Czech or foreign natural persons can conduct business activity in the Czech Republic if they comply with the Czech law.
The main condition is the issuance of a Czech trade license regulated by the Trade Licensing Act, or another distinct permit overseen by a number of specific acts, depending on the type of business activity conducted.
The exception from this condition applies to entrepreneurs from another European Union member state in case of temporary provision of services based on the trade licenses granted in such member state.
Forms of business activities that are allowed in the Czech Republic
The Act on Business Corporations recognizes the following types of business entities in the Czech Republic.
• limited liability companies (s.r.o.)
• joint-stock companies
• general partnerships
• limited partnerships
• Co-operatives
• Societas Europaea (European companies)
• European Economic Interest Grouping (EEIG).
A Czech legal entity is an entity that has its registered office in the Czech Republic. Commercial companies are formed in two stages. The first stage involves founding the company and the second stage involves establishing it as a legal person, as of the date of its entry in the Commercial Register.
Conducting business with a trade license in the Czech Republic
According to the Trade Licensing Act, business activity is conducted systematically, individually, using one’s own name, on one’s own responsibility, with a view to make profits, and under the conditions laid down under this law.
The Trade Licensing Act differentiates between notifiable trades, where the license is granted once the agreed conditions are met and the Trade Office is notified, and concessionary trades, which require state permission. Every natural person who is considering pursuing a trade must meet a set of general conditions, including being 18 years old and above, having legal capacity, and being a person of good character.
Conducting business without a trade license in the Czech Republic
In the Czech Republic, it is possible to be an entrepreneur even without being required to have a trade license granted by the Czech Trade Licensing Office. However, the range of activities that might be performed without a traded license will be limited.
Acquiring a Czech Trade Licence
Trades are divided under the Czech Trades Licensing Act into notifiable trades, which can be obtained based on notification, and concession trades, which can only be pursued on the basis of a special business license.
Notifiable trades are categorized into three further groups which are vocational, professional, and unqualified.
Trades that require concessions include operating a travel agency, road freight transport, or a security firm employed to protect other people’s property.
Those interested in a license for a notifiable trade can obtain one by notifying the trade, while applicants for a concession can submit their application at one of the general Trade Offices, by means of government administration contact points (Czech-Point) or do so electronically using the Trade Register web system.
General conditions for starting a business in the Czech Republic
The general conditions applying to a natural person starting a business are, to have reached the age of 18 years, to have the full legal capacity, and a clean criminal record. But for some professions, evidence of professional competence, education, and experience, are required besides the general conditions.
Other terms and conditions
Moreover, a document attesting to the legal basis for use of the premises on which the trader has located its place of business must be submitted, and also a receipt for payment of the administrative fee, which is 1,000 CZK (40 EUR) for a notifiable trade must be submitted.
A foreign natural person must further provide an extract from the criminal register or equivalent document issued by the relevant court or state authority of the country of which the individual is a national, and the extract must not be more than three months old.
Incorporating a company in the Czech Republic
Some of the basic steps for incorporating a company in the Czech Republic are presented below
• Choose the most suitable business structure business for your company.
• Provide four choices for the proposed company name and open a corporate bank account.
• Formulate the company’s statutory documents, the memorandum of association, and the notarial deed.
• Notarize the Czech company’s documents in front of a public notary in the Czech Republic.
• Once the company’s documents are signed and notarized, the company’s representatives have to register the legal entity with the Commercial Register.
• In order to register with the Commercial Register, it is necessary to fill in a special form with the Register Court, the entity which administers the Czech Commercial Register.
In order to submit an application to the Commercial Register or Trade Register, it is not compulsory to be represented by a lawyer. However, with respect to the fulfillment of formal requirements, we recommend that an attorney-at-law is engaged
Taxes in the Czech Republic.
The only administrative issue of an entrepreneur is the commitment to file tax returns for the previous year.
Income tax equals 19% for legal entities, and 15% – for natural persons in the Czech Republic. VAT is 15-21% but it depends on the type of activity of the company.
Business costs in the Czech Republic
The registration procedure of a business in the Czech Republic is free of cost, however, one must pay attention to the minimum share capital for the selected business structure. The name verification of the company, which is the first step in the business formation, is also subject to zero costs, just like the registration for tax matters in the Czech Republic. The only things to consider when registering a business in the Czech Republic are the public notary fees which will depend on the paid-up capital of the company.
At Damalion, helping with the Registration of companies is one of the main directions of our work. Contact us now to assist with the whole process of your company incorporation in the Czech Republic
