Since 2024, changes related to pension reform have been introduced through a consolidation package. These changes, along with the increase in average wages, also impact social insurance for self-employed individuals (OSVČ). Health insurance has not undergone significant changes. However, conditions for lump-sum tax have changed.

 

Social Insurance

The calculation of minimum contributions to social and health insurance is influenced by the increase in the average wage, which is set at CZK 43,967 from January 2024. The minimum annual assessment base for primary self-employment has changed, increasing from the original 50% to 55% of the tax base.

The minimum monthly assessment base for primary activity will increase from the original 25% of the average wage up to 40%, as follows:

• in 2024 to 30%,
• in 2025 to 35%,
• and in 2026 to 40% of the average wage.

 

New Groups of Self-Employed Individuals

Two groups of self-employed individuals have emerged: existing and new. A new self-employed person is someone who has recently started and has not been engaged in self-employment in the past twenty years. This is to support new entrepreneurs. The support is for the first three calendar years from the start of the business. For these entrepreneurs, the minimum assessment base is 25% of the average wage.

Existing self-employed individuals performing primary activities have an assessment base of at least 30% of the average wage, which is CZK 13,191. For new self-employed individuals performing primary activities, it is 25% of the average wage, which is CZK 10,992. For secondary activities, it is 11% of the average wage, which means the insurance deposit is CZK 1,413.

The minimum insurance deposit for primary activities is:

• For existing self-employed individuals, 29.2% of CZK 13,191 = CZK 3,852.
• For newly established self-employed individuals, 29.2% of CZK 10,992 = CZK 3,210.

29.2% consists of 28% pension insurance and 1.2% state policy insurance.

When mentioning the minimum assessment base, it is also necessary to state the maximum assessment base, which is 48 times the average wage, i.e., 48 × CZK 43,967 = CZK 2,110,416 for 2024.

 

Health Insurance

The minimum assessment base for health insurance for self-employed individuals is understood as 12 times 50% of the average wage. The monthly minimum assessment base for health insurance in 2024 is 50% of CZK 43,967 = CZK 21,983.50. The minimum monthly insurance (deposit) is 13.5% of CZK 21,983.50 = CZK 2,968.

 

Final Minimum Deposit Amounts for 2024

To summarize the deposits that self-employed individuals are obliged to pay from 2024 onwards:

• Minimum social insurance (SP) deposit for primary activity: CZK 3,852 (for newly established self-employed individuals: CZK 3,210).
• Minimum social insurance (SP) deposit for secondary activity: CZK 1,413.
• Minimum health insurance (ZP) deposit: CZK 2,968.

In addition to social and health insurance, entrepreneurs must also pay income tax, which is 15% of the tax base.The tax base is the difference between income and expenses, or in the case of double-entry bookkeeping, between costs and revenues.

 

Lump-Sum Tax Regime

For entrepreneurs who do not want the administrative burden of filing a tax return and wish to pay tax, social, and health contributions in one payment, there is an option to use the lump-sum tax. This means that in one monthly deposit, they pay income tax and mandatory contributions to social and health insurance.

After the end of the calendar year, an entrepreneur in the lump-sum tax regime does not have to submit an income tax return or statements for social and health insurance. The resulting tax burden for entrepreneurs, including contributions to social and health insurance, thus corresponds to 12 times the fixed monthly amounts.

 

Who Can Use the Lump-Sum Tax Regime

In the lump-sum tax regime, only a natural person who:

• Is self-employed.
• Is not a VAT payer.
• Had an income not exceeding CZK 2 million in the previous calendar year.
• Is not a partner in a public company.
• Is not employed.
• Does not have other income except income exempt from tax, income taxed by withholding tax, or income from other activities subject to taxation, provided that such income does not exceed CZK 50,000 per year.

 

How to Proceed If You Want to Use the Lump-Sum Tax Regime

If, as of January 1 of the given year, you meet the conditions for entering the lump-sum tax regime, you must submit the form “Notice of Entry into the Lump-Sum Regime” electronically by January 10 of the given year.

There are three bands of the lump-sum regime defined by Section 2a of the Income Tax Act:

• Band 1 is intended for the following groups of entrepreneurs (natural persons) with income from self-employment:
  • Up to CZK 1,000,000 per year regardless of the field of activity.
  • Up to CZK 1,500,000 per year if at least 75% of the income is from business activities to which an 80% or 60% expense lump sum applies.
  • Up to CZK 2,000,000 per year if at least 75% of the income is from business activities to which an 80% expense lump sum applies.
• Band 2 is intended for the following groups of entrepreneurs (natural persons) with income from self-employment:
  • Up to CZK 1,500,000 per year regardless of the field of activity.
  • Up to CZK 2,000,000 per year if at least 75% of the income is from business activities to which an 80% or 60% expense lump sum applies.
• Band 3 is intended for the following groups of entrepreneurs (natural persons) with income from self-employment:
  • Up to CZK 2,000,000 per year regardless of the field of self-employment.

For 2024, the monthly deposits for each band are:

Band	Income Tax Deposit	SP Deposit	ZP Deposit	Total
Band 1	CZK 100	CZK 4,430	CZK 2,968	CZK 7,498
Band 2	CZK 4,963	CZK 8,191	CZK 3,591	CZK 16,745
Band 3	CZK 9,320	CZK 12,527	CZK 5,292	CZK 27,139

 

Obligations for Entrepreneurs in the Lump-Sum Tax Regime

In conclusion, an entrepreneur in the lump-sum tax regime must record everything that can prove compliance with the conditions for applying this regime for determining their tax and contribution (SP and ZP) obligations.

For example:

• Whether they did not exceed the income limit of CZK 2 million.
• Whether they do not exceed taxable income from other types of income (except self-employment and dependent activities) of CZK 50,000 per year, etc.

Section 7a(8) of the Income Tax Act directly instructs entrepreneurs to keep records of income from self-employment broken down by applicable expense lump sums to verify whether they meet the conditions of the chosen lump-sum tax band.