HOW DOES SELF-EMPLOYMENT IN THE CZECH REPUBLIC WORK? Part two: Advances on social and health insurance

Self-employed persons (OSVČ) are obliged to pay advances for social and health insurance. During the first year of business, only the minimum amount of advances is paid. In the following years of business, the amount of the monthly advance is based on the profit achieved last year and is calculated in the Statements of Income and Expenditures (Přehledů o příjmech a výdajích) that all self-employed persons must deliver annually to their health insurance company and the relevant Czech Social Security Administration.

The amount of the minimum advance for social and health insurance is based on the average gross wage, which is determined by government regulation and in 2020 was set at CZK 34,835.

Minimum advances for social insurance

The minimum advance payments for social insurance for the main activity of self-employed persons in 2020 amount to CZK 2,544.

Advances for social insurance are payable during the month for which they are paid – for example, the January deposit will be due during the month of January.

How are the minimum advances for social insurance calculated?

The minimum advances for social insurance are determined on the basis of the average gross wage, which was set at CZK 34,835. The assessment base for the calculation of the minimum advance for social insurance is a quarter of the average gross wage, i.e. CZK 8,708.75, rounded to CZK 8,709.

Social insurance consists of two components – pension insurance in the amount of 28% and the contribution to the state employment policy in the amount of 1.2%. You can also optionally pay for sickness insurance in the amount of 2.3%, which is CZK 201 after rounding.

To calculate the minimum advances for social insurance, take one-quarter of the average gross salary of CZK 8,175 and multiply it by 29.2% (optionally, add 2.3% for sickness insurance). After rounding, we get a minimum monthly deposit of CZK 2,544 (or CZK 2,745 with optional sickness insurance).

Minimum advances for health insurance

The minimum advance payment for health insurance in 2020 is CZK 2,352.

Payment of the deposit must take place by the 8th day of the following month – for example for January 2020, the deposit of CZK 2,352 must be paid by February 8, 2020.

How are the minimum advances for health insurance calculated?

The minimum amount of advances for health insurance is calculated from the average monthly gross wage, which was set at CZK 34,835. The assessment base for the calculation of the minimum advance for health insurance is 50% of the average gross wage, i.e. CZK 17,417.50, rounded to CZK 17,418.

The health insurance rate is 13.5% of the assessment base, i.e. 0.135 x 17,418, which is CZK 2,352.

Waiver of minimum advances for pension and health insurance (March-August 2020)

In March 2020, the Chamber of Deputies approved the waiver of the minimum advance payments for social and health insurance for the self-employed persons (OSVČ) for half a year, i.e. for the months of March to August.

A self-employed person who pays monthly minimum advances for social and health insurance does not have to pay anything. Deposits will be waived in full. If the self-employed pay higher monthly advances for pension insurance than the minimum advances for pension insurance, then they also do not have to pay anything in the coming months. However, the amount that the self-employed person pays above the minimum monthly pension insurance premium is not waived. The payment will only be deferred.

When submitting the Statements of Income and Expenditures (Přehledů o příjmech a výdajích) for 2020 to the Czech Social Security Administration, which will be sometime in the spring of 2021 (the statement must be submitted within 1 month after filing the tax return), self-employed persons will be able to have the amount of the minimum premium for March to August deducted (as if they had paid the advances) and on that basis, they will be refunded the overpayment or they will pay the premium.