The Czech Republic is on the rise as a European Powerhouse.

The appeal of the Czech Republic as the home of your new business is obvious to many. Located in the centre of Europe, the Czech Republic enjoys a rock-solid economy, stable infrastructure, and a brimming talent pool from which businesses can hire.

The European country is also appealing from a financial perspective, with a relatively low average monthly salary for Czech employees, minimal living expenses, and a low 19% business tax rate.

Now, the Czech government is also offering significant tax breaks for companies who will bolster strategic services outside of the country’s urban centre in Prague.

What types of Czech business structures are there?

There are a variety of legal entities that may be formed in the Czech Republic.

• General Commercial Partnership (v.o.s)
• Limited Partnership (k.s.)
• Limited Liability Company (s.r.o.)
• Joint Stock Company (a.s.)
• Cooperative
• Branch Office
• Joint Venture

Any of the previously listed business forms can be a joint venture, in which there are two partners, one of whom is typically a Czech resident.

The Czech Republic’s most common business type: SROs.

SRO’s are the most common company type established in the Czech Republic. Like in many countries, partners in an SRO are liable for the company’s obligations only up to the capital they originally contributed to the company. In the Czech Republic, SROs are required to start with a minimum registered capital of CZK 200000.

Starting business in the Czech Republic for foreigners outside the EU

If you are foreigner from outside the EU, a realistic opportunity for registration as a self-employed person is to come to the Czech Republic for another purpose (studies, work …). You could than begin your business directly the Czech Republic, and if necessary, you could change the purpose of your long-term residence permission for business purpose.

For establishing an LLC, you could come to the Czech Republic on a short-term visa (tourism). When a foreigner outside the EU is a member of a Czech legal entity, he/she may apply for short-term Schengen visas for business trips and participation on the running of the company. Companion of an LLC may also apply for a long-term visa for business purposes in the Czech Republic, but he/she has yet to consider some interest of the authorities about the business plan and the functioning of the company.

Registering self-employment for foreigners

Because being self-employed is a business of a natural person, the Trade Office requires by registration to prove your stay permission in the Czech Republic. You also need an extract from the penalty register from the country of origin (often could be ordered at your embassy).

The Trade Office allows self-employment for foreigners with the long-term residence only for the duration time of their residence permit. This means that the foreigner must prolong the self-employed status each year after the receipt of a new visa.

The Trade Office also requires to register the place of business. It can be a place of residence of the foreigner in the Czech Republic, but the property owners must give their consent with their authenticated signature. You can also rent a virtual office by a specialized company.

A foreigner with permanent residence in the Czech Republic has the same conditions as a Czech citizen. He/she doesn’t have to provide the extract from the penalty register. He/she could register the place of business at the address of the permanent residence without any proof from the property owner.

The 10 steps for setting up your Czech SRO

1. Obtain police records for any current or future managing directors.
2. Have the revenue authority confirm documents that state none of the business’s partners have outstanding tax obligations.
3. Get authenticated statutory declarations and specimen signatures for all current and future managing directors.
4. Establish an office for the company’s operations, as well as ownership documents if purchasing property.
5. Produce partnership articles, which must be signed and verified by the commissioner.
6. Set up a bank account for the initial deposit of capital.
7. Register at the Trade Licensing Office and license applications.
8. After your company is established, apply for a Commercial Register registration within 90 days.

Registration will require the following documents:

1. 2x Partnership agreement, signed by the commissioner
2. Confirmation of deposits
3. Bank confirmation of the ability to make deposits
4. Authorized copies of trade licenses
5. Lease or documents establishing ownership of office property
6. Statutory declarations of managing directors
7. Police records of managing directors
8. Legal stamp
9. Register at the Social Security Administration, and select a health insurance company within 8 days of registration
10. Finally, register at the Revenue Authority within 30 days of company establishment

What taxes will I need to pay on my Czech business?

If you establish a business in the Czech Republic, you can expect to pay two or three kinds of taxes:

1. Corporate tax – Currently 19%.
2. VAT – The standard VAT rate is 21%, however some products may be taxed at the reduced rate of 15 or 10%.

3. Road Tax – Applicable only if you plan to use a motor vehicle in your business. Road tax rates are variable, but fall between CZK 1000-5000 annually.