This short information has been prepared by BURIL PARTNERS as a general guide for those companies or persons wishing to engage in business activities in the Czech Republic (which formally joined the European Union on May 1, 2004). The Czech Republic is located in the heart of Europe, neighbouring Austria, Germany, Poland and Slovakia. The capital city is Prague (approximately 1.5 million inhabitants).
Most Common Form of Business Vehicle – Limited Liability Company (společnost s ručením omezeným – “s.r.o.”)
- Most foreign investors utilize a limited liability company for carrying out their business activities in the Czech Republic
- Company can be formed on the basis of a constituent document – memorandum of association or founding deed (both must be drawn up in the form of a notarial deed)
- No shares are issued to the participant
- The minimum initial capital of each participant is CZK 1 (Czech Crown)
- The company must have at least one participant and there is no maximum limit as to the number of participants
- The company has no board of directors and there is no need to establish a supervisory board
- The company is represented by one or more Managing Directors
- Liability of the participants in a limited liability company is limited up to the total amount of the unpaid contribution to the registered capital as registered in the Commercial Register
- The Company is to be registered in the Commercial Register
- Annual General Meeting – to be held within a six months period after termination of the relevant accounting period
- Approximately costs connected with establishment of a limited liability company: EUR 400
Audit Requirements
With some simplification, a statutory audit of the financial statements and annual report is required for companies and individuals keeping accounting where at least two of the conditions are met for both the current and previous accounting period: (i) turnover exceeding CZK 80 million, (ii) total gross value of assets exceeding CZK 40 million and (iii) average number of employees exceeding 50 persons.
Applicable Taxes
- Income Tax: (a) Personal Income Tax (15%) and (b) Corporate Income Tax (19%)
- Value Added Tax (21% and 15%)
- Excise Duties (on hydrocarbon fuels, spirits, tobacco, beer and wines)
- Road Tax
- Environmental taxes
- Real Estate Transfer Tax (4%)
- Real Estate Tax
A withholding tax of 15% applies on dividends modified by applicable double tax treaties.
Investment Protection
The Czech Republic is a member of the Multilateral Investment Guarantee (MIGA) and the country has signed a number of bilateral international treaties which support and protect foreign investment (for example Austria, Germany, Spain, etc.).