Consolidation package and changes affecting self-employed persons

Lucie Šutovská
The number of entrepreneurs actively engaged in self-employment according to the records of the Czech Social Security Office is 1.130 million. In today's article from the series on the consolidation package, we will focus on the changes that the package brings to these persons.

Changes in social security

From 2024, the annual assessment base of a self-employed person for pension insurance contributions and contributions to the state employment policy is increased to 55 % of the tax base, with the possibility of a voluntary increase. Entrepreneurs who pay social security contributions from the actual assessment base will thus be affected by a 5 % increase compared to the current rate.

However, the planned changes will also affect those self-employed persons who pay social security contributions from the minimum assessment base. This will be gradually increased from 2024 by 5 % for each year to a final 40 % in 2026. The current minimum assessment base is 25 % of the average salary; thus, for 2024 the minimum assessment base will be 30 % of the average salary. Changes will also affect self-employed persons performing so-called subsidiary activities. However, in this case, it will not be such a significant change, as the minimum assessment base will increase from the current 10 % to 11 % of the average salary.

The good news for new entrepreneurs is that they will not be affected by these changes in the year in which they start self-employment and in the two following years and will continue to be subject to the minimum monthly assessment base of 25 % of the average salary in this particular period.

The last change to the assessment base will affect self-employed persons who voluntarily participate in sickness insurance, where the rate of insurance contributions will increase from the current 2.1 % to 2.7 % of the assessment base.

Just or the sake of completeness, we would also like to mention changes concerning taxpayers in lump-sum tax regime. The amount of the monthly assessment base for

  • 1st level is 45 % of the average salary (with a gradual increase of 5 % until 2026);
  • 2nd level is CZK 28 050; and
  • 3rd level is CZK 42 900.

Other changes

In this part of the article, we would like to summarize other changes that will also have an impact on self-employed persons, especially with regard to taxation of income.

There will be a new regulation in the area of tax credits where we will see a change in the tax credit on spouse which will only be applied to a spouse caring for a child up to the age of 3 years while simultaneously meeting the existing condition of income up to the limit of CZK 68,000. At the same time, the student tax credit and the so-called kindergarten tax credit will be cancelled from 2024.

Other major changes include the broadening of tax progression where a higher tax rate of 23 % will be applied from tax base equal to 36 times of the average salary. For 2024, the higher taxation will be thus applied from CZK 1,582,812 per year (compared to the current limit of CZK 1,935,552).

Other changes that await us in the area of taxation of individuals from 1 January 2024 were discussed in our previous article Employee benefits and changes for individuals where you can read more detailed information.

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Jiri Sindelar
Jiří Šindelář
Tax Director

Tax advisory