As a European citizen, it isn’t always necessary to travel far in order to pay less tax. Just go to the airport and take a short flight to the Czech Republic. The Czech Republic taxes personal income at a flat tax rate of 15%, which isn’t bad. But that’s not all. If you’re self-employed (as a EU citizen, you can become self-employed very easily in the Czech Republic), you’re allowed to apply a delightful lump sum deduction in order to lower your taxable income. So instead of claiming actual expenses such as social security and health contributions, you can apply a lump sum deduction (ranging from 40% to 60%) to lower your taxable income. And if you’re a farmer, you’re allowed to apply a lump sum deduction of even 80%!
Generally, the lump sum deduction of 40% applies: when you have a taxable income base of 100, you can deduct 40 from it. You will then pay 15% personal income tax on the remaining 60. Bottom line is that your personal income tax burden is reduced to only 9%. Yes, we could live with that! Even better is when you’re engaging in farming activities. Whether you breed chickens, kangaroos, ostriches, donkeys or Bugs Bunnies; whether you cultivate beautiful flowers, high-fibre vegetables good for the intestines or a new, legal and genetically modified mind-expanding herb, it doesn’t matter: the Czech Republic is your Walhalla! As a self-employed farmer in the Czech Republic, your personal income tax burden equals only 3% (due to the generous lump sum deduction of 80%)!
The Czech Republic offers opportunities, that much is clear. As a self-employed individual, you can simply invoice a Czech company and you pay personal income taxes in the Czech Republic at a maximum flat tax rate of 9% (taking into account the lump sum deduction). Let’s leave aside for now who owns that Czech company. You can also invoice foreign companies of course. Again, let’s leave aside for now who owns these foreign companies… With regard to the substance requirements: you must be able to prove that you’re running your business from the Czech Republic. Maybe you can rent a cosy apartment in Prague, because after all, it’s a very pleasant city.