Czech Republic

A country in Central Europe. It shares borders with Poland, Germany, Austria and Slovakia. The Czech Republic was founded by the merger of three historical regions: Bohemia, Moravia and part of Silesia. Since March 12, 1999 is a NATO member, and since May 1, 2004 is a member of the European Union. The Czech Republic is among the countries that have signed the Schengen agreement.

Capital

Prague

Official language

Czech

Currency

Czech koruna (CZK)

Government

Parliamentary democracy. The head of state (president) is elected by Parliament every five years. He appoints the prime minister and other members of the government office. The Czech parliament consists of the Chamber of Deputies and the Senate. Highest appellate body is the Supreme Court.

Economy

The Czech Republic has one of the most stable and successful economies among all post-communist countries. Its basis is the industry (mechanical, electrical and electronics, chemicals, food processing and metallurgy) and services. The share of agriculture, forestry, and mining industry is small and continues to decline.

Legal system

The legislation is based on civil law of the Austro-Hungarian Empire.

Corporate law

  • Civil Code as of February 3, 2012 No. 892012
  • Commercial companies and cooperatives (corporations) Act as of January 25, 2012
  • Commercial Code of the Czech Republic - Obchodni Zakonik
  • Tax System Act No. 212/1992
  • Administration of Taxes and Fees Act No. 337/1992 (amended)
  • Real Estate Tax Act No. 338/1992
  • Inheritance Tax, Gift Tax and Real Estate Transfer Act No. 357/1992
  • Income Tax Act No. 586/1992
  • Value Added Tax Act No. 235/2004, as amended by Act No. 302/2008
  • Economic Competition Protection Act No. 143/2001.

Types of companies

  • Limited Liability Company (S.r.o.)
  • Open Joint Stock Company (A.S.)
  • Limited Partnership 
  • General Commercial Partnership
  • Co-Operatve
  • Branches

Limited Liability Company (S.r.o.)

  • Minimum share capital equal to 1 (one) CZK is required for s.r.o. companies. If a company has only one founder, the share capital must be paid in full.
  • S.r.o. do not issue shares. The share of each member company is registered in the memorandum.
  • A license must be obtained for carrying out any commercial activity on the territory of the Czech Republic. However, 80 main types of activities (among which the most popular as wholesale and retail trade) are granted a so-called "free license", which doesn't have any requirements or restrictions. Such a license can be obtained when incorporating a company, within a period of 14 days.
  • Limited Liability Company may not engage in banking and finance, insurance and reinsurance activities.
  • At least one natural or legal person, resident in any country in the world is required for s.r.o. The company, that has one founder may not be the sole owner of another company.
  • S.r.o. may have a sole director. Director is appointed by the general meeting of shareholders. If directors are not residents of the Czech Republic they must provide a proof of clear criminal record.
  • Registered address of the company, specified in a statement from the trade register and the business address of the company must be the same.
  • All legal entities are obliged to maintain accounting records. Income tax return, balance sheet and other financial reports must be submitted before March 31 to the tax office at the place of registered address.

Open Joint Stock Company (A.S.)

  • The minimum share capital of an open joint stock company (AS) is CZK 2 million and has to be fully paid at the time of registration. In addition to this a reserve fund must be set up - at least 20% of net profit in the first year of operation.
  • A.S. can not issue bearer shares. Issue of shares without par value is prohibited.
  • A.S. must be controlled by the board of directors.
  • The name of the company shall contain a reference to its legal form.
  • A license must be obtained for carrying out any commercial activity on the territory of the Czech Republic. 
  • Registered address of the company, specified in a statement from the trade register and the business address of the company must be the same.
  • Accounting report is required.
  • The following information can be provided at request of third parties: company name, address, registration number, the amount of share capital, the names and addresses of directors and shareholders, the powers of directors.

Taxation of company

All Czech companies are taxed on profits at the same rate equal to 19%, regardless of the place of source of revenues - Czech Republic or abroad. If the company does not conduct activities and thus delivers a zero balance, it is exempt from income tax. VAT is paid at the basic rate of 21%. The tax on dividends as a general matter is 15% (throughout Europe - 0%).

Agreements on avoidance of double taxation

Signed with more than 70 countries.