself (based on Article 21 of Regulation 987/2009). The money stays the employer's cost, but the employee does the paperwork, which many employees do not want.
Income tax
An employer without a permanent establishment in the Czech Republic is usually not obliged to withhold Czech income tax. The employee, as a Czech tax resident, then pays the tax himself with his own yearly tax return, with a credit for any foreign tax under the double tax treaty. In the first year there are no advances: the whole tax is paid with the return. After that, tax advances during the year may follow, depending on the size of last year's tax. Many employees do not know this until they are asked to explain their income.
The exception is international hiring out of labour: when the employee in fact works under the direction of a Czech company that pays for the work, the Czech company may have to withhold the tax.
The permanent establishment risk
A permanent establishment (stálá provozovna) makes the foreign company taxable in the Czech Republic: it must register here and pay Czech corporate tax on the profit that belongs to it. An employee working from home is usually not a permanent establishment by himself. It becomes a risk when:
- the employee regularly negotiates or signs contracts for the company with Czech or other clients;
- the company provides or pays for an office here, or the home office is in fact the company's place of business;
- the work is the company's core business and lasts long, for example a service project for Czech clients.
The exact test is in the double tax treaty between the two countries. Assess it before the first hire, not after a tax inspection.
The alternatives
| Option | When it fits | Watch out |
|---|---|---|
| Employ directly and register in the Czech Republic | One or a few employees, no Czech business | Monthly Czech payroll, the employee's own tax |
| Employer of record (an agency employs the person for you) | Quick start, no own Czech payroll | Monthly fee; the agency must really be the employer |
| A Czech s.r.o. or branch (odštěpný závod) | A team here, Czech clients, a long-term plan | Accounting and corporate tax in the Czech Republic |
| Contractor on a trade license | One or two people working here for the company; the most common solution in practice | Disguised employment (švarcsystém) is mainly an issue when the client is a Czech company |
In practice, few foreign companies open a Czech entity or run Czech payroll for one or two people. Most often the person gets a Czech trade license and invoices the company, which is simpler and usually cheaper for both sides. The person pays Czech tax, social security and health insurance as a self-employed person, and the company only receives an invoice, usually without Czech VAT because the service is supplied to a business abroad. A Czech s.r.o. or branch mostly makes sense when the company wants to do business on the Czech market itself. See the trade license guides on tradelicense.cz.
Hiring someone from outside the EU who does not yet have free access to the Czech labour market is difficult without a Czech employer: the employee card is tied to an employer and a job here. Get advice before you plan this.
Related
- Working remotely for a foreign employer while living in Czechia
- Hiring your first employee in Czechia
- Tax residency: why the 183-day rule is not the whole story
- Payroll, also for foreign companies and what an employee costs
This guide is general information for 2026, not personal advice: the answer depends on the countries involved and on what the employee does.
Official sources: Regulation (EC) 883/2004 and 987/2009; ČSSZ (foreign employers, international agreements, unified monthly employer report); Finanční správa; Act No. 586/1992 Coll. on Income Taxes (§ 6, § 22, § 38c).
