Company registration in Czech Republic

General information

The Czech Republic, known for its stable economy and liberal business environment, is becoming increasingly popular among foreign investors. Relatively low labor costs, a highly skilled workforce, and favorable geographical location create ideal conditions for business development.

The Czech Republic is a landlocked country located in Central Europe. It gained the status of a sovereign state in 1993 following the dissolution of Czechoslovakia.

In recent years, the Czech Republic has become a stable and highly attractive place for conducting business by foreign investors. Many have chosen to establish companies in the Czech Republic or to start individual entrepreneurial ventures.

This article provides practical information on establishing and running a business in the Czech Republic.

Company registration in Czech Republic: Why is it worth establishing a business in the Czech Republic?

What attracts foreign entrepreneurs to invest in the Czech Republic includes low labor costs, a free-market and stable economy with a fast growth rate, and a highly skilled workforce. Unemployment has remained steady for several years, and the inflation rate is one of the lowest among EU countries. The main export markets for the Czech economy are Germany, Slovakia, and Poland, while in terms of imports, the key partners are Germany, Poland, and Slovakia.

The Czech Republic continues to be one of Poland’s most important economic partners, ranking 2nd in terms of trade turnover (data from April 2022 by PFR). The Czech Republic offers a much less bureaucratic environment for conducting business, often resulting in significant savings in tax and administrative burdens.

For many types of businesses, the availability or ease of obtaining permits and licenses is extremely important. A particularly interesting advantage of establishing a company in the Czech Republic is also the tax benefits associated with purchasing luxury vehicles.

Assistance with company registration in Czech Republic

We provide comprehensive advice on the optimal business structure for your operations. In the Czech Republic, we collaborate with a reputable accounting firm that handles accounting for our clients in accordance with local requirements.

Comprehensive support for Company registration in Czech Republic

If needed, we have an extensive network of partners in the Czech Republic, including notaries, lawyers, banks, and real estate agents, which enables us to efficiently transfer our clients’ business operations to the Czech Republic.

By choosing our services, you gain access to the assistance of Czech legal professionals (including legal advisors and attorneys), accountants, and tax consultants—all in one place, ensuring a fast and efficient process.

Company registration in Czech Republic: Conducting business in the Czech Republic

The Czech legal system is governed by two primary laws that regulate business activities: the Commercial Code (Obchodní zákoník) and the Trade Licensing Act (Živnostenský zákon). Both Czech and foreign investors are subject to the same laws and are entitled to engage in business activities in the Czech Republic under the same conditions and within the same scope.

Depending on the type of business activity and required qualifications, there are three types of business activities: craft, regulated, and free.

Starting craft, regulated, and free business activities in the Czech Republic

Engaging in craft activities in the Czech Republic requires completing specialized schooling that grants the necessary qualifications. For regulated activities, it is only required to have the appropriate professional qualifications, but the method of obtaining these qualifications is not specified. Free business activities do not require any qualifications.

When conducting business in the Czech Republic as a foreign resident, it is crucial to consider the provisions of the double taxation avoidance agreements between Poland and the Czech Republic, as well as both foreign and Czech laws. It is advisable to consult a specialist before deciding to open a company in the Czech Republic on your own.

Types of companies in the Czech Republic

The S.R.O. (společnost s ručením omezeným)—Czech limited liability company—is the most commonly chosen form of business entity by foreign entrepreneurs in the Czech Republic. The share capital is divided into shares, and the owners of these shares are registered in the commercial register.

The minimum capital requirement is 20,000 CZK per partner. The company name must include “společnost s ručením omezením,” or the abbreviation “spol. s r.o.” or “s.r.o.”

Trade name and legal requirements for companies in the Czech Republic

The trade name of a company must meet the general conditions specified in the Commercial Code, particularly ensuring that it is not identical to the name of another business entity. To change the company name or relocate its registered office to another city, a notarial deed is required.

Company registration in Czech Republic. Management and shareholders

A notarial deed is not necessary for changes to the management board or shareholders. Since 2014, new Czech companies are no longer required to create a reserve fund from their profits to cover potential losses.

Companies established before 2014 can dissolve their reserve fund if they decide to amend their articles of association. Limited liability companies (S.R.O.), similar to those in Poland, are subject to corporate income tax (CIT) at a rate of 19%.

Company registration in Czech Republic. Dividend taxation and management responsibilities

Dividends, whether paid out at the end of the year or in the form of advances, are taxed in the country of the specific shareholder’s tax residency. Board members do not need to be employed by the company nor are they required to pay social insurance, even if the board consists of only one person.

Czech law does not recognize the concept of a civil law transaction tax. As a result, agreements and the very act of establishing a company are not subject to additional taxation.

Company registration in Czech Republic. Decision-making and notarial requirements

In the case of a single-member Czech company, the owner can make decisions without the need to convene a shareholder meeting. Most actions also do not require a notary.

Company registration in Czech Republic. Capital requirements for registration

Before submitting an application for entry into the commercial register, at least 30% of the contributions must be paid, but not less than 200,000 CZK. The application for entry into the commercial register must be signed by all persons representing the company. If the company is founded by a single person, the entry into the commercial register takes place after 100% of the share capital has been paid.

General meeting of shareholders: The highest authority in a Company

The highest governing body of a company is the General Meeting of Shareholders. The General Meeting is responsible for making the most important decisions regarding the company’s operations, including, but not limited to: appointing and dismissing the individuals who represent the company externally, making amendments to the company’s articles of association, and approving annual financial statements.

Additionally, if the company’s articles of association provide for the establishment of a supervisory board, the General Meeting is responsible for appointing and dismissing its members.

Company registration in Czech Republic. Statutory Body of the Company

The statutory body of the company consists of one or more persons who represent the company externally (jednatel společnosti). If there is more than one such person, each has the right to represent the company independently, unless otherwise specified by the company’s articles of association. The limitation of the rights of these individuals to represent the company externally may arise from the articles of association, the statute, or resolutions of the General Meeting.

Company registration in Czech Republic. A.S. (Czech Joint-Stock Company – Akciová Společnost)

The joint-stock company is primarily chosen by large entrepreneurs. Due to its legal form, a joint-stock company is exclusively a capital company.

The minimum share capital for a joint-stock company in the Czech Republic is 2,000,000 CZK. The share capital is divided into shares.

The company name must include the term “akciová společnost” (joint-stock company) or the abbreviation “akc. spol.” or “a.s.” The trade name must meet the general conditions specified in the Commercial Code, particularly ensuring that it is not identical to the name of another business entity.

Company registration in Czech Republic. Corporate governance in joint-stock companies

For a joint-stock company in the Czech Republic, there is a requirement to have 3 members on the board of directors and 3 members on the supervisory board. The statutory body of a joint-stock company is its board of directors.

The board is elected from among the company’s members, who represent it externally. Board members are registered in the commercial register, and any changes in the board must also be recorded in the register. Generally, board members are elected and dismissed by the General Meeting.

V.O.S. (Czech General Partnership – “Veřejná Obchodní Společnost”)

A general partnership (V.O.S.) is the simplest form of company in which all partners are jointly and severally liable for the company’s obligations with all their assets. A general partnership in the Czech Republic can be established by at least two partners, who can be either natural persons or legal entities.

Company registration in Czech Republic. Naming and legal requirements

The company name of a general partnership should include the phrase “veřejná obchodní společnost,” the abbreviation “veř.obch.spol.,” or “v.o.s.” If the company’s name includes the surname of at least one of the partners, it is sufficient to add the phrase “a spol.” after the surname.

Company registration in Czech Republic. Partnership agreement

The partnership agreement should include:

• The name and registered office of the company,
• A list of partners, including the name and registered office of legal entities or the names and addresses of natural persons,
• The scope of the company’s activities.

Company registration in Czech Republic. Registration process and capital requirements

The application for entry into the commercial register must be signed by all partners. General partners are not required to contribute share capital when establishing the company. Any contributions made by partners can be specified in the partnership agreement.

General Partnership (V.O.S.): Representation and tax transparency

In a general partnership (V.O.S.), each partner can represent the company externally on their own. Any limitations on a partner’s ability to represent the company, as stipulated in the partnership agreement, do not have legal effect on third parties.

Without the consent of the other partners, no partner may conduct business activities that align with the company’s business objectives, including activities on behalf of third parties. A general partnership is a personal company and is tax-transparent.

Company registration in Czech Republic. Tax considerations for general partnerships

The income of such a partnership, despite being taxed in the Czech Republic due to the presence of a “permanent establishment” for tax purposes, must be included in the annual tax return of a foreign tax resident.

Avoiding double taxation requires the application of the double taxation avoidance methods outlined in the Polish-Czech double taxation treaty.

Company registration in Czech Republic. K.S. (Czech Limited Partnership – “Komanditní Společnost”)

Similar to the Polish limited partnership, the Czech limited partnership (K.S.) also has two types of partners: general partners, who are liable for the company’s obligations with all their assets, and limited partners, who are liable for the company’s obligations only up to the amount of their contribution registered in the commercial register.

The company name of a limited partnership must include the term “komanditní společnost” (limited partnership), the abbreviation “kom. spol.,” or “k.s.”

Company registration in Czech Republic. Naming and Liability

As in the Polish Commercial Code, the Czech law stipulates that if the company’s name includes the surname of a limited partner, that partner is liable for the company’s obligations as a general partner.

Trade name and legal requirements for a Limited Partnership (K.S.)

The trade name of a limited partnership (K.S.) must meet the general conditions specified in the Commercial Code, particularly ensuring that it is not identical to the name of another business entity. The partnership agreement must include:

• The name and registered office of the company,
• A list of partners, including the name and registered office of legal entities or the names and addresses of natural persons,
• The scope of the company’s activities,
• A designation of which partners are general partners and which are limited partners,
• The amount of each limited partner’s contribution.

Company registration in Czech Republic. Registration and capital requirements

The application for registration in the commercial register must be signed by all partners. Limited partners are required to contribute a minimum capital amount as specified in the partnership agreement, which cannot be less than 5,000 CZK.

The contribution should be made within the timeframe specified in the partnership agreement or, if not specified, without undue delay after the company is formed or after becoming a partner.

Company registration in Czech Republic. Representation and liability

Only general partners are authorized to represent the company externally. A limited partner who undertakes obligations on behalf of the company without proper authorization is liable for those obligations in the same manner as a general partner.

Unless otherwise stated in the partnership agreement, the non-compete clause applies only to general partners.

Company registration in Czech Republic. Branch (“Organizační Složka”) of a company in the Czech Republic

A company or an individual conducting business abroad can establish a branch in the Czech Republic. A branch is not a legal entity but an integral part of the foreign company. The branch must be registered with the Czech equivalent of the National Court Register (KRS).

Upon registration, the branch will receive the Czech equivalent of REGON (IČO). To register the branch, a document confirming the existence of the business outside the Czech Republic (such as an extract from the KRS) must be provided.

For individuals (both legal entities and natural persons) with a registered office or place of residence in an EU member state, the Commercial Register must include details about the branch manager appointed in the Czech Republic and their place of residence, as specified by legal regulations.

Establishing a branch requires a notarial deed. A foreign branch must maintain full accounting records and operates within the scope of the parent company’s activities.

Taxation and basic technical information for registration

General Information on companies in the Czech Republic

Company registration in Czech Republic. Registration rervices

Are you interested in establishing a company in the Czech Republic or learning more about the tax system or tax residency rules? You’ve come to the right place. Our law firm has been helping clients establish and manage companies abroad for over 10 years—if you want to know more, please contact us.

Company registration in Czech Republic – FAQs

Company registration in Czech Republic – the procedure

The Czech legal system is governed by two main legal acts that regulate business activities: the Commercial Code (Obchodní zákoník) and the Trade Licensing Act (Živnostenský zákon). Both Czech and foreign investors are subject to the same laws and are entitled to conduct business in the Czech Republic under the same conditions and scope.

Depending on the type of business activity and required qualifications, there are three types of business activities: craft, regulated, and free. Engaging in craft activities requires completing a specialized school that grants the necessary qualifications.

For regulated activities, it is only necessary to have the appropriate professional qualifications, without a specific form of obtaining them being prescribed. Free activities do not require any qualifications.

Conducting business in the Czech Republic by foreign residents requires consideration of the double taxation treaties between Poland and the Czech Republic, as well as both foreign and Czech laws. It is advisable to consult a specialist before deciding to establish a company in the Czech Republic on your own.

Company registration in Czech Republic: Registration process step by step

• Drafting and signing the founding deed and articles of association.
• Depositing the initial capital into a bank account.
• Obtaining the licenses and permits required for the specific type of business activity.
• Registering the company with the Commercial Register.
• Registering the company with the Tax Office.

Company registration in Czech Republic: Shareholders

There are no restrictions on the maximum number of shareholders; however, at least one partner is required to establish a company. Foreign shareholders are allowed.

Company registration in Czech Republic: Management

The company is managed by a director or a board of directors, in addition to the general meeting of shareholders.

Company registration in Czech Republic: Supervision

A supervisory board can be established but is not required.

Company registration in Czech Republic: Registered office

The company must have a registered address, along with phone and mail forwarding services. It is also possible to have a physical office (prices vary depending on needs).

Company registration in Czech Republic: Timeline

The time to establish a company is approximately 10 days.

Company registration in Czech Republic: Capital

There is no required minimum capital.

Company registration in Czech Republic and taxes and finances

Company registration in the Czech Republic. Tax residency of the company

A company is considered a tax resident if it is registered in the Czech Republic or is managed and controlled from there. Residents pay tax on income derived from both domestic and international activities. Non-residents are only taxed on income earned within the Czech Republic.

Company registration in Czech Republic. Corporate Income Tax (CIT) Rate for companies in Czech Republic

• The standard CIT rate is 19%.
• Investment funds are taxed at a rate of 5%, while pension funds are exempt with a 0% tax rate.
• All expenses incurred to obtain, secure, and maintain income can be deducted, provided they are documented by the payer and allowed for deduction by law.
• Assets can be depreciated using either the straight-line or accelerated method, but they must have a useful life longer than one year and a value exceeding 40,000 CZK to qualify.Assets are categorized into six classes, determining the depreciation period:
  • 3 years
  • 5 years
  • 10 years
  • 20 years
  • 30 years
  • 50 years
• Losses can be carried forward for the next 5 years. However, carry-back is not allowed. Losses also cannot be deducted if there has been a significant change in the structure of shareholders or management, unless 80% of the profits come from the same activity that generated the loss.
• Capital gains are included in the income tax base (19%).

Company registration in Czech Republic. Double taxation for companies in Czech Republic

Double taxation is avoided based on tax treaties concluded with other countries.

Company registration in Czech Republic. Anti-Tax avoidance measures

• Transfer Pricing: Regulations similar to those in Poland apply. If the prices of transactions between two related parties differ from market prices and cannot be justified, market prices will be applied for tax purposes. Czech transfer pricing rules largely follow the OECD guidelines. There are no specific documentation requirements, but the tax authorities have the right to request documentation during an audit.
• Thin Capitalization Rules: These rules apply to loans and credits from related entities. The debt-to-equity ratio is 4:1 (6:1 if the debtor is a bank or insurance company). Interest derived from the debtor’s profits cannot be deducted.

Company registration in Czech Republic. Accounting for companies in Czech Republic

The deadline for submitting tax returns is the first day of the fourth month following the tax year. This deadline can be extended to the first day of the seventh month if the tax return is filed by a tax advisor holding power of attorney and if the tax office grants approval. Companies that are statutorily required to undergo audits automatically receive this extension.

The tax year is the calendar year. An alternative fiscal year may be adopted if approved by the tax authorities, but it must always span 12 months.

Company in the Czech Republic. Advance Tax Payments

• Companies are required to make 2 or 4 advance tax payments, depending on their tax liability from the previous fiscal year.
• The statute of limitations for tax liabilities is 3 years. In certain cases, this period may be extended by one year or restarted.
• The statute of limitations for enforcing the payment of underpaid taxes is 6 years.

Company in the Czech Republic. Withholding Taxes

• Dividends, Interest, Royalties: The standard withholding tax rate is 15%; however, a 35% rate applies when payments are made to residents of tax havens.

Company in the Czech Republic and VAT

• The standard VAT rate is 21%, with reduced rates of 15%, 10%, and in some cases, 0%.
• VAT registration is mandatory for businesses with an annual turnover exceeding one million CZK.
• Non-resident companies must register for VAT when selling products or services subject to VAT in the Czech Republic (unless the VAT is paid by the recipient).
• Other businesses can register voluntarily.
• The VAT return must be submitted within 25 days after the end of the tax period, which can be a month or a quarter, depending on the company’s turnover.

Company in the Czech Republic. Other Taxes

• Property Tax: The rate for land is calculated based on its location or value. For buildings, it is calculated based on the size of the plot or the building. The rates are multiplied by a coefficient ranging from 1 to 5, depending on the property’s location.
• Real Estate Transfer Tax: The rate is 4% and is applied to either the sale price or 75% of the market value, whichever is higher.
• Customs Duty: Imposed on products originating outside the EU.
• Excise Duty: Applied to tobacco, alcohol, and fuel.
• Environmental Taxes: Imposed based on the consumption of fuels and electricity.
• Road Tax: Levied on vehicles, with the amount depending on engine capacity and the number of axles.

Company in the Czech Republic and Local Labor Law

Company registration in Czech Republic. Employee rights

The Labor Code regulates the relationship between employers and employees. It also provides protection to employees, requiring employers to consult with trade unions before carrying out mass layoffs, setting limits on working hours and overtime, and ensuring employees have the right to information about their employer.

The Labor Code mandates that all employers enter into written contracts with their employees. The contract must specify the type, location, and start date of the job. Contracts typically include information about the monthly salary, the length of the probationary period (up to 3 months, or 6 months for managerial positions), and are usually concluded for an indefinite period.

Company registration in Czech Republic. Working hours:

The standard weekly working time is 40 hours. For overtime, employees are entitled to a 25% bonus on their regular pay rate or additional time off (with the employee’s consent). Employees cannot be required to work more than 150 hours of overtime per year, although with their consent, this limit can be increased to a maximum of 416 hours annually.

Employees working on weekends or between 10:00 PM and 6:00 AM are entitled to a 10% bonus. A 100% bonus is given to those working on public holidays. Additional allowances are provided for employees working in difficult conditions.

Company registration in Czech Republic. Employee leave:

Employees who have worked for a specific company for at least 60 days are entitled to paid leave, with the length of the leave depending on the number of days worked. The minimum leave for all employees is 4 weeks per year.

If an employment contract lasts less than a year, the employee is granted 1/12 of the annual leave for each month worked. If an employee has worked less than 60 days, they are entitled to 1/12 of the annual leave for every 21 days worked.

Company registration in Czech Republic. Wages:

The minimum wage is set by the government and currently stands at 12,200 CZK gross per month.

Company registration in Czech Republic. Social insurance:

The Czech Republic has a state-run social insurance system that covers pensions, disability benefits, sickness, maternity, unemployment benefits, and health insurance. The system is funded by contributions from both employees and employers. Employers contribute 34% of the employee’s gross salary to social insurance, while employees contribute an additional 11%.

Company registration in Czech Republic. Termination of employment:

Employment can be terminated by mutual agreement, resignation, or immediate dismissal. An employer can only terminate an employee under specific circumstances, such as:

The employee neglecting their responsibilities.

The employer ceasing operations or relocating.

The employee becoming redundant due to the company’s restructuring, changes in production technology, or increased efficiency.

The employee being unable to meet job requirements or perform their duties due to health reasons.

Company registration in Czech Republic. Guide for investors starting business in the Czech Republic

An entrepreneur starting a business in the Czech Republic can choose between a limited liability company (s.r.o.), a branch of a foreign entrepreneur, or individual entrepreneurship. For the latter, the foreign entrepreneur is required to register with several authorities, primarily including registration with the tax authority (Financial Office/Finanční úřad), health insurance fund, and the social security office (OSSZ). Learn more about Czech companies at: [link provided].

Registration of a self-employed person with authorities

If an entrepreneur (self-employed person) does not complete the full registration process within the CRM system (central registration system), separate registration must be ensured with the district social security office, health insurance fund, and tax authority.

Health insurance registration for self-employed persons

• Legal Basis: Obligations set out in Act No. 48/1997 Coll., on Public Health Insurance.
• A self-employed person is obliged to notify the relevant health insurance fund of the commencement and termination of their activities as a self-employed person no later than 8 days from the day they began or ended such activities.
• An entrepreneur conducting their business under a trade license (živnostenské oprávnění) fulfills this obligation by submitting such notification to the appropriate business licensing office as well.

Registration of a Self-Employed Person with the Tax Authority

• Legal Basis: Obligations set out in Act No. 337/1992 Coll., on the Administration of Taxes and Fees.
• An entrepreneur who obtains a permit or authorization to conduct business or who begins other independent economic activities must submit an application for registration to the tax authority within 30 days according to local jurisdiction. This period begins the day after the business permit or authorization becomes final or after the day when other independent economic activity begins.

Registration of a Self-Employed Person with the District Social Security Office (OSSZ)

• Legal Basis: Obligations set out in Act No. 589/1992 Coll., on Social Security Contributions and State Employment Policy.
• Reporting Obligations: A self-employed entrepreneur or a cooperating person must notify the relevant district social security office of:
• The start (resumption) of their business as a self-employed person or their cooperation in carrying out business as a self-employed person, indicating the date from which they are entitled to perform this activity. A cooperating person must also notify the name, surname, permanent residence, and national identification number of the self-employed person they are cooperating with.
• The termination of business activities as a self-employed person.
• The expiration of the authorization to conduct business as a self-employed person.
• The date from which they no longer work, are no longer entitled to disability pension, parental allowance, or no longer personally care for a person under 10 years old dependent on another person’s care at a mild level (level I dependency), moderate level (level II dependency), severe level (level III dependency), or full dependency (level IV dependency). They are also required to notify when they no longer receive maternity benefits related to pregnancy and childbirth if such benefits are from employee health insurance, have ceased military service (civil), or have ceased to be a dependent child.

Company registration in Czech Republic. Social Insurance for Self-Employed Persons in 2017

Advance payments for social insurance for self-employed persons (OSVČ) who conduct business as their main economic activity will increase in 2017. The amount of the advance is calculated based on the gross profit from the previous period.

• The minimum monthly advance in 2016 for those conducting their main economic activity was 1,972 CZK. The total social security (pension) contribution for 2016 depends on the gross profit earned that year. The total social insurance is then offset by the monthly advances paid, and any shortfall must be paid within 8 days of receiving the “Income and Expenditure Report for 2016.”

Company registration in Czech Republic. How Much is the Minimum Social Insurance Payment?

• The minimum monthly advance for social insurance is calculated based on one-quarter of the average wage, with the social insurance rate set at 29.2%. According to the government regulation of September 21, 2016, the necessary data are:
• The general assessment base for 2015 was 27,156.00 CZK, and the coefficient for adjusting the assessment base for 2015 was 1.0396. The average wage on which the minimum payment will be based is 28,232 CZK (27,156 CZK x 1.0396).
• Therefore, the minimum monthly advance is 2,061.00 CZK (28,232.00 CZK x 25% x 29.2%).

The minimum monthly advance increases by 89 CZK from the 2016 level of 1,972 CZK. The table below shows the minimum monthly payment for social insurance since 2010. Compared to 2010, the minimum monthly advance will be one-fifth higher next year.

Self-employed persons will continue to pay the same advance until the month in which they submit a new income and expenditure report, including the minimum monthly advance. The new monthly advance is first paid for the month in which the “Income and Expenditure Report” is submitted.

Health Insurance for Self-Employed Persons in 2017

Self-employed persons (OSVČ) paying minimum monthly advances for health insurance will pay 83.00 CZK more monthly in 2017 than in 2016.

• All self-employed persons, for whom business is the primary source of income, must pay health insurance contributions, usually in the form of monthly advances to the account of the relevant health insurance company. The monthly advance amount is based on the gross profit achieved in the previous year.

The new minimum monthly advance must be paid by March 8, 2017, for January 2017. The table below shows the minimum monthly advances for health insurance in previous years. In 2017, the minimum monthly advance will be approximately one-third higher than in 2008.