Self-employed person

What it means

A self-employed person trades as an individual: a licensed trader, but also an author, athlete, expert or personal assistant operating under a special statute, rather than through a company.

They are liable for debts with all their personal assets, unlike a member of an s. r. o. That difference is what usually decides a change of form as the business grows.

In social insurance the term SZČO is narrower than in everyday speech. A person becomes a compulsorily insured SZČO only once their business income exceeds the threshold set by law, and the Social Insurance Agency then notifies them. So holding a trade licence does not in itself mean paying social contributions; that depends on income.

How it works in practice

They keep single-entry books or tax records and may claim flat-rate expenses. With a larger volume of documents, recording actual costs usually works out better.

Contributions are generally not paid in the first year and are set from the income in the first return filed. That is why the second year of trading is the financially hardest.

A trade is now notified through the single point of contact, which at the same time handles income tax registration and notification to the health insurer. We set up the client’s records from day one, so the first documents do not end up in a box and the choice between flat-rate and actual expenses can already be made in the first year.

What to watch out for

Invoicing a single client with fixed hours and instructions risks being treated as disguised employment. An inspection looks at the substance of the relationship, not the wording of the contract.

Suspending or cancelling a trade licence does not end the obligations. Tax and contribution arrears and debts to suppliers remain and are collected from personal assets, if need be through enforcement. Anyone winding up the business should therefore settle what they owe and file the final return first, and only then cancel the trade licence.