Setting up an Identification number in the Czech Republic

Have you reached a stage in your career where you are considering whether employment in the form of a full-time job is really the best option for you? Perhaps you prefer the greater freedom that running your own business can bring. Below, we provide a detailed overview of the steps, requirements, and obligations you will face if you want to become a self-employed person (OSVČ).
 
The article below applies to Czech Republics´ citizens. Foreigners living and working in the Czech Republic should verify the Information with regards to laws for foreigners running a business in the country.
 
The division of individual trades is specified in Act No. 455/1991 Coll. on Trade Licensing (Trade Licensing Act). Trades are divided into notifiable and concession trades, with notifiable trades further divided into free, craft, and regulated trades.
 
Anyone who has reached the age of 18, is legally competent, and has no criminal record can start a trade in the Czech Republic. No professional qualification is required for free trades, which include a large number of qualified jobs.
 
On the Trade Licensing Portal, you will find all the important information, including a link to the electronic filing office.
 

I want to set up an Identification Number - “IČO”

An Identification Number (ICO) is needed by anyone who decides to do business as a natural or legal person. As a natural person applying for registration, you will need:
 
  • Identity card
  • Completed application form for a trade licence, which you can obtain at the trade office or on the trade office website
  • Documents proving your expertise, if you are applying for a trade other than a free trade, which must be officially confirmed, for example at CzechPoint
  • Administrative fee of CZK 1,000, or CZK 800 if you are setting up the trade electronically via the Trade Licensing Portal
After submitting all the data and documents, the trade office has 5 days to register you in the trade register. You will then receive an extract and an Identification Number (IČO).
 

Trade Licence vs Trade Certificate

A trade can only be operated on the basis of a trade licence, which replaced the former trade certificate. If it is necessary to prove the trade licence, the trade office will issue an extract from the trade register, which contains your details as a self-employed person with a list of all your trade licences.
 

Registered business address

The law requires every self-employed person to have a business address. There can only be one, and in the case of natural persons, it is usually your residential address. However, the law does not specify this place in more detail; it is an official correspondence address used by authorities to communicate with you. If you choose an address other than your permanent residence as your business address, you must also provide an officially verified consent of the property owner.
 
Another option is a virtual office, which intermediaries can arrange for you at prestigious addresses without requiring you to disclose your residence. In a virtual office, you typically have 24-hour access to a mailbox, and the monthly costs for a virtual office average around 200 Czk.
 

Data mailbox

The law also requires self-employed individuals to have a data mailbox. In some cases, the box is created automatically upon the establishment of the trade; if this is not your case, you can apply for the creation of a data box. There are no extra charges for setting up and using the data mailbox.
 

What are my obligations as a self-employed person?

 
If your business is your main activity, you must pay advances on health and social insurance from the first month of establishing the trade. The amount of these advances changes annually; in 2025, the minimum advance for health insurance is 3,143 CZK and for social insurance 4,759 CZK, with a lower assessment base and a minimum advance of 3,399 CZK for new trades.
 
You can also voluntarily pay monthly sickness insurance premiums, with the minimum set at 243 CZK for 2025.
 

Flat-rate tax

A practical option for self-employed individuals with an annual income of around 670,000 crowns is the flat-rate tax; for lower incomes, paying the flat-rate tax is not worthwhile. It is a single amount that includes minimum health insurance, minimum social insurance, and income tax. Flat-rate taxpayers do not need to submit tax returns and insurance overviews.
 
The flat-rate tax is divided into three bands, determined by the amount of income in the calendar year and the applicable expense allowance that the self-employed person could apply. The expense allowance represents a percentage amount that can be deducted from income.
 
First band:
Annual income: up to 1 / 1.5 / 2 million CZK
Flat rate expenses: 60% or 80%
Tax amount: 8,716 CZK
 
Second band:
Annual income: up to 1.5 / 2 million CZK
Flat rate expenses: 60% or 80%
Tax amount: 16,745 CZK
 
Third band:
Annual income: up to 2 million CZK
Flat rate expenses: 40%
Tax amount: 27,139 CZK
 
You can apply for the flat-rate tax provided you are not a VAT payer, your income does not exceed 2 million crowns per calendar year, you are not in insolvency proceedings, and you are not a partner in a general partnership or a general partner in a limited partnership. More details on the flat-rate tax can be found here.
 
If you are unsure whether the flat-rate tax is beneficial for you, we recommend using online calculators available on the internet, such as here.
 

Flat rate expenses

The flat-rate expenses is a set percentage of income that you can use to reduce your tax liabilities. Simply put, these are fictitious expenses that you can legally claim as a self-employed person.
 
Depending on the activity you perform, you can reduce your tax base by 30%, 40%, 60%, or 80%. The amount of the expense allowance is determined by the activity performed, and it can always be applied up to the maximum annual amount which is set by law.
 
In most cases, the self-employed apply a 60% expense rate, with the maximum amount you can deduct annually being 1.2 million crowns. The flat-rate expenses are suitable when actual costs are lower. However, if you exceed this amount, you must keep records of all documents and expense items.
 

Income Tax

You become a tax resident of the Czech Republic if you have a residence in the country or usually stay here (at least 183 days a year).
 
If you are not a flat-rate taxpayer, you must submit a tax return once a year (no later than April 1st) and pay income tax on the income you earned in the calendar year. The tax base is your income after deducting incurred expenses. There are two income tax rates, determined by the amount of the tax base:
 
15% - the tax base up to 48 times the average wage
23% - the tax base exceeding 48 times the average wage
 

Self-employed and VAT

You become a mandatory VAT payer if your income exceeds 2 million crowns in the past 12 months. Most qualified professions, including IT specialist services, are subject to a 21% rate.
 
You register for VAT at the tax office yourself and can do so at any time during the year. It is advisable to monitor the achievement of the 2 million CZK limit to avoid being notified by the tax office at the end of the year, as VAT can be calculated retroactively to the period when the limit was reached.