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Working Remotely for a Foreign Employer While Living in Czechia

Your contract is with a company abroad, your laptop is in Prague. For tax and insurance, where you physically work usually counts more than where your employer is.

Remote work for a foreign employer is common among expats, and it is one of the setups that most often goes wrong without anyone noticing for years. Three questions have to be answered separately: income tax, social security and health insurance. The answers can be different for each.

Income tax: usually the Czech Republic

If you are a Czech tax resident (see tax residency) and you do the work while you are physically here, the Czech Republic taxes the salary. The tax treaties follow the same rule: employment income is taxed where the work is done. The country of your employer can only tax it if you actually work there.

A foreign employer without a business presence here does not deduct Czech tax from your salary. You then:

  • declare the salary yourself in your Czech personal income tax return (section § 6, employment), converted to CZK;
  • claim any tax your employer's country did deduct, using the treaty: either that country refunds it, or it is credited in the Czech return, depending on where the work was done;
  • from the second year, pay tax advances during the year if your last tax was high enough: half-yearly when it was more than 30,000 CZK, quarterly when it was more than 150,000 CZK.

Days you really work abroad, for example on business trips to the employer's office, may be taxable there. Keep a simple record of where you worked each day.

Social security with an employer in the EU, EEA, Switzerland or the UK

Within Europe, one country's social security applies at a time, decided by EU coordination rules (Regulation 883/2004; the UK follows similar rules under its agreement with the EU). The basic rule: you are insured where you physically work. Working from home in Prague for, say, a German company therefore means Czech social security and health insurance, not German.

Your employer then has two options:

  • register as an employer with Czech social security and a Czech health insurer, and pay Czech contributions through Czech payroll; or
  • make a written agreement with you (Article 21 of Regulation 987/2009) that you pay the contributions yourself, both your part and the employer's part, usually with a gross-up in your salary.

Exceptions where you stay in the employer's country, proven by an A1 certificate issued by that country:

  • Telework agreement: since 1 July 2023 a framework agreement lets cross-border teleworkers stay in the employer's system if they work from home in their country of residence at least 25% but less than 50% of their working time. Both countries must have signed it (the Czech Republic has), and you and your employer apply together in the employer's country. It is granted for up to 3 years at a time.
  • Posting: the employer sends you here temporarily, normally for up to 24 months, to do work for the employer in the Czech Republic. If you move here by your own choice and keep working remotely, that is not a posting, and the A1 for posted workers does not apply.
  • Working in several countries: special rules apply when you regularly work in two or more countries.

Without an A1, your foreign contributions do not replace Czech ones, and missing Czech contributions are claimed back with penalties, sometimes years later.

Employer outside Europe

For an employer in, for example, the United States, Canada or Asia, the EU rules do not apply. What happens then depends on whether the Czech Republic has a social security agreement with that country (it has one with the US, Canada, Japan, South Korea, Australia, Israel and several others) and on the Czech rules for employees of foreign employers. The details are often hard to work out.

In practice, the simple solution is a Czech trade license. You pay Czech tax, social security and health insurance as a self-employed person, and invoice the company abroad. For the company it is one invoice: no Czech entity, no payroll, no changes in its accounting. See the trade license guides on tradelicense.cz.

Health insurance

Health insurance follows the same rules as social security. If Czech social security applies, you must be registered with a Czech public health insurer (for example VZP or OZP) and 13.5% health insurance is paid on your salary. If you stay in the employer's system with an A1, you register the A1 with a Czech insurer (form S1) to get care here.

Non-EU citizens: the public health insurance that comes with working here is often the reason to set this up properly, because commercial insurance for foreigners covers far less.

What it means for your employer

  • A company with employees working in the Czech Republic may have a permanent establishment here, especially when the employee signs contracts or runs a business line. Then the company itself owes Czech corporate tax.
  • Czech labour law applies to work done here in many respects, such as minimum wage, working time and holidays.
  • In practice, many people working for a foreign company switch to a Czech trade license and invoice the company instead, which is simpler for both sides (see the trade license guides on tradelicense.cz). Other companies register here as an employer without a branch, or use an employer-of-record provider. See a foreign company employing people in Czechia and our payroll service.

Checklist

  1. Are you Czech tax resident? Then the salary for work done here goes in your Czech return.
  2. Which social security applies? Without an A1 from the employer's country, it is the Czech one.
  3. Is someone paying Czech social and health insurance: the employer through Czech payroll, or you under an Article 21 agreement?
  4. Are you registered with a Czech health insurer?
  5. Do you keep a record of your workdays abroad?

The net salary calculator shows what a Czech salary leaves after tax and insurance, for comparison. General questions: ask Taxbot.

This guide is general information, not advice on your own situation.

Official sources: Act No. 586/1992 Coll. on income taxes, §§ 2, 6 and 38a; Regulation (EC) No 883/2004, Article 11 and 16, and Regulation (EC) No 987/2009, Article 21; ČSSZ, Framework Agreement on cross-border telework.