The appeal of the Czech Republic as the home of your new business is obvious to many. Located in the center of Europe, the Czech Republic enjoys a rock-solid economy, stable infrastructure, and a brimming talent pool from which businesses can hire.
The European country is also appealing from a financial perspective, with the a relatively low average monthly salary for Czech employees, minimal living expenses, and a low 19% business tax rate.
At the moment, the Czech government is also offering significant tax breaks for companies who will bolster strategic services outside of the country’s urban center in Prague.
No matter your reasons for choosing Czechia to start your business, one thing is clear: the Czech Republic is on the rise as a European Powerhouse. This guide will take you through the relatively simply process of opening a business in the Czech Republic, including what kinds of entities can be opened there, what documents you’ll need, and what your taxes will look like.
At the moment there are a variety of legal entities that may be formed in the Czech Republic.
In a VOS, two parties trade under a joint name, and are equally obligated to and liable for the company, up to the amount of their individual contributions. Partners are liable with all of the property they hold, and the company is liable for all the property it holds.
A KS is a company in which all partners are liable for the company’s obligation up to the amount of their contributions as disclosed in the Commercial Register, paid or unpaid.
SRO’s are the most common company type established in the Czech Republic. Like in many countries, partners in an SRO are liable for the company’s obligations only up to the capital they originally contributed to the company. In the Czech Republic, SROs are required to start with a minimum registered capital of CZK 200000.
A founding contract, including the company’s statutes, and an issue of shares establishes an AS. Shares can be freely traded without registration in the Czech Republic’s Commercial Register, which makes it attractive if you plan to make your company publicly traded. A Joint Stock Company must have a minimum capital stock of CZK 2 million. At least 30% of that amount must be paid at the time of incorporation.
A cooperative may conduct business for the benefit of its members, the number of whom does not need to be specified. A cooperative is liable for all of its assets.
A branch office isn’t technically a Czech business; just a representative of your foreign business in the Czech Republic. Branch offices have a pretty hefty set of restrictions, and must list all of their planned activities on their Commercial Register application. The company must also appoint an office head who is either a Czech resident of a foreigner with a long-term Czech residency permit.
Any of the previously listed business forms can be a joint venture, in which there are two partners, one of whom is typically a Czech resident.
For the remainder of this guide we’ll focus on the formation of the Czech Republic’s most common business type: SROs.
- Obtain police records for any current or future managing directors.
- Have the revenue authority confirm documents that state none of the business’s partners have outstanding tax obligations.
- Get authenticated statutory declarations and specimen signatures for all current and future managing directors.
- Establish an office for the company’s operations, as well as ownership documents if purchasing property.
- Produce partnership articles, which must be signed and verified by the commissioner.
- Set up a bank account for the initial deposit of capital.
- Register at the Trade Licensing Office and license applications.
- After your company is established, apply for a Commercial Register registration within 90 days.
- 2x Partnership agreement, signed by the commissioner
- Confirmation of deposits
- Bank confirmation of the ability to make deposits
- Authorized copies of trade licenses
- Lease or documents establishing ownership of office property
- Statutory declarations of managing directors
- Police records of managing directors
- Legal stamp
- Register at the Social Security Administration, and select a health insurance company within 8 days of registration
- Finally, register at the Revenue Authority within 30 days of company establishment
If you establish a business in the Czech Republic, you can expect to pay two or three kinds of taxes:
1. Corporate tax - Currently 19%.
2. VAT - The standard VAT rate is 21%, however some products may be taxed at the reduced rate of 15 or 10%.
3. Road Tax - Applicable only if you plan to use a motor vehicle in your business. Road tax rates are variable, but fall between CZK 1000-5000 annually.
If you’re planning to reside in the Czech Republic, you’ll need to get a Long-Term Residency Visa. The Ministry of the Interior of the Czech Republic has plenty of useful information about Visas.
If you have further questions about the steps for registering a business or the allowed business types in the Czech Republic, the Embassy of the Czech Republic in London has set up an excellent resource for navigating the process.
Expats.cz has a wealth of information, not only about forming your business, but about how business is conducted and life in the Czech Republic.
Doingbusiness.org has conveniently broken down all of the procedures (and how long they’ll take) if you’re interested in learning more about the timeline for establishing your Czech business.
The Ministry of the Interior of the Czech Republic has detailed information on visas, permits, and migration.
While you’re looking to fund your new venture from abroad at the least possible cost, consider using TransferWise. Not only does TransferWise use the real mid-market exchange rates to convert your money (which nearly always beat the banks), but because your money is received and sent via local bank transfers in both your home country and in the Czech Republic, all those nasty international fees magically disappear. Give it a try.