Do you want to work abroad as a freelancer?

Chapters of the article

• Before you accept a contract from your neighbours
• The focus of interest is key
• Contact the point of contact
• What about insurance?
• Income taxation

Before you accept an order from your neighbours

With our accession to the EU, conditions have changed radically, not only for travel, but also for business and employment. Under the Free Movement of Services Act, it’s no problem to go to Austria to lay paving stones or landscape your garden. Outside the EU, the freedom to work also applies to Switzerland, for example.

There are several possible schemes:

• one-off or occasional cross-border provision of services on the basis of a Czech business licence for cross-border provision of services,
• long-term and regular provision of services in a particular country. In this case, it is a permanent business in a foreign state, or establishment. In this case, the person in question permanently carries on business in the foreign state, e.g. in the form of a branch established under the laws of that state or by obtaining a trade licence there.

The key is not who you are working for at the time, but in which country. So if you want to work as a sole trader in Germany and, for example, lay a floor for a Czech diplomat or doctor, this is still considered as working abroad, although you can bring Czech parquet floors and sign the contract in Czech.

The key is the focus of interest

Essential to assessing the regime you will be in is the country in which you provide the majority of your services. If the contract in question was essentially an isolated extra job in Germany, but you otherwise work and do business predominantly in the Czech Republic, then it is a one-off cross-border provision of a service for which the only issue is whether the activity is regulated in the relevant state.

The situation has to be assessed on a case-by-case basis, in particular with regard to the frequency, regularity, duration and continuity of the activity; the essential condition is that the service is also provided by you in the Czech Republic.

It is not possible to determine generally which activities are or are not regulated abroad. This varies from state to state. The Single Point of Contact will help you to find out whether your chosen activity is regulated in your country or not. Regulation could be another small, but not insurmountable, obstacle to your foreign activities. If your chosen profession or activity is regulated in an EU country, you must contact the local competent authority (for example, the chambers of commerce), which may issue a certificate of recognition of professional qualifications. In the vast majority of cases, there is a fee of tens or hundreds of Euros for the issue of the certificate. It may be conditional, for example, on you providing proof of your qualifications, your good character or your medical fitness. Sometimes you also need to provide proof of an order from a foreign entity. Again, it depends on the local conditions, which determine how long the authorisation you have obtained is valid for. As a rule, this is a year or a few years.

If the profession is unregulated in the Czech Republic, but is regulated in the state, the self-employed person must provide any evidence that he or she has been engaged in the activity in question for at least two years in the previous ten years.

If the profession is not regulated in the foreign country, then you can practice it just like any national of that country.

Certain services can typically only be provided in an establishment, such as beauty services, hotel or restaurant services, and as also indicated above, in such a case a Czech trade certificate is far from sufficient. It is necessary to apply for a licence to provide services in the host Member State. The Points of Single Contact also help would-be entrepreneurs with whom to contact and where to find them.

Contact the point of contact

As mentioned above, reliable information on the provision of services within the European Union is provided by the Single Window. Its purpose is to provide information to interested businesses and entrepreneurs. The contact points are located in the municipal trade offices of the municipalities of the regions and in two locations in Prague. In the Czech Republic there are fifteen of them.

If you already have a more specific idea of where you would like to do business and in what area, you can also get a specific contact to the office that authorises the activity.

What about insurance?

An important question for expatriate workers is whether they have to pay social security and health insurance in the foreign country. It is not possible to be insured for social security and health insurance in more than one EU country. The place of employment is again decisive. If you are employed or start a business in another EU member state, you usually have to comply with the notification requirements of the relevant institutions in both the Czech Republic and the relevant country. For one-off or sporadic trips to work within the EU, it is only necessary to apply to the district social security administration for confirmation of the European portable form proving membership of the Czech social security system.

It is also assumed that the self-employed person is insured with a Czech health insurance company and holds a European Health Insurance Card

Income taxation

As regards the taxation of income, the procedure is again simpler in the case of occasional provision of services abroad while providing the majority of services here in the Czech Republic. Then, as a rule, the tax resident is a Czech tax resident (tax residents are those who are domiciled or stay in the Czech Republic for at least 183 days in the relevant calendar year), in which case everything is usually included in Czech income and taxed here. Only the income earned in the foreign country can then be taxed. However, the Czech Republic has a double taxation treaty with most neighbouring countries, which prevents certain income from being taxed twice. Therefore, if the entrepreneur has already paid tax abroad, the Czech tax return may, for example, be offset or exempted from taxation. The entrepreneur should therefore familiarise himself with whether or not the Czech Republic has a double taxation treaty with the country in question and, if applicable, what its content is. It is also a good idea to study the conditions of tax residency in the other country.

Another situation is if, for example, a service provider establishes a permanent establishment in the other country, there is an obligation to register for income tax in the other country and pay the tax there. It is also always necessary to keep an eye on the obligation to pay VAT in the other Member State.