Double taxation treaties for self-employed people in Czechia

Do you work in Czechia as a self-employed person (OSVČ, osoba samostatně výdělečně činná, the Czech term for a sole trader) and invoice clients abroad? Then the same income can, in some situations, be claimed for tax by Czechia and by the other country. If you do not know how double taxation treaties work, you risk paying tax twice, or missing a perfectly legal way of avoiding the second tax. This guide explains how the treaties work and what they mean for your business.

What a double taxation treaty is

A double taxation treaty (in Czech smlouva o zamezení dvojího zdanění, often shortened to SZDZ) is a bilateral agreement between two countries that sets out who may tax income with a cross-border element. Its purpose is to stop the same income being taxed in full by both countries at once.

The Czech Republic has double taxation treaties with more than 90 countries. The Czech Ministry of Finance keeps the list of treaties in force, and it is also published on the website of the Czech Financial Administration (Finanční správa). The treaties follow the OECD Model Tax Convention, but each one is negotiated separately and the details can differ.

Key concepts you need to know

Tax resident or non-resident

The first question in international taxation is always: where are you tax resident? A Czech tax resident pays Czech tax on worldwide income. A non-resident pays Czech tax only on income from Czech sources.

You are a Czech tax resident if you:

• have your home in Czechia (a permanent place to live, such as a flat or a house), or
• habitually stay in Czechia, meaning at least 183 days in a calendar year.

If the domestic rules of two countries would both treat you as resident, the treaty decides using the so-called tie-breaker rules. They are applied in order: permanent home, centre of vital interests, habitual abode and, finally, citizenship.

Permanent establishment

A permanent establishment is the key concept for business owners. It is a fixed place abroad through which you carry on your business. It can be an office, a workshop, a building site (once it lasts longer than the period set by the particular treaty; the OECD model uses 12 months) or a dependent agent acting for you.

If you are a Czech OSVČ and work only from Czechia, for example remotely for foreign clients, you normally do not create a permanent establishment abroad. Your income is then taxed only in Czechia. This is the most common and the simplest scenario.

The credit method

Under the credit method, the income is taxed in both countries, but you deduct the tax paid abroad from your Czech tax. There are two variants:

• Ordinary credit: you can deduct foreign tax only up to the amount of Czech tax that falls on that income. If the foreign tax is higher, the difference is lost.
• Full credit: you can deduct the whole foreign tax paid. This variant is less common.

The exemption method

Under the exemption method, you leave the foreign income out of your Czech tax base, as if you had never received it in Czechia. Again there are two variants:

• Exemption with progression: the income is removed from the Czech tax base but is taken into account when setting the tax rate for your other income. With only two Czech rates, 15 % and 23 %, the effect is limited, but it can decide whether part of your income falls into the 23 % band.
• Full exemption: the income is removed from the Czech tax base with no further conditions.

The most common situations for Czech OSVČ

Situation 1: remote work for a foreign client

This is by far the most typical case. A programmer, designer or consultant works from home in Czechia for a client in Germany, the United States, the United Kingdom or elsewhere.

The rule: if you have no permanent establishment abroad (and when you work remotely you usually do not), your income is taxed only in the Czech Republic. The treaty gives the right to tax business profits to the country of residence, which is Czechia.

What you do:

1. You invoice in a foreign currency (EUR, USD, GBP and so on).
2. For your Czech tax return you convert the amounts into Czech crowns (CZK) at the daily exchange rate of the Czech National Bank (ČNB), either on the day the payment is received or on the tax point date (DUZP). Self-employed people may instead use the uniform annual rate (jednotný kurz) published by the tax authority.
3. You report the income in your personal income tax return as ordinary income from self-employment under Section 7 of the Czech Income Tax Act.
4. You pay Czech tax at 15 %, or 23 % on the part of the tax base above 1,762,812 CZK (the 2026 threshold).

Remember that a service for a foreign business also has a VAT side. Czech VAT is called DPH, and even if you are not a VAT payer, supplying a service to a business in another EU country makes you an identified person. More in the identified person and when you become one.

Situation 2: working physically abroad

If you travel abroad and work on site, for example as a consultant at the client's office for a longer period, you may create a permanent establishment in that country. In that case:

• the income will also be taxed abroad,
• you still report it in Czechia, but apply the method set by the relevant treaty (credit or exemption),
• you fill in Appendix 3 (Příloha č. 3) to the Czech income tax return, which covers income from foreign sources.

Situation 3: licence fees and royalties

If you receive royalties from abroad as a Czech OSVČ, for example for software, photographs or other copyright works, the foreign country may deduct withholding tax. The maximum rate depends on the particular treaty:

• Germany: up to 5 % of the gross royalties (Article 12 of the treaty).
• United States: 0 % on royalties for copyright in literary, artistic and scientific works; up to 10 % on other royalties, including software and industrial rights (Article 12 of the treaty). Check which category your income falls into.
• Russia: the treaty sets 10 %, but Russia suspended the key articles on 8 August 2023 and Czechia has applied the suspension reciprocally since 29 September 2023. You cannot rely on the treaty.

Foreign tax withheld in line with the treaty is credited in your Czech tax return.

Selected countries for Czech freelancers

Germany

For Czech residents, the Czech–German treaty mainly uses exemption with progression; the credit method applies only to dividends, interest and royalties (Article 23). Most income from services without a permanent establishment is taxed only in Czechia. Germany is the most frequent business partner of Czech OSVČ.

United Kingdom

The treaty between Czechia and the UK remains in force after Brexit. For Czech residents it mainly uses exemption with progression; the credit method applies to dividends, royalties, directors' fees and income of artists and sportspeople (Article 22). Income from remote work for British clients, with no permanent establishment in the UK, is taxed in Czechia.

United States

The Czech–US treaty is one of the more complex ones. The United States taxes on a special basis: it also taxes its own citizens living abroad. For a Czech OSVČ who is not a US citizen and has no permanent establishment in the US, the income is taxed in the usual way in Czechia.

Slovakia

The Czech–Slovak treaty uses the ordinary credit method (Article 22): tax paid in Slovakia reduces your Czech tax, but only up to the Czech tax that falls on that income. Many Czech OSVČ work with Slovak companies. Without a permanent establishment in Slovakia, income from services is taxed in Czechia in the same way as in the other examples.

Worked example: a Czech developer with a German client

Let us take a specific, illustrative case.

Situation: a web developer is a Czech OSVČ. All year they work remotely from Brno for a German company and invoice 4,000 EUR a month.

• Annual income: 48,000 EUR
• Converted into CZK (for illustration at an average rate of about 25.20 CZK/EUR; in practice you use the daily ČNB rate for each payment or the uniform annual rate): 1,209,600 CZK
• Permanent establishment in Germany: no (the work is done in Czechia)
• Right to tax under the treaty: Czech Republic only
• The developer reports the income under Section 7 and claims either the 60 % flat-rate expense allowance or actual expenses.
• No Appendix 3: the work was done in Czechia, so the income does not come from a foreign source and no tax was paid in Germany.

With the 60 % flat-rate expenses, the tax base is 483,840 CZK. Tax at 15 % is 72,576 CZK, and after the basic taxpayer credit of 30,840 CZK the income tax is 41,736 CZK (social security and health insurance are paid on top). The procedure is the same as for a Czech invoice; the only difference is the currency conversion.

If you work remotely from Czechia for a foreign company, see also working remotely in Prague for a foreign company. Platform income is covered in how to tax work for Upwork, Fiverr and foreign clients.

How to apply a treaty in your tax return

If you really have been taxed abroad (for example, your client withheld tax), proceed as follows:

1. Get confirmation of the tax paid abroad from the foreign tax authority or from the payer.
2. Fill in Appendix 3 to the income tax return (income from foreign sources). State the country, the amount of income, the tax paid and the method used (credit or exemption).
3. If needed, ask your Czech tax office for a certificate of tax residence (potvrzení o daňovém domicilu). The foreign country may require it before it applies the reduced treaty rate.

Taxorio and international business

If you invoice foreign clients, Taxorio helps with the Czech side of the work. You can issue invoices in CZK, EUR, USD, GBP, CHF or PLN, and the amounts are converted at the ČNB rate for the tax point date. Taxorio checks EU VAT numbers in the VIES system, prints the reverse charge note on invoices automatically and supports the identified person status. See invoicing foreign clients in our help centre.

Know where the product stops, though. Taxorio does not calculate the uniform annual rate, does not assess treaties and is not a tax adviser. On the PRO plan it exports your income tax return as a DPFDP7 XML file, but the file contains only your self-employment income (Section 7) and the basic taxpayer credit. Foreign income, the tax credit or exemption and Appendix 3 are things you add yourself in EPO, the tax authority's online filing portal, after you upload the file. More in personal income tax in the help centre.

Taxorio scope: Taxorio provides invoicing and income/expense records for Czech sole traders. It is not full accounting or personalised tax advice. For an unsupported or unusual case, verify the treatment with a Czech accountant or tax adviser before filing.