?? Company formation in the Czech Republic

Published by Yeye Agency at 13/01/2020

Company formation in the Czech Republic

Establishing a company in the Czech Republic is possible without bureaucratic obstacles if a local expert supports you. If not, then it might be a stressful process for you. Recent reforms have reduced the cost and number of procedures to establish a company.

The Czech Republic is one of the members of the European Union (EU) and as an EU member country, the Czech Republic complies with all EU directives and regulations that it follows in relation to trade agreements, import regulations, customs duties, import quotas, agricultural agreements, rules of origin, and other trade regulations. Companies operating in the Czech Republic can access the non-tariff consumer market through the country’s EU membership and free trade with Iceland, Liechtenstein, Norway and Switzerland through other agreements.

Business establishment

The Czech Republic is the 6th best European country for startups according to NimbleFins.

The Civil Code and the Companies Agreement provides the main legal framework for doing business in the Czech Republic. There are no restrictions on the import or export of capital, and the government provides economic incentives in line with EU legislation to encourage investment in specific sectors and regions. Most types of foreign investment do not require special government approval.

Company Formation in the Czech Republic

Companies located in the Czech Republic, as well as foreign companies operating in the Czech market or branches of foreign organizations established in the Czech Republic, are obliged to register with the Trade Register. An application assessment is usually completed within five business days.

Establishing a company in the Czech Republic can be done individually via power of attorney, through business development agencies, lawyers, consultants, or notaries who speak English in Prague. The services provided by business development agencies usually include the execution of official transactions, virtual office renting, recruitment, accounting and legal support.

Advantages of establishing a company in the Czech Republic

Central location in the middle of Europe
EU member but not in Eurozone
Independent and powerful central bank
Political stability
Economic stability
Confident and peaceful environment
Long and strong history of foreign investors
EU Membership
Quality and suitability of local suppliers
Existing platforms for R & D
High quality and compact infrastructure
Skilled workforce
Eligible labour costs and price stability
Transparency of investment incentives environment

Types of Companies in the Czech Republic

General Partnership – Veřejná obchodní společnost / v.o.s.
Limited Partnership – Komanditní společnost / k.s.
Limited Liability Company – Společnost s ručením omezeným / s.r.o.
Joint Stock Company – Akciová společnost / a.s.
Cooperative – Družstvo
Organizational Branch of a foreign company – Odštěpný závod

Most Common Types of Companies in the Czech Republic

Branch Establishment in the Czech Republic: The branch of a foreign company in the Czech Republic does not have legal status, but you are required to register with the Trade Registry and obtain all relevant licenses. It may conduct business within the scope of the parent company and continue its activities with an official to be appointed.
Establishment of a Limited Liability Company (LLC) in the Czech Republic: Minimum required capital is 1 CZK. Can be established with one partner. A minimum of one authorized manager should be appointed. Both the owner and the authorized director of the company may be foreign nationals.

Opening a Bank Account in the Czech Republic

During the establishment of the company, the registration capital of the company must be deposited in a private bank account before the registration in the trade office. The amount in this account cannot be used in any way until the registration process of the company is fully finalized. After the establishment of the company, the bank account becomes active. The person who will be responsible for depositing the capital of the company must be specified in the notary protocol, this person may be a foreign national and this person must go to the bank branch physically at the opening of the bank account.

According to the recent applications, the bank management requests important documents such as business plan, budget, contract, web site related to the company you want to establish. We recommend that you consult with banks before establishing your company and prepare these documents with professional support.

The Czech Republic Tax Rates

The main taxes applied to companies in the Czech Republic are corporate tax, withholding tax, value-added tax (VAT), social security contributions, road tax and property tax.

Tax	Tax Rate
Corporation income tax	Corporation income tax rate: 19%.
Personal income tax	Personal income tax rate: 15 %
The standard VAT	The standard VAT rate of 21 % – Applies to most products and services. The standard VAT 15 % – basic foodstuffs, some pharmaceutical products, newspapers, some medical supplies, heating, social housing. Reduced standard VAT 10 % – basic baby foods, some medicines, books, mill products and other products suitable for a gluten-free diet.
Property Acquisition Tax Property tax	On receipt of a new property the buyer pays a fixed 4%. The location of the property varies according to its type and purpose.

Social and Health Insurance Participation Shares

Insurance premiums	Employer (%)	Employee (%)
Health insurance	9.0	4.5
Pension contributions	21.5	6.5
Unemployment premium	1.2	0.0
Disease and other benefits	2.1	0.0
Total	33.8	11.0

The Czech Republic Visa and Work Permit

The principles of the free movement of labour in Europe apply to all EU, European Economic Area (EEA) and Swiss citizens alongside their family members working in the Czech Republic. Employees from these countries can work without a work permit if they have a travel document or ID card. However, all non-EU and non-EEA citizens must obtain a visa before entering the country.

The Czech Republic requires visas from citizens of non-EU member countries. The visa types for the Czech Republic are as follows:

Short term visa
Long-term visa
Long-term residence
Employee Card

The Employee Card is issued to persons who will be employed for more than 90 days, not more than 2 years. Each extension is made for no more than 2 years.

Visa procedures may change over time, so the websites of the embassy and consulate should be checked to get the most up-to-date information. Or you shall get in contact with Yeye Agency for a successful visa application

Employee Card Czech Republic

Employee Card

The Employee Card is a biometric-plastic card and holds an employee’s fingerprint and photo. The Employee card is valid for all salary and education levels. First, the position which the employee will be employed as must be announced through the Labor Office for at least 30 days to prove that there is no better candidate within the EU. If the position is not filled by a Czech or EU citizen within 30 days, then a special number is given to apply for an Employee card to fill the same position with a person from third countries.

In the Czech Republic, applicants who do not have long-term visas or long-term residence permits are required to apply for an Employee Card through the Czech Embassy in their home country or in another country. Candidates with long-term visas or long-term residence permits in the Czech Republic may apply to the Employee Card through the Department of Asylum and Migration Policy of the Ministry of Interior.

The official waiting period for Employee Card is 60-90 days, 120 days in complicated cases. However, if the documents are complete, this process usually takes less time. You can visit the website of the Ministry of Interior of the Czech Republic for detailed and up-to-date information or feel free to follow the social media channels of Yeye Agency for the latest updates.