Thursday, August 27, 2009

Wages, Taxes and VAT

When you refer to wages here, they are in monthly terms; not annually like in the U.S. The average gross Czech income is around 19.000 Kč per month (~$1,056 U.S). But about 2/3rd don’t reach the average gross wage. Like other places, the technical and financial fields earn the highest wages while agriculture and textile workers have the lowest.

The labor code sets the minimum wage here at 48,10 Kč (~$2.67) per hour or 8.000 Kč per month (~$444). How in the heck do people here make it on the minimum wage?
Income tax here is 15% but I’ve heard that this may go up, quite a lot, depending on how the upcoming elections turnout. Employees contribute 8% for social security and unemployment insurance while the employer contributes 26%. Health insurance is 4,5% for the employee and 9% for the employer. Basically, you give up 30% of your monthly paycheck to taxes. Oh yeah, you get paid once a month here. Not twice a month or every two weeks like back home.

We don’t have VAT (value added tax) in the U.S. but most other countries do. It is a consumption tax levied on any value that is added to a product. All this means to me is that the sales tax here is 19% on goods & services. A reduced rate of 9% is charged for food, medication, newspapers, books, heating & water.

EDIT:  In 2012, the VAT rate has increased.
EDIT:  In 2013, the VAT rate increased as well.

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