Posting of employees from EU-states into the Czech Republic
In many cases, the posting of your own employees is a simplification against the possibility of being an employer in the foreign market. In the Czech Republic, there is no legal obligation to report on the basis that it would be necessary to report the employee on the customs or some other specialised office before an employee´s posting.
In spite of it, the posting is connected with many rules and legislative limitations, which are necessary to know before posting the employee to avoid sanctions from the control authorities in the state of posting and to ensure the smooth progress of the employee´s stay in the other EU-state.
Pursuant to Council Directive 96/71/EC of the European Parliament on the posting of workers in the framework of the provision of services, in addition to the conditions laid down in the local employment contract, it is necessary to follow the provisions of the Czech Labour Code for workers posted to the Czech Republic, i.e., maximum length of the working hours and minimal rest hours, minimum amount of holidays, minimum wages and overtime bonuses, occupational health and safety, or equal treatment of workers. However, this is not the case if one of the areas of the homeland legislation is more favourable for the employee, with each claim being assessed separately. Some claims may be governed by the law of the home state, or by others under the labour law of the State of employment. For the year 2017, the minimal amount of wage is 11 000 CZK for nonqualified professions in the Czech Republic. For the year 2018, the minimal amount increases to the amount of 12 200 CZK. With a number of jobs, there is a so-called guaranteed wage assured in accordance to the law, which the employer has to pay. This guaranteed wage takes the complexity, strenuousness and responsibility of the relevant work into account.
Another aspect related to the posting is the area of legal insurance. States covered by the EU Coordination Regulations, the main principle is the competence to the directives of social and health insurance of one state only and it is possible to use the posting institute. Thanks to that institute and under the specific conditions, the posted employee can stay in the system of the social security scheme of the homeland also when working out of the state the employee is insured in. Thanks to the EP directive and Council Directive 883/2004, it is possible to use the posting provision for the planned posting for a maximal time of 24 months. This rule influences where the employee and the employer pay their legal payments of social and health insurance. However, it does not limit the employee to use the health care system in the state of posting if necessary (and his dependant family members). By using the posting institute, it is necessary to contact the institution ensuring the social security together with the employee and ask for a confirmation of the affiliation to the system of social and health insurance of one of the states via the A1 form.
As far as income tax is concerned, it is necessary to follow the relevant double taxation treaty, which will determine the tax residence of the posted employee and the possibility of establishing a permanent establishment for the purpose of income tax. For non-resident taxpayers, only the income from sources in the Czech Republic is subject to tax; for tax residents, all their income is subject to taxation. If the right to tax in the Czech Republic arises on the basis of the contract, the income of the employee will be taxed at 15% of the tax on the dependent activity and if his/her annual income exceeds 1,355,136 CZK in 2017 (1,438,992 CZK in 2018), the income above that limit will be subject to a solidary tax increase of 7% as well. The basic amount for calculating the tax on the dependent activity is not just based on the gross wage. This is increased by the employers’ insurance contributions of 34%. Thus, the real taxation rate is around 20% if the income of the employee is not as high as to be subject to the solidary tax increase. In addition, each employee is entitled to a taxpayer discount of 24,840 CZK per year, and if he/she is a non-resident taxpayer, 90% of his worldwide income must come from sources in the Czech Republic in order to qualify for any other tax credits. At the same time, it is important to determine whether a foreign employer is a taxpayer under Czech law and thus obliges him/her to impose a tax or a tax advance on his/her employee or whether this obligation will be imposed on the employee himself/herself.
In the case of posting outside the EU-states, many aspects will be similarly solved in accordance to the contracts about the prohibition of double taxation. There is no unifying directive in the area of the legal insurance and it is necessary to verify the impacts in the bilateral contract about the social insurance agreement concluded between the Czech Republic and the posting state if this contract exists.
If you think about posting your employees to the Czech Republic, we can help you to get oriented in the related legislation and we will find the best possibly solution together.
More posts from Jana Heranová
More from MO(O)RE News Czech