The Czech government offers generous tax incentives for enterprises that provide strategic
services, such as telephone exchanges and service centres, in developing regions of the country.
The stability of the local economic environment results directly from continuous flow of investment. Since 2000, the Czech economy has been showing constant annual growth rate between 1.5% and 4%. This figure is primarily attributable to increase in production and foreign investment.
The state’s flourishing economy reflects the importance large companies attach to carrying out activities in Prague. Moreover, such prosperity illustrates the recognition of the country’s potential and economic expansion that takes place in Central Europe.
choosing a country
choosing a bank
payment (by any method)
bank account opening
Choosing organisational and legal form of a company
Once you decided on starting a business in the Czech Republic, the desired legal form shall be chosen. The main options are as follows: a self-employed business license (živnostníci), a Limited Liability Company (S.R.O., společnost s ručením omezeným) or a Joint Stock Company (A.S., akciová společnost).
The present article will focus on establishing a Limited Liability Company since this organisational and legal form is the most common one in the Republic. Additional options available when setting up a company or a franchise are commercial and limited partnerships.
Incorporating a Limited Liability Company (S.R.O.) in the Czech Republic
Since 2014, only a symbolic amount of share capital deposited into the bank account has been required to establish an S.R.O. in the country. This condition shall be met if the government is to approve the company registration.
It is strongly recommended that you avail yourself of the services provided by a company that specialises in setting up a business in the Czech Republic. This will enable you to receive assistance in complying with the local legislation, registering company owners and executives, obtaining relevant trading licences, opening bank accounts, going through certification procedures, and getting various authorisations. All of the above is required of a non-citizen when starting a business in the country.
A list of the essential documents that shall be submitted if setting up a company includes registered office address within the territory of the Republic, the owner’s address, and the certificate of criminal record issued in the name of the owner by the police authorities of the state where he or she resides. All the documents must be translated and notarised. It is worth noting that the company’s share capital shall be deposited into a Czech bank account.
Corporate income tax — all taxation-related issues shall be resolved within 30 days from a company registration date (CIT rate is 19%).
Value added tax (VAT) — The Czech legislation provides for three VAT rates. 21% value added tax is levied mainly on supplies of goods and services. 15% VAT rate is applicable for certain goods (mostly, essential items). The third rate of 10% applies to pharmaceutical products, books, and baby food. Limited Liability Company is obliged to file annual VAT returns and make relevant tax payments if its turnover exceeds CZK 1 million in the previous consecutive 12 months. If an LLC is engaged in trading with other EU countries, it shall register as a VAT payer and file all the necessary returns every year even if its annual turnover does not exceed CZK 1 million.
Road tax is levied uniquely in the Czech Republic. This tax is paid by the companies that use vehicles for commercial purposes. Enterprises are free to decide whether to operate vehicles for business or for semi-commercial / semi-private use. The road tax rate varies from CZK 1,200 to CZK 1,400.
Personal income tax rate — any company that hires non-citizens shall consider the issue of such employees’ residency for tax purposes. To be regarded as a Czech resident for tax purposes, an individual must stay in the Republic for at least 183 days in a given calendar year. A non-citizen whose length of stay is less than 183 days will pay the personal income tax in his or her country of origin and in the Czech Republic (provided that no double tax treaties are concluded between the former and the latter), but in the Republic he or she will subject only to tax on income from Czech sources. If a non-citizen stays in the Czech Republic for 183 days or longer, the tax paid locally applies to personal worldwide income.
In accordance with the local legislation, the majority of companies registered in the Czech Republic is obliged to file annual financial statements either electronically or in paper form. The amount of information to be published varies depending on the legal form, the size, and the nature of the activities carried out by an entity.
Financial statements reporting is regulated by the Act on Accounting and other normative instruments.
Accounting system in Serbia is based on the International Financial Reporting Standards (IFRS).
Financial statements are filed with the Commercial Register (Obchodní rejstřík) once a year. The standard deadline for submitting reports is 31 March of the year following the reporting one. In certain cases, this time limit may be extended.
Filing financial statements is obligatory for:
Complete annual financial statement includes:
Small and microenterprises file annual reports under simplified procedure, without statement of cash flows and statement of changes in equity.
Financial auditing is mandatory for:
Reporting allows to receive detailed information on financial status, creditworthiness, and financial performance of an enterprise.