Czech Republic
With the covering of the Vltava river of its capital city of Prague, the country of Czechia is one of those central European countries which is completely landlocked but holds a high culture and history. Since the 18th century, the country has attracted a lot of attention from artists, writers, and various people from the fraternity of art & culture.
The early 20th century saw communalism, and atheism as one of the major practices in the country where the churches have been funded by the country’s government, but there was a restriction on practices until 1989 where the Czechs practiced religion at free will.
Communalism lost the upper hand during the late 20th century where the country established all the civil factors and opened the market for international players and started welcoming foreign investment. The city of Prague contributes a good number to the country’s GDP from the tourism industry. Other than that level of unemployment have depreciated over the year and with regular FDI the country has seen a steady upliftment in its economy. Which plays a major role in registering a Czech company. In the early 1990 the Czech government decided to have a floating exchange rate. With an economic rebound in the early 21st century this country has recorded a better or a higher standard of living than any other European communist country.
It joined the EU in 2004 and even with the debt crisis back in 2000, the country did not fail to hold its rate of unemployment. Which means that once you register a manufacturing unit in Czech a certain amount of manpower could be utilized at a cheaper rate.
In this article we will discuss complete procedure for Czech Republic company registration. Along with several criteria, documents, advantages, and rates of taxation in the Czech Republic.
Why register a company in the Czech Republic?
- The Czech Republic has an advantageous business environment.
- The country has great living conditions.
- The Czech Republic, which is in the center of Europe, serves as an entry point for both the eastern and western marketplaces.
- Any firm in the Czech Republic gains from the nation’s trade arrangements and economic contacts with the majority of global business hubs as a European Union member.
- In the Czech Republic, the industrial sector has a great history and plays a large role in the country’s economy by contributing over one-third of the country’s GDP.
- The nation is a great area for firms to grow because of its well-trained employees and robust business environment.
- The corporation is not subject to a yearly tax in the Czech Republic.
- When a Czech business is engaged, the accounting and finance processes are significantly more efficient.
Procedure for Czech Republic Company Registration
In order to register a company in the Czech Republic, the following steps must be followed:
1. Decide the business structure
If you wish to register a company in the Czech Republic, the first step that must be followed is to decide the business structure of the firm.
2. Choose a business name
Once the legal structure of the firm is decided, it is essential to select a business name for the firm.
3. Verify if the name is available
The availability of the chosen name must be verified at the Registry of the Regional Commercial Court. If the proposed name is available and acceptable, the name can be taken as the official name of the business enterprise.
4. Prepare the essential documents
Create the firm’s articles of association (AOA) and the statutory documents of the firm and have a Czech public notary certify them. Along with that, other necessary documents must also be submitted for Czech Republic Company Registration.
5. Open a corporate bank account
Upon collecting all the essential documents for company registration in the Czech Republic, a corporate bank account must be created. Once the corporate bank account is established, the required share capital must be deposited in the bank account to register a company in the Czech Republic.
6. Register with the Czech Commercial Register
A form must be filled out with the Register Court, the organization in charge of maintaining the Czech Commercial Register, to register a company with the Commercial Register.
7. Obtain the license
Apply for necessary licenses and permissions, to conduct commercial operations.
8. Enroll for Social Security
Enroll the company for Social security.
9. Register with the tax office
Register with the tax office and acquire the tax identification number.
Eligibility criteria for Company Registration in the Czech Republic
For doing company registration in the Czech Republic, the following are the conditions that must be satisfied:
1. Number of Members
The formation of a general commercial partnership requires a minimum of two members. It is possible to form a Limited liability Company (S.R.O.) with a minimum of one member and a total of 50 members. In order to do a Czech Republic Company Registration for a Limited Partnership, two members are required.
2. Number of directors
At least one director is required to form an S.R.O.
3. Capital Requirement
The required amount of capital for a Czech joint-stock company is CZK 2 million. However, for an S.R.O., a minimum of CZK 1 is required. There isn’t any registered capital necessary to do branch office company registration in the Czech Republic.
4. General meeting requirements
An S.R.O. must organize its general meeting yearly.
Documents to register a company in the Czech Republic
The following documents are essential to register a company in the Czech Republic:
- Company name and operation
- Details of the registered office address
- Business’s statutory document
- Details of the deposited share capital
- Articles of Association of the firm
- Summary of the corporate managers, their names, and a statement confirming their approval of the firm’s incorporation in the Commercial Register
- Clean criminal record of all the firm’s managers
Business structures for Czech Republic Company Registration
The following business structures may be utilized to register a company in the Czech Republic:
1. General Commercial Partnership
A General Commercial Partnership may be formed by a minimum of two individuals. A general commercial partnership is a business where each member has the power to speak on behalf of the whole and is fully, equally, and collectively responsible for all obligations. Even though it is a distinct legal organization, its continuation depends on the cooperation of its participants.
2. Limited Liability Company (S.R.O)
A Limited liability Company (S.R.O.) is one of the most widely used business structures for Czech Republic company registration. It may be created with at least 1 member and a total of 50 members. It is possible that a single individual serves as both the company’s proprietor and executive. An S.R.O. must have a minimum of CZK 1 in registered capital to establish itself in the Czech Republic.
3. Joint Stock Company (AS)
To do a joint stock company registration in the Czech Republic, a board of directors, as well as a supervisory board, are required. The functions of the directors and the corporate operations are under the supervision of the supervisory board. A joint stock company must possess at least CZK 2 million in authorized capital, with at most 30% of that value to be provided at the time of Czech Republic Company Registration.
4. Limited Partnership
Limited Partnership is a type of business structure where there are two members. One of the members has unlimited liability, whereas the other member’s liability is capped at the value of his authorized contributions to the firm. Only individuals with unrestricted liability are permitted to handle the business.
5. Co-operative
A minimum of 5 individual citizens or 2 legal bodies must come together to form a cooperative. A cooperative has to maintain a minimum capital of CZK 50,000, and both the authorized capital and the contributions from participants must be recorded in the Commercial Registry. An indivisible reserve that represents at least 10% of the total investment should be established at the moment of formation.
6. Branch Office
A branch office is a business presence of its overseas parent company and is not a legal body under Czech law. Despite having a separate administration and accounting, it is a legal organization that is reliant on its corporate headquarters. In order to do a Branch office company registration in the Czech Republic, it is important to know that the name of the branch office should be identical to its holding business with the term “Organisational Unit” in it. It is crucial to designate a director for establishing a branch office. The branch office is not required to contribute any initial capital.
Advantages of Company Registration in the Czech Republic
The following are the advantages of Czech Republic Company Registration:
- Accessibility to the Czech markets: One of the advantages of doing a Czech Republic company is accessibility to the Czech markets. The Czech market is easily accessible to entrepreneurs from the eastern as well as the western nations because of the advanced infrastructural facilities.
- Foreign Direct Investments: The nation is one of the countries that receive a significant amount of foreign direct investments.
- Higher skilled personnel: The Czech economy is made up of individuals who hold professional qualifications and specializations across a range of occupations and sectors.
- Lower labour expenses: Additionally, the labour expense is significantly cheaper in comparison to those of western nations.
- Tax advantages: The Czech Republic as well as other nations have agreements that prohibit double taxation on profits, interests, and royalties.
Corporate Income Tax (CIT) in the Czech Republic
Corporate income tax (CIT) is levied on all business profits, including those made by overseas company branches. In both general and limited partnerships, corporate members are taxed on their portion of the partnership’s earnings.
Czech resident firms must pay CIT on earnings generated from international sources. Non-resident firms must pay CIT on income generated in the Czech Republic.
- For all corporate earnings, such as capital gains on sales, the Corporate Income Tax is 19%.
- Czech tax residents from non-resident firms are levied a Corporate Income Tax of 15% on dividend income.
- For some investment funds’ revenue, a 5% lower CIT rate is applicable.
- The CIT level for retirement funds is 0%.
Various investment incentives for Czech Republic Company Registration
The Czech Republic provides several incentives for investments. Because incentives are regarded as state assistance, they are given in utmost accordance with European Union state aid laws.
The Investment Incentives Act provides incentives, which include the following:
- For some infrastructure initiatives, a financial contribution of approximately 20% of the invested capital is given.
- Income tax assistance is provided for a duration of 10 years for newly established ventures incorporated for an investment program.
- Pre-existing business developing an investment project is offered a partial taxation break for a maximum period of 10 years.
- Employment subsidies in the kind of incentives for employment generation and skills in relation to technological hubs.
Conclusion
Due to the Czech Republic’s geographic location in Europe and ease of access to growing markets, many investors decide to incorporate their business there. The country, which has a population of about 1.05 crore, offers business owners access to highly skilled and reasonably priced labor. Another reason why investors favor the Czech Republic is that it has sophisticated infrastructural facilities and attracts a sizable quantity of foreign direct investment.
The following article briefly explains how you can register a company in the Czech Republic. If you want to incorporate a company in the Czech Republic, you can consult our experts at Odint Consultancy. Our company formation experts will guide you through the process and will assist you to acquire the required paperwork for Czech Republic company registration.
FAQ’s
- The Czech Republic, which is in the center of Europe, serves as an entry point for both the eastern and western marketplaces.
- The Czech economy is made up of individuals who hold professional qualifications and specializations across a range of occupations and sectors.
- The labor expense is significantly cheaper in comparison to those of the western nations.
- The Czech Republic as well as other nations have agreements that prohibit double taxation on profits, interests, and royalties.
- For all corporate earnings, such as capital gains on sales, the Corporate income tax is 19%.
- Czech tax residents from non-resident firms are levied a Corporate Income Tax of 15% on dividend income.
- For some investment funds’ revenue, a 5% lower CIT rate is applicable.
- The CIT level for retirement funds is 0%.
In order to register a company in the Czech Republic, you have to submit an application for registering a company with the Czech Commercial Register.
The various kinds of companies that you can incorporate in the Czech Republic are:
- General Commercial Partnership
- Limited Liability Company (S.R.O)
- Joint Stock Company (AS)
- Limited Partnership
- Co-operative Firms
- Branch Office
- It serves as a business representative for its parent company.
- It is a body that is legally reliant on its main offices.
- Fewer regulations
- Requires less registered capital
- It may have a single owner who is either a natural person or a legal person.
- It is not necessary to have a Supervisory Board.
- In specific circumstances, shares could be publicly exchanged on the stock market.
- Flexible ownership transference
- Exists independently from its stockholders.
