What news does the year 2023 bring for workers with a work contract or work activity contract? How will contract work be taxed in 2023 if you are a student, retiree, OBZP or part-time worker with no further employment?
Work under a work performance contract (DPP) or work activity contract (DPČ) is one of the most popular forms of extra income in the Czech Republic, used by students, pensioners, people on parental leave and entrepreneurs . However, in some cases the taxation of contract work is very high, what is the taxation of contract work in the Czech Republic in 2023?
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Work limits on agreements
In 2023 there was an increase in the limit, which the employee must not reach on DPČ pay social and health insurance, from CZK 3,499 to CZK 3,999.
Restrict u DPP remains the same and amounts to 10,000 CZK. Above these limits, both the employee and the employer must pay health and social insurance as if the person in question were employed.
Like every year, the minimum withdrawal for health insurance changes and health insurance levy for persons without taxable income (OBZP) in the amount of CZK 2336, i.e. in cases where he does not pay the health insurance in any other way or exceeds the limit of the agreements.
The situation is different in state-insured (typically retirees and students under age 26), for whom the state pays for health insurance and they don’t have to pay for health insurance up to the limit, pay only 4.5% of gross salary over the limit (the employer then pays an additional 9%) and there is no additional calculation up to the minimum withdrawal amount.
The tax relief per taxpayer and tax relief remain at the same amount as in 2024. The tax relief per taxpayer amounts to CZK 2,570 per month, which means that employees, whose gross salary does not exceed CZK 17,100 will have no taxes.
What will the labor taxation on the DPP be in 2023?
Let’s look at cases where the worker has a signed tax return (can directly apply a tax rebate to the taxpayer), we will also list the labor taxation on the DPP up to and above the CZK 10,000 limit.
In the last row, we indicate the amount of earnings for state insured persons.
Labor taxation on DPP in 2023
| Gross wage | 10,000 CZK | 10,000 CZK | 10,001 Czech crowns | 10,001 Czech crowns |
|---|---|---|---|---|
| Signed tax return | NO | STILL | NO | STILL |
| Health insurance (employee deduction) | 0 | 0 | 1435 Czech crowns | 1435 Czech crowns |
| Social insurance (employee tax) | 0 | 0 | 651 Czech crowns | 651 Czech crowns |
| Type of tax | Precipitation | Backups | Backups | Backups |
| FO income tax | 1500 CZK | 1500 CZK | 1515 Czech crowns | 1515 Czech crowns |
| Tax rebate for the tax payer | 0 | 2570 Czech crowns | 0 | 2570 Czech crowns |
| Taxes after the discount | 1500 CZK | 0 | 1515 Czech crowns | 0 |
| Net salary | 8500 CZK | 10,000 CZK | 6400 CZK | 7915 Czech crowns |
| (gross salary less insurance less taxes) | ||||
| Health insurance payment like OBZP | 2336 Czech crowns | 2336 Czech crowns | – | – |
| Earnings after paying for health insurance | 6164 Czech crowns | 7664 Czech crowns | 6400 CZK | 7915 Czech crowns |
| Earnings in the case of state insured | 8500 CZK | 10,000 CZK | 7384 Czech crowns | 8889 Czech crowns |
Source: own calculations
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What will be the taxation of labor in DPČ in 2023?
Let’s look at cases where the worker has a signed tax return (he can directly apply the tax rebate to the taxpayer), then we will list the labor taxation on the DPČ up to and above the limit of CZK 3,999.
In the last row, we indicate the amount of earnings for state insured persons.
Labor taxation at DPČ in 2023
| Gross wage | 3999 Czech crowns | 3999 Czech crowns | 4000 CZK | 4000 CZK |
|---|---|---|---|---|
| Signed tax return | NO | STILL | NO | STILL |
| Health insurance (employee deduction) | 0 | 0 | 1976 Czech crowns | 1976 Czech crowns |
| Social insurance (employee tax) | 0 | 0 | 260 Czech crowns | 260 Czech crowns |
| Type of tax | Precipitation | Backups | Backups | Backups |
| Tax | 600 CZK | 600 CZK | 600 CZK | 600 CZK |
| Sleva na dani | 0 | 2570 Czech crowns | 0 | 2570 Czech crowns |
| Taxes after the discount | 600 CZK | 0 | 600 CZK | 0 |
| Net salary | 3399 Czech crowns | 3999 Czech crowns | 1164 Czech crowns | 1764 Czech crowns |
| (gross salary less insurance less taxes) | ||||
| Health insurance payment like OBZP | 2187 Czech crowns | 2187 Czech crowns | – | – |
| Earnings after paying for health insurance | 1212 Czech crowns | 1812 Czech crowns | 1164 CZK | 1764 Czech crowns |
| Earnings in the case of state insured | 3399 Czech crowns | 3999 Czech crowns | 2960 Czech crowns | 3560 Czech crowns |
Source: own calculations
The tables show that the agreements depend on the amount of earnings, the signing of a tax return and the type of health levy. The differences in the amount of earnings are often very striking and are particularly advantageous for state insured persons.
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