Employment contract (FTE) and taxes in 2025

Work on FTE

Contract work is one of the two basic forms of so-called “agreement employment”. It is mainly used for longer-term but still short-term and less formal working relationships. For example, it is suitable for working a few days a week, regular shifts outside of the main employment relationship or as extra work.

Main features of working on a FTE:

• Scope of work: work on a FTE must not exceed on average half of the weekly working time, which is a maximum of 20 hours per week for a normal 40-hour working week (calculated as an average over the whole period for which the agreement is concluded, up to a maximum of 52 weeks).
• The agreementmust be in writing and contain in particular the type of work, the place of work and the agreed remuneration.
• Period of notice: The FTE may be terminated either by agreement or by giving 15 days’ notice, starting from the date of delivery of the notice.

Deductions from FTE

The amount of monthly remuneration plays a key role when you work under an employment contract (FTE). This determines not only whether social security and health insurance contributions are payable, but also whether the income is taxed by way of withholding or advance tax. Earnings also determine whether the employee can ask the employer for an annual tax settlement or whether he or she must file his or her own tax return.

The fixed threshold for participation in sickness and pension insurance is CZK 4,500 per month. If an employee exceeds this amount in the course of a temporary employment with one employer, he or she automatically becomes a member of the insurance. In the case of employment on several FTEs with different employers, this threshold is assessed separately for each employer.

Income up to CZK 4 499 per month

If an employee has a monthly income of less than CZK 4,500 per month from a temporary employment contract with one employer, he/she does not participate in sickness and pension insurance. In this case:

• no social security or health insurance is paid,
• 15% income tax is payable.

Income of CZK 4 500 or more per month

Once an employee’s income from a FTE with one employer reaches or exceeds CZK 4,500, compulsory participation in sickness and pension insurance is triggered. In this case:

• social insurance is paid: 7.1% of the gross wage is paid by the employee, 24.8% by the employer;
• health insurance: 4,5 % is paid by the employee, 9 % by the employer;
• income tax is 15%.

Taxation of FTEs: how to calculate the tax on a work arrangement

The taxation of income from an employment contract (FTE ) is determined by the amount of the monthly remuneration and whether the employee has signed an Income Tax Declaration (pink paper). The key is the threshold of CZK 4,500 per month, which determines whether withholding tax or advance tax applies.

Taxation of FTEs with income up to CZK 4,500 per month

• Without a signed tax declaration: 15% withholding tax is deducted from the remuneration. The employee does not pay any further tax.
• With a signed tax declaration.

Taxation of FTEs on income over CZK 4,500 per month

As soon as the remuneration from the FTE exceeds CZK 4,500, the advance tax is always applied, regardless of whether the employee has signed the declaration. In this regime, the tax is 15% and:

• if the employee has a signed declaration, he/she can claim tax credits (e.g. for the taxpayer, for children, for students),
• if he has not signed the declaration, the 15% advance is deducted, but he can claim it back on his tax return.

Who can sign the pink declaration?

Any employee can sign the pink declaration, officially the personal income tax declaration, regardless of whether they are a student, pensioner or entrepreneur.

The declaration may only be signed for one employer in the same month. If the employee has several jobs at the same time (for example, two DPPs or one DPP and one main job), he/she must choose only one employer to sign the declaration with. Most often the one with the highest income is chosen.

If the employee signs the pink declaration with more than one employer at the same time, the tax credits will be incorrectly applied. This will result in an underpayment of tax which the employee will have to pay – and the risk of penalties from the tax office. In addition, the employer is obliged to report this and deduct the difference in tax from the employee’s wages.

Practical examples

Income up to CZK 4,500, without a signed tax declaration

Example: Lenka has a FTE with a monthly remuneration of CZK 4,000 and has not signed the pink slip.
Result: her employer withholds 15% withholding tax, i.e. CZK 600. She receives CZK 3 400 in her account. The tax is not dealt with any further.

Income up to CZK 4,500, with a signed declaration

Example: Tomas has a permanent job with a salary of CZK 4 000 and has signed a tax declaration.
Result. Tomas receives the full amount of CZK 4 000 in his account.

Income over CZK 4,500, without a signed declaration

Example.
Result: 15% advance tax is deducted from the remuneration, i.e. CZK 900. Lucie receives CZK 5 100. If she files a tax return, she can claim a rebate and get part of the tax back.

Income over CZK 4,500, with a signed declaration

Example.
Result: 15% tax = CZK 1,500, which is fully covered by the taxpayer’s rebate. Therefore, David will not be taxed at all and will receive the full CZK 10 000.

More FTEs with different employers

Example. She earns CZK 4,300 with employer Alfa and CZK 5,200 with employer Beta. Her tax declaration is signed only for employer Alfa.
Result. For Beta, the tax is calculated as an advance payment (780 CZK) because she has an income of over 4 500 CZK. Petra can claim the taxpayer discount back on her return and get the tax back.

FTE and tax returns: when to file and when is it worthwhile?

For an employee working on a work arrangement (FTE), it is worth filing a tax return in certain cases , even if they are not legally obliged to do so. Typically, this is where tax has been deducted from their earnings during the year, but they have been unable or unsuccessful in claiming tax credits. By filing a return, he can then get some – and sometimes all – of this tax back.

The most common situation is that the employee has not signed a tax return. In this case, the employer will automatically withhold 15% tax. However, if the employee includes this income in the tax return and claims the basic taxpayer’s allowance, he or she can reclaim the withheld tax. This is particularly worthwhile if the employee worked for only part of the year or had a low income and therefore did not take full advantage of the tax credit.

A similar situation arises if an employee has multiple employment agreements with different employers but has signed a tax declaration with only one of them. For the others, the tax is deducted without the possibility of claiming the discount. However, he can include this income in his tax return and claim the tax credits retrospectively, thereby obtaining a refund of part of the tax.

The student discount was abolished in 2024. So students can no longer claim it in 2025, but they can still use the basic ratepayer’s discount when working under a work arrangement (FTE). So for many students, it’s still worth filing a tax return and claiming back tax on a DPT – especially if they didn’t use all their allowances during the year or had multiple employers.

FTE and annual tax settlement

The annual return is a simpler form of income tax settlement that your employer can do for you. At the end of the year, it will recalculate your actual tax liability, apply any available allowances and, if you have paid more tax than you should have during the year, give you a refund – usually in the form of an increased payment.

Your employer can give you an annual tax settlement if you meet the following conditions:

• You have a signed tax declaration (called a pink slip).
• You did not have another employer at the same time during the year from whom advance tax was withheld (income up to CZK 4,500 withholding tax does not matter).
• You had no other income that you should have declared yourself – for example, from business, renting or abroad.
• You will ask your employer for an annual statement in writing by 15 February of the following year and provide the necessary supporting documents.

Summary

An employment contract (FTE) is suitable for regular work of up to 20 hours per week. If the monthly remuneration does not exceed CZK 4,499, no social security or health insurance is payable and tax is deducted as a 15% withholding tax – unless the employee has signed a tax declaration. If he has signed it, a discount applies and the tax may be zero. If the remuneration is CZK 4,500 or more, both the levies and the 15% advance tax must be paid. With a signed declaration, discounts can be applied. Without it, discounts can be claimed retrospectively on the tax return.

The declaration can only be signed with one employer in a given month. The employer can make the annual tax return for the employee if the conditions are met, otherwise the employee has to file the tax return himself and it is often worthwhile because he can get back part of the tax paid.