Eternity Law International News The guide for starting a business in the Czech Republic

The guide for starting a business in the Czech Republic

September 9, 2022

Here is a brief guide to help you make your selection and realize all benefits of running a business in the Czech Republic.

Reasons to choose the Czech Republic

  • In comparison to its western European competitors, the Czech Republic provides a stable economy with excellent infrastructure, a knowledgeable and trustworthy labour force, and cheaper wages and living costs.
  • The Czech government generously gives tax benefits to companies providing key services.
  • A consistent inflow of investment into the nation has directly contributed to the steady growth of the Czech economy. Since 2000, the Czech economy has grown annually at a consistent pace of between 1.5 and 4 per cent. The main causes of this rate are rising output and direct investment from abroad.

The initial stages of starting a business in Prague

Determining your company’s legal structure

After deciding to launch a business in the Czech Republic, the legal type of the enterprise must be determined.

The typical types are:

  • a limited liability company ‪(S‪R‪O‪)
  • a self-employed person (OSVČ)
  • a joint stock company ‪(A‪S‪)

Creating SRO (LLC) in the Czech Republic

Since 2014, before the company’s approval for registration to establish an SRO you are required to have declared capital. For the government to authorize a registration, this requirement must be met.

Non-Czech nationals must have all of the following to launch a business.

  • Bank accounts
  • Trade licenses
  • Registered entrepreneurs and executives
  • Certifications, authorizations, and regulatory obligations
  • The package of documents consists of the registered address of the company‪, address of ‪the owner and certificate of good conduct

Additionally, all of this obligatory documentation has to be translated and certified. In this case, you are strongly advised to engage the services of a firm that specializes in the formation of enterprises in the Czech Republic. We can help you to gather all data and documents that are needed.

Mandatory statements

  • After a company is registered in the Czech Republic, all outstanding company tax matters must be resolved within 30 days.
  • The VAT in the Czech Republic has two rates. First, a 21% rate is mostly applied to sales and services. The second is a reduced rate of 15% imposed on a select group of goods, principally basic food items. The third reduced rate is assessed on books, child nutrition items, and pharmaceuticals.

If yearly sales exceed 1,000,000 korunas, a limited liability firm is required to file annual VAT reports and refunds. For tax offset, the firm in issue must enroll and submit a VAT report if it conducts business with another EU country. This company must file an annual VAT report even if its annual trade is less than 1,000,000 korunas.

  • The Czech Republic is the only country that levies a road tax. A firm must pay a road tax if it plans to utilize automobiles for work-related reasons. Companies are allowed to decide whether to use their cars exclusively for business or a combination of semi-business and semi-private use. The cost is between 1200 and 1400 korunas.
  • Individual Tax

A company that employs non-citizens should take into account the problem of residence for income tax reasons. Residency is determined by a period of at least 183 calendar days. A non-citizen who stays in the Czech Republic for fewer than 183 days is only required to pay base income tax to the Czech Republic and income tax to their home country. Non-citizens who spend more than 183 days a year in the Czech Republic must pay the country’s tax rate. Income tax is typically paid to the nation in which business is done, however alternative payments can be made for nations with whom the Czech Republic has a double tax treaty.

  • Non-EU nationals who desire to visit the Czech Republic for a period longer than 90 days must apply for a long-term visa. With evidence of healthcare coverage for the period of the residency in the Czech Republic, evidence of residence for the duration of the stay in the Czech Republic, and evidence that the applicant has enough money to cover living expenses in the Czech Republic, the request must be made at the Czech embassy by the applicant’s citizenship. The individual making the request must also apply for an employment visa if they are not an EU citizen.

Please contact us to get more information.

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