The Czech Republic is a relatively small country in Central Europe, bordering Germany, Poland, Slovakia and Austria. The modern Czech Republic was formed by the dissolution of Czechoslovakia in 1993, but the history of Czech statehood goes back to the early Middle Ages. Since 2004, the country has been an equal member of the European Union and the Schengen area.
Although the Czech Republic has never been an offshore zone or a tax haven with zero tax rates on foreign income, foreign entrepreneurs quite often choose this country to register their business in Europe.
Your firm will be registered in a completely white European jurisdiction with a convenient business infrastructure, a resilient economy and a strong local currency.
In the process of registering and organising his company in the Czech Republic, an entrepreneur spends incomparably less money than in such European countries as Germany or Austria. At the same time, there are as many opportunities for company development as there are for German or Austrian businessmen.
An additional advantage of the Czech Republic is its human resources potential. Those foreign entrepreneurs who already have experience of working abroad note that the services of Czech employees are 2-3 times cheaper than in neighbouring countries. The average salary in the Czech Republic in 2023 was €1,460, while in Germany it was €3,900.
Access to large European sales markets. Once registered for VAT, Czech companies can supply their products or provide services throughout the European Union.
The Czech Republic has one of the lowest corporate income tax rates in Europe. With a competent approach to tax planning, an enterprising foreigner can legally reduce the fiscal burden on his business.
A company registered in the Czech Republic can open a current account in a major international bank or register in an electronic payment system, which will enable it to work with major international financial organisations and significantly simplify settlements with foreign counterparties.
With the support of our staff, it will not take you long to open a current account, as we know what criteria are used to check potential clients of financial institutions in the Czech Republic and will help you to prepare.
Starting a company in the Czech Republic is not difficult. The procedure will not take you long and will not cost you a fortune. And if you have a reliable representative acting under a power of attorney, you can register a new company without even travelling to the country.
The Czech Republic is without exaggeration an extremely attractive place to incorporate a company. However, as in any other jurisdiction, business processes in the Czech Republic have their own specifics. To insure against unfortunate mistakes, it is better for a start-up entrepreneur to seek advice from Imperial & Legal specialists.
The Czech laws that regulate business activities in the country allow foreign businessmen to choose the most suitable legal form from a variety of options to register a company. Most often entrepreneurs choose one of the 3-4 most common types of companies. Let us consider each of them.
A limited liability company is the most popular corporate form of doing business in the Czech Republic, as it is well suited for the vast majority of commercial activities.
To register an S.R.O. it is enough to have one founder, who can be a resident of any country, including a foreign legal entity.
The liability of the shareholders of such a company for its debts and financial obligations is limited to the amount of their contribution to the authorised capital at the time of incorporation. The founder makes its contribution to the share capital either in cash or in kind, either by transferring its property or by undertaking to pay a certain amount in the event of bankruptcy of the organisation.
In 2014, restrictions on the minimum amount of the authorised capital of Czech S.R.O.’s were removed, so the size of the investment can be whatever you want — the main thing is that the contribution of each shareholder must be at least 1 crown. Of course, in practice, the amount of the founding capital is declared much larger than 1 kroon, even if the company is opened by one legal or private person.
Strategic management decisions in Czech companies are made by the founders — the Board of Shareholders or the sole shareholder if the business is run by a single entrepreneur. Direct management rests on the shoulders of a director or several directors.
The head of an S.R.O. can be appointed by one of the founders or an employee can be hired for this position. Unlike many other European jurisdictions, the Czech Republic does not require at least one of the directors of such a company to have citizenship or permanent residence in the country.
Unlike a limited liability company, the shares of a Czech a.s. have a material embodiment. As in an S.R.O., a Czech a.s. can have only one shareholder.
A.s. shares may be assigned to certain founders by subscription or may be freely traded on the stock market. In other words, a joint stock company in the Czech Republic issues securities and the risks of its shareholders are limited to the market value of the shares they own.
This type of corporate structure is more complex than a regular limited liability company. Therefore, a joint-stock company is the choice of those foreign entrepreneurs who need to attract additional investment in their project by placing company shares on the stock market, even at the cost of additional expenses for registration and administration of the company.
The minimum amount of the declared share capital of a.s. is 2,000,000 crowns or 80,000 euros. At least 30 per cent of this amount is paid by the founders of the company during the incorporation process, by transferring the money to a special bank account in one of the country’s banks.
A general partnership in the Czech Republic is not a corporate legal form for conducting business activities or managing assets, for example, abroad. In a V.O.S. there must be at least 2 members — general partners — who not only take an active part in the management of their organisation, but are also liable with all their property for its debts.
As a rule, general partnerships in the Czech Republic are established by private individuals. If another company acts as a partner, it must appoint a representative, who can only be a natural person, to manage the partnership and liaise with the authorities.
Unlike corporations, any Czech partnership can be established without articles of association, relying only on a social contract, in which the partners’ shares in the founding capital and in the distribution of profits, as well as the extent of each founder’s liability, will be set out. In the Czech Republic there are no requirements for the minimum paid-up capital of partnerships. Usually, the founders share the profits and losses of V.O.S. according to their shares in the business.
In such an organisation, all participants are divided into two types:
K.S. registration requires the participation of at least two partners — general and limited partners.
Less common variants of foreign business presence on the hospitable Czech soil are branch and representative office.
A branch office is registered so that your foreign business can carry out commercial activities in the Czech Republic. A branch office is not considered a Czech business as it is not considered a separate organisation by the authorities and all decisions in the organisation are approved by the head office abroad. The foreign parent company is also materially responsible for the operation of its branch in the Czech Republic, as well as its liabilities and debts.
A representative office of a foreign company in the Czech Republic is also registered in the interests of the foreign company. Unlike a branch office, a representative office cannot trade or provide services, as its main tasks are to conduct research on the Czech market and to advertise the products of its parent company.
The Czech Republic has a good business reputation. This country cannot be called a tax haven, so all companies registered in this country, including branches of foreign firms, are obliged to pay corporate tax on profits earned.
Czech resident companies pay tax on all income, regardless of where it arises.
Non-resident companies pay corporate tax only on profits earned in the Czech Republic. If a company is a founder in a K.S. or V.O.S., the tax is charged on its share in the distributed profits of the partnership.
Starting from 2024, the corporate income tax rate in the Czech Republic is 21%. The taxable base includes all profits of commercial organisations, including capital gains from the sale of shares.
There are exemptions applied in the Czech Republic when calculating income tax on profits of companies registered in the country. In particular, Czech companies’ income tax on dividends from non-resident organisations is charged at a reduced rate of 15%.
The income of some Czech investment funds is subject to corporate tax at the rate of 5 per cent. A zero income tax rate applies to the income of pension funds.
There is also the opposite example, where a “windfall tax” is applied – a surcharge on the standard corporate tax rate when calculating fiscal payments from excess profits of large banks and energy companies in the Czech Republic.
The Czech value added tax is 21%. It is standard practice in the Czech Republic to charge a reduced VAT rate on certain goods and services. From 2024, books, both paper and electronic, will not be subject to value added tax.
If you employ workers in the Czech Republic, social benefits will amount to up to 33 per cent of their wages.
Some transactions in the Czech Republic are subject to stamp duty. Companies owning immovable property pay an annual land tax.
Through tax deductions and incentives, the Czech authorities encourage entrepreneurs to spend their profits on investment and research and development. The country has numerous international double tax treaties with other jurisdictions. If you are interested in reducing your Czech company’s tax costs through proper planning, contact Imperial & Legal for advice.
The financial report is submitted annually to the Czech Commercial Court in electronic or paper form by post. As a rule, small and ultra-small business organisations prepare a simplified annual report and it is not preceded by a company audit.
The audited financial report is filed by medium and large companies and those small businesses for which at least one of the following statements would be true:
The data of the Czech Commercial Court on the financial statements of companies are public. In order to access the financial figures, the requestor must know the exact name and identification number of your organisation.
Datová schránka is a state information system operating in the Czech Republic, which is a network of authorised electronic boxes through which documents are exchanged between citizens, organisations and authorities.
Electronic versions of documents received or sent through this system have the same legal force as documents on paper.
This modern tool for communicating with the authorities saves a lot of time, as a significant part of requests can now be made remotely, and the documents you send using the system are considered official by default and do not require a separate electronic signature.
The disadvantages of the Datová schránka system include the fact that notifications from government services sent in this way are automatically deemed to have been read by the addressee within 10 days. As soon as your company has an account in this system, never ignore incoming mail!
Before starting to register a business in the Czech Republic, a foreign businessman must answer a number of important questions:
It is common for founders to come up with several names for their company so that at least one of them can pass the eligibility test. The name of a Czech company must not repeat the names of business structures and trade marks already registered in the country. Our employees will help you to find and check the appropriate name.
As emphasised earlier, the choice of the appropriate type of company depends entirely on the tasks it will fulfil in the course of its business activities.
In the Czech Republic there are no requirements regarding the nationality of the founders of a company. All information about individuals and legal entities starting a company is submitted by a notary to the Commercial Court, the state registration authority, where this data is entered in the Register of Beneficiaries.
The register of beneficiaries appeared in the Czech Republic and a number of other EU countries in 2018. Data on the beneficiaries of Czech companies is public and can be freely requested in the relevant section of the government website by company name or identification number.
The address of registration will determine to which territorial unit of the Czech tax office your company will be attached. According to the current legislation, you can even register a Czech company at the address of a private flat. However, you will need the written consent of the owner of the flat.
Without a real office in the Czech Republic, a foreign entrepreneur will not be able to establish a sub-stance (economic presence) of the business in the country. It is easier for companies with an economic presence to conclude a service agreement with Czech banks.
If necessary, Imperial & Legal will provide you with a suitable office in the Czech Republic to list as your registered office.
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All commercial activities of companies registered in the Czech Republic are carried out on the basis of a state licence. Moreover, all commercial activities are divided into free and conditional activities.
Free activity is a commercial activity for which an entrepreneur does not need to comply with a whole set of strict requirements, undergo additional certification and training. Licensing in this case is not permissive, but of a notification nature. For example, you have opened a company in the Czech Republic. When you apply for a licence, you inform the Commercial Court what you will be doing. A free licence is relatively easy to obtain, but the process still takes time and can last 2-3 working days.
Conditional activities are strictly regulated by local authorities and require the entrepreneur to create special conditions, obtain additional authorisations and have appropriate education. Examples of conditional activities are the sale of hunting weapons or the provision of dental services. A conditional licence takes much longer to obtain than a free licence.
As a rule, companies with an economic presence at the place of incorporation have tax obligations in the Czech Republic. Some business activities within the country will require additional licences.
If you consult our staff, you will quickly pass the preliminary stage associated with agreeing the structure of the company, finding a legal address and drawing up the statutory documents. Therefore, the further registration process will be completed in just 3 steps.
Our agents contact a Czech notary and arrange a meeting. At the meeting, the notary, in the presence of the founders or their official representatives, checks and assigns a unique name to your company, registers the articles of association, collects information about the founders and directors in one package (names, residential addresses — for individuals; copies of the articles of association — for companies).
All documentation must be in Czech, otherwise it must be provided with a certified translation.
A Czech company is considered to be already established once the statutory documents have been agreed and signed by the founders in the presence of a notary.
Next, our specialists pay the registration fee and submit all the necessary information about the company along with the application for registration.
Another option is to have your company entered in the Commercial Register by a Czech notary at the stage of registration of the statutory documents.
The procedure of official registration of a company in the Czech Republic takes an average of 5 working days. Each Czech company is assigned a unique identification number, which can be entered into the search section on the official website of the Commercial Court to obtain detailed data on the structure and owners.
Your accountant will need to register the company with the tax authorities and obtain a taxpayer identification number. Imperial & Legal specialists will provide all the assistance you need if your employees do not yet have experience of communicating with the tax authorities.
Imperial & Legal has been helping overseas entrepreneurs successfully launch their businesses in the UK and the European Union for many years.
If you are planning to incorporate a company in the Czech Republic, we will provide detailed advice on each of the steps, right up to the application to the tax office.
Our staff will also help you open a local bank account, organise the relocation of employees to the Czech Republic and optimise taxation. Competent support from Imperial & Legal will allow you to save significant funds and spend your time freed from bureaucratic red tape on your business!
The amount of your expenses depends on a mass of variables: type and location of business activity, economic presence in the country, use of the services of a nominee director, etc.
Therefore, we can only tell you about some of the unavoidable expenses of a Czech businessman. For example, the services of a notary in the process of registering an S.R.O. cost the founders €250-300. You can limit yourself to renting only a legal address for a relatively small amount of money or rent a real office directly at the place of registration and hire Czech staff.
If you need the exact amount required to incorporate a Czech limited company for your circumstances, contact Imperial & Legal’s advisers.
A Czech company is well suited for any business activity, whether it is carried out at the place of incorporation or outside. But if your company operates directly from the Czech Republic, you will get such advantages as:
Financial institutions in the Czech Republic are characterised by their reliability and convenience, but they are very selective in choosing their clients. Therefore, it will be easier for us to tell you which company will be able to open a current account in a local bank.
Your chances of concluding a service contract with a financial institution in the Czech Republic will increase significantly if:
Of course, the above requirements are not declared in writing anywhere. The bank representatives do not explain the reason for their refusal. But if you plan to work in the Czech Republic, you’d better use the services of a nominal Czech director with citizenship and at least one founder nominally registered in the country.
Often a ready-made Czech company is bought to start working immediately either directly in the country or from its territory, using the already existing office, legal address and bank account. Before buying a business in the Czech Republic, do a thorough check of the company for unpaid debts, fines, court seizures of property, etc.
As in any other country, entrepreneurs in the Czech Republic also face some difficulties, especially when dealing with local banks. Most of these difficulties can be avoided or successfully overcome if you have local knowledge.
We strongly recommend that you tell your bank manager in detail at the outset how you intend to conduct your business and that you give advance notice of large sums of money coming into your current account (if it is more than €20,000). This way you can avoid having large payments frozen in your current account. Over time, your Czech bank will no longer react to every large instalment and will operate smoothly.
Another peculiarity of banking in the Czech Republic is that even for the maintenance of an empty current account without any transfers, the Czechs still charge a monthly fee. Therefore, if you decide to “put your Czech company to sleep” for a while, you should suspend co-operation with your bank and close your current account at the same time.
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