How much will self-employed individuals in the Czech Republic pay for social and health insurance in 2025?

Last week, the Czech Republic published a draft government regulation that outlines the basis for calculating minimum advance payments for health and social insurance for 2025. Overall, advance payments for self-employed individuals (OSVČ) will increase by CZK 1,127 next year.

As is customary, the amounts for health and social insurance advance payments in 2025 will be adjusted based on the total tax base. The Ministry of Labor and Social Affairs recently released a draft regulation detailing these changes. We have calculated the expected advance payments for social and health insurance for the self-employed for the upcoming year, as well as the flat tax rate applicable to them.

What should the average salary be?

As of January 1, 2025, the government regulation sets the average salary data in the Czech Republic, which is used for calculating pensions in 2025. These data are also used to determine the minimum and maximum tax and insurance bases for self-employed individuals for the following calendar year.

The general tax base for 2025 is determined based on statistical data from 2023, while the conversion factor is calculated using data from the first half of 2024. This factor expresses the increase in the average salary for that period. The product of the established general tax base from 2023 data and the growth factor for the first half of 2024 is the expected average salary for 2023, which is used to set pensions and insurance advances for the following year.

Data required to determine advances for 2025:

• The total tax base shall be CZK 43,682.
• The conversion factor for adjusting the total assessment base shall be 1.0720.
• The average salary shall be CZK 46,828.

Social Insurance in the Czech Republic for 2025

The maximum and minimum tax bases for self-employed individuals are determined by the average wage set for 2025. As a result, the maximum tax base for social insurance will increase to CZK 2,247,744 (calculated as CZK 46,828 × 48) in 2025. If self-employment is a secondary activity, the amount for participation in social insurance will be CZK 112,388 (calculated as CZK 46,828 × 2.4) for 2024.

According to current regulations, the minimum monthly tax base for individual entrepreneurs in 2025 will be CZK 14,049 (calculated as CZK 46,828 × 0.3). For those with additional income, the minimum will be CZK 5,152 (calculated as CZK 46,828 × 0.11). Consequently, the minimum advance payment for social security for the self-employed will rise from CZK 3,852 to CZK 4,103 in 2025.

However, the consolidation package that took effect earlier this year will increase the minimum social contributions for the self-employed over the next few years. Starting in 2024, the basic tax base for self-employed individuals will rise from 25% of the average wage to 30%. For individual entrepreneurs with additional income, it will increase from 10% to 11%. In 2025 and 2026, this will rise by an additional 5 percentage points.

As a result, the minimum advance payment for 2025 for self-employed individuals will be calculated at 35% of the average salary, amounting to CZK 4,786. For those whose entrepreneurial activity is a secondary source of income, the advance payment will increase from CZK 1,413 to CZK 1,505. The minimum monthly tax base for individual entrepreneurs with primary income will be CZK 16,390, while for those with secondary income, it will remain at CZK 5,152.

An exception is made for new self-employed individuals, whose minimum tax base in the first two years of activity is set at 25% of the average salary. In 2025, they will be required to make minimum advance payments of CZK 3,419.

Health Insurance for 2025

With the new calculation base, the amount of advance payments for health insurance will also change. As a result, the minimum advance payment for health insurance in 2025 will increase from CZK 2,968 to CZK 3,161.

Flat Tax Rate for Self-Employed Individuals in the Czech Republic in 2025

Since 2021, self-employed individuals have had the option to simplify their tax reporting by using a single fixed payment, which exempts them from declaring income tax, social security, and health insurance in three separate reports. However, this option means that sole proprietors lose the ability to claim tax credits, tax relief, or tax-exempt amounts.

Starting in 2023, the flat tax rate is divided into three different bands, depending on the self-employed person’s previous income and fixed expenses. In the first band, the minimum health insurance contribution, 1.15 times the minimum social security contribution, and a tax of CZK 100 are required. For 2024, this amounts to CZK 7,498. In the second band, self-employed individuals pay a single tax of CZK 16,745, while in the third band, the tax is CZK 27,139.

In 2025, the single tax for the first band is expected to be CZK 8,765 per month, which includes CZK 5,504 for social security, CZK 3,161 for health insurance, and CZK 100 for income tax. The amounts for the second and third bands will remain the same as in the previous year.

Increased Limit for Pension Reduction

The average salary used for pension insurance purposes directly affects the limits for reducing the credit of the individual tax base in the calculation base for determining the pension percentage. These limits are set at 44% of the average salary (1st reduction limit) and 400% of the average salary (2nd reduction limit). The amount is included in full up to the first reduction limit, while the credit between the first and second reduction limits is 26%. Any amount above the second reduction limit is not taken into account.

Reduction limits for determining the calculation base for pension calculation:

1. The reduction threshold for 2025 will be CZK 20,605.
2. The reduction threshold for 2025 will be CZK 187,312.

The basic amount of old-age, disability, widow, widower, and orphan pensions for 2025 is CZK 4,690. Old-age, disability, widow, widower, and orphan pensions granted before January 1, 2025, will be increased from January 1, 2025, so that the basic pension amount increases by CZK 290 per month, and the percentage pension amount increases by 0.4%. The amount of the supplement for one child in 2025 will be CZK 502.

https://www.podnikatel.cz/clanky/jak-se-maji-osvc-zmenit-zalohy-na-socialni-a-zdravotni-pojisteni-v-roce-2025/?utm_source=push&utm_campaign=2024-08-14