Creating a company in Czech Republic
Incorporation time: 20 days
Shelf companies: Yes
Accounting: Yes
Secretary: Yes
Nominee Shareholder: Yes
Nominee director: Yes
TAX: 19%
The Country
The Czech Republic has existed officially since 1969, and has experienced a very complex history over the past several centuries. The country only achieved independence 24 years later, in 1993, when it separated from Slovakia. This split marked the end of the State of Czechoslovakia. At the heart of Europe, and surrounded by other countries, the Czech Republic joined the European Union in 2004.
An offshore centre
The Czech Republic does not have the most attractive tax rates in Eastern Europe, but offers FDIs a number of incentives enabling them to reduce taxes applicable to individuals and companies. Companies can therefore benefit from tax breaks for a period of five years after their formation.
The different types of onshore companies are:
- Limited liability company
- Joint stock company
- General partnership
- Branch
The various types of companies
Setting up a company in the Czech Republic takes 20 Days and 9 procedures.
| Types of companies | Capital | Number of partners |
|---|---|---|
| Limited liability company | CZK 200,000 minimum | maximum of 50 shareholders, liability limited to contributions |
| Public limited company | Minimum CZK 2,000,000 | No minimum or maximum, but only 1 owner, liability limited to share capital |
| General partnership | No minimum capital | at least 2 shareholders, unlimited liability |
| Limited partnership | Minimum 5,000 CZK | a minimum of at least 2 shareholders, 1 active and 1 passive, unlimited liability for assets, liability limited to contributions for liabilities |
Different tax rates
In the Czech Republic, corporate income tax, and capital gains tax, are fixed at 19%. Investment revenue and pension funds are taxed at 5%.
It is possible to deduct the following from taxes: depreciation of assets; materials and services purchased; wages; health insurance and social security contributions; donations; R & D expenses; tax losses.
Consumer tax (VAT) is 21%, or 15% for books and food and health products. Individual income tax is fixed (15%), and pension contributions, disability allowance, mortgage interest, life insurance and business gifts are all tax-deductible.
France and the Czech Republic signed a Double Tax Avoidance Agreement in 2003.
Links:
Tax Guide
Double Tax Avoidance Agreement
Accounting Overview
National Accounting Standards govern the corporate fiscal year, and are established by the Ministry of Finance. They strive to meet International Financial Reporting Standards.
The fiscal year must be different from the calendar year; companies are therefore free to choose their fiscal year, but it must be spread over a period of 12 months. Companies’ financial statements must be written in Czech, accounted for in CZK, and must include a balance sheet, a statement of profit and loss, as well as notes.
A external auditor must also carry out an annual audit of the company.
The jurisdiction in detail
Although the Czech economy is one of the most powerful in the region, its dependence on foreign commerce and international trade means that the 2008 crisis was particularly difficult for the country. It entered a recession in 2009, and growth remains low despite a slight rebound in 2010. The growth estimate for 2013 is 0.8%.
The Czech Republic’s industrial sector plays a significant role in the nation’s economy, representing 40% of GDP. It is primarily focused on the automotive industry, with the presence of Skoda, Toyota and Peugeot, as well as on textiles.
The service sector naturally plays the main role in the country’s development, employing more than half of the active population, and includes an expanding tourism sector.
Finally, Czech agriculture is less influential, employing only 3% of the active population. It produces beets, potatoes, barley, wheat and hops. This branch of the economy is now heavily subsidized.
As discussed above, the country is open to the outside world, and trades extensively with foreign countries. This activity is supported by the country’s membership to the EU. Today, the Czech Republic has a positive trade balance.
Advantages of investing:
- Skilled, cheap labor
- Access to the European market
- Stable currency
- Powerful central bank
Disadvantages
- Dependence on external demand
- No Euro
- Sometimes turbulent political environment
As with many countries in Eastern Europe, the Czech Government implemented measures to attract foreign investment, e.g., a programme for the non-discrimination of foreigners.
Trade and Market Intelligence
The Czech Republic is a member of the World Trade Organisation and the OECD. It is a signatory to the Kyoto Protocol, the Washington Convention, the Basel Convention and the Montreal Protocol, as well as the 2001 International Coffee Agreement.
As with all countries in the European Union the country’s customs policy promotes a liberal import system which tends to exclude, insofar as possible, the need for licences for trading goods. However, free trade does not mean fewer inspections, and certain sectors such as agriculture and textiles are subject to strict regulation.
For European Union member states trade with the Czech Republic requires an Intrastat Declaration and Entry Summary Declaration relevant to the Import Control System for EU countries. The latter is intended to increase the safety of international trade. Exchanges with other members of the EU are not taxed, while taxes on imports from non-European Union countries remain very low (3 / 4%).
Czech distribution is now similar to that of the Western European countries having undergone a profound transformation, abandoning small local shops in favour of large chains of supermarkets. The complete market domination by German, British and Austrian companies is evidence of this, with Czech brands for the most part, having disappeared. Groups such as Tesco, Ahold, Kaufland, Metro, Rewe and Lidl are now found throughout the country.
The transport of goods in the Czech Republic is limited to land and rail. The country has no sea or river access, although air transport is increasing. In terms of industry the automotive and electronics sectors are the driving economic forces of the country.
Links:
Czech Customs Administration
TARIC Tariff Database
Ministry of Transport
Czech Chamber of Commerce
Employment Legislation in the Czech Republic
The legal working week in the Czech Republic is limited to 40 hours with a minimum monthly salary of 8,000 CZK. The retirement age is 63 for men and 62 for women. Employers pay social security contributions at a rate of approximately 35% and employees contribute 12.5%.
11% of employees are union members and the country’s most powerful union is the Czech-Moravian Confederation of Trade Unions (CMKOS).
Intellectual Property Regime in the Czech Republic
| Type of rights | Legislation | Validity of protection | Agreements signed |
|---|---|---|---|
| Patents | 527/1990 Law on inventions and rationalization proposals | 20 years | – Patent Cooperation Treaty – Strasbourg Agreement Concerning International Patent Classification |
| Trademarks | 441/2003 Law on trademarks | 10 years | – Nice Agreement on the International Classification of Goods and Services – Madrid Agreement Concerning the International Registration of Marks |
| Designs | 207/2000 Law on the protection of industrial design | 25 years | |
| Copyright | 121/2000 Law on copyright | 70 years after the author’s death | |
| Industrial designs | 478/1992 Law on utility models | 4 years |
Links:
Ministry of Labour and Social Affairs
Copyright Office
Czech Republic Political Data
The President (Miloš Zeman) is chosen by Parliament for a five year term, and has restricted powers. It is the President who appoints the Prime Minister (Bohuslav Sobotka) who in fact exercises executive power. The legislature consists of the Senate and the Chamber of Deputies.
The Czech Republic has several political parties, such as the Czech Social Democratic Party, the Civic Democratic Party, the Communist Party, the Christian Democratic Union and the Green Party.
