A typical example of cross-border provision of services is, e.g., construction activities, software provision or consultancy; on the other hand, services tied to one place (restaurant, hotel, hairdresser’s) are inadmissible. The posted workers are subject to certain provisions of Czech labour law, which regulate all relevant issues such as working hours, minimum wages, occupational health and safety or the extent of leave according to Article 3 of the Posting of Workers Directive 96/71/EC. The workers nevertheless remain contracted to the posting employer.
The posted workers and their employer need to comply with the specific rules concerning the posting of workers, in particular, the rules pertaining to reporting.
Moreover, if the service that is to be provided is regulated in the host country, it is necessary to report the qualification of the company to the relevant authority of the host state. Please visit the Database of regulated professions and professional activities to find out which services/professions are regulated in the Czech Republic. More information about the declaration. The respective form.
Registration, taxation and social security and health insurance
One of the obligations defined in the Act on the Residence of Foreign Nationals (pdf, 1 MB) for citizens of the EU, Iceland, Norway, Liechtenstein, or Switzerland is the “reporting requirement” in the event that the length of the intended stay in the Czech Republic is longer than 30 days. In this situation, within 30 days of entering the Czech Republic, an individual is required to report their presence to the appropriate Foreign Police Department that holds jurisdiction over the location of their stay in the Czech Republic. For details, see https://www.mvcr.cz/mvcren/article/entering-the-czech-republic.aspx
The posted workers usually do not pay social security and health insurance in the host member state because if posting lasts up to a 24-month period, they remain affiliated to the system of their country of origin. To prove this fact, they should always have the A1 form and the European Health Insurance Card issued in their country of origin.
Concerning income taxes, it is necessary to act in line with the respective treaty avoiding double taxation and respective income tax acts. In case of conflict of the particular treaty avoiding double taxation and the particular income tax act, the treaty prevails.
If a posting company must apply for a permanent establishment in the Czech Republic (Article 5 of the respective treaty), the posting company must register for income tax in the Czech Republic and pay the relevant taxes there. An obligation of a permanent establishment can arise, for instance, in the case of a construction project running longer than 12 months or in case of cross-border provision of services longer than 6 months during 12 consecutive months.
The posted employees are obliged to pay their income tax only in the member state of origin if all of the following conditions are met:
- The posting period is shorter than 183 days within 12 consecutive months (or in a calendar year).
- The costs are not borne by the permanent establishment of the posting company.
- The remuneration is paid by the employer who is not a resident of the Czech Republic.
If the income tax obligations arise, they commence from the beginning of the activities in the Czech Republic. The registration should be done in the relevant tax office; nevertheless, the Points of Single Contact (list and contact details) can assist foreign companies with the registration or with other administrative procedures connected to the posting of workers to the Czech Republic.