The Czech Republic, or Czechia, is a small European country famous for its culture and history. Its low cost of living, high quality of life and comparatively low tax rates makes it an interesting residency option for EU citizens. This guide covers residency options and how taxation and banking works in the Czech Republic.
Residency options
The Czech Republic is an EU country and a member of the Schengen area. EU citizens enjoy the right to live and work in the country with no time limit and / or restrictions. There is also no requirement to register or obtain a certificate of residency upon arrival in the Czech Republic. In other words, an EU citizen can simply show up and settle. Do note that if you qualify for tax residency, or otherwise have a local tax liability, you will have to register with the Czech authorities.
I do not recommend the Czech Republic as a residency option for non-EU citizens. Getting a long stay visa is fairly easy but the benefits are not worth it, compared with other EU options.
As per EU law, a resident is entitled to apply for permanent residency after living in the country for an uninterrupted period of five year. Citizenship can also be applied for after a five year period but is not advisable in this case due to the Czech Republic not recognizing dual nationality.
Taxation
The Czech Republic can be, in some circumstances, a low tax country. For example, an EU citizen staying in the country for less than two years. In such a case, the EU citizen could apply to be exempted from paying Czech social security and would thus only need to pay the 15% Czech income tax (social security would still have to be paid but in the originating state, which can work very nicely if the originating state has a low contribution cap such as in Bulgaria). Another example is that of an EU citizen registered as self-employed in the Czech Republic. Self-employement deductions of up to 80% are available and are a fanstactic way to reduce taxable income. For example, if you earned 1000000 CZK and were allowed a 40% deduction, you would only be taxed on 600000 CZK. At the rate of 15%, this means an effective tax burden of 90000 CZK or 9% of your total income, plus social contributions.
Also of interest is the fact that dividends are tax-exempt when the tax is collected at the source (this works nicely with Estonian companies, assuming that no actual work is performed in the Czech Republic).
Compliance
A tax resident of the Czech Republic is an individual who spent at least 183 days in-country in the previous twelve month period. Residents are liable for taxation on their worldwide income. The fiscal year is the calendar year and all returns must be filed by the 1st of April. All income is taxed at the flat rate of 15% (except in rare circumstances). Some categories of income are also be subject to an additional withholding tax
Powerful tax strategies
You can find powerful tax strategies in The Freedom Surfer course, especially in module two and three.
Banking
The Czech Republic is one of the easiest countries in the world in which to open a bank account as a non-resident. It is even easier as a resident. With that said, the banks and their products are not particularly attractive. For this reason, I only recommend opening an account if you intend to reside in the country or if you have no other options.
Opening an account
To open an account, simply show up at a branch with your passport and a secondary piece of ID (national ID card, driver’s license etc). Some banks allow accounts to be opened online although most will still require you to physically show up at a branch for identification purposes. In most cases, your account will be opened on the spot. With that said, most banks banks will insist on mailing your debit card or will expect you to show up a week or two later at the same branch to collect it.
International transfers
Transferring money into the Czech Republic has become easier in recent years thanks to the rise of services like Wise and Revolut. Their rates usually beat the banks’ and they are far more secure than carrying large sums of cash. Speaking of which, you are allowed to bring as much as you want across the border but must declare any amounts in excess of 10000 USD (or equivalent). For EU transfers, SEPA is usually the best option with most banks supporting instant transfers.
