Company registration in Czech Republic

1. Economy and Legislation of the Czech Republic: Excellent For Starting a Company

The Czech Republic (Czechia) has long been a desirable destination for multinational companies willing to expand their business in Eastern Europe. The country has a highly diverse social market economy with a significant share of automobile exports; the country currently experiences one of the EU’s highest GDP growth, one of its lowest unemployment rates, and a rising standard of living. The labor market is well-trained and mobile. Monetary policy normalization has been assuming greater prominence in recent years.

The current government strives to continue pro-business, pro-EU, and fiscally prudent policies. Critical reforms introduced by previous administrations streamlined business start-up regulations, set an effective tax regime to expedite entrepreneurial efforts, and institutionalized a welcoming environment for worldwide trade and investment. A relatively sound legal framework sustains judicial effectiveness and government integrity. Property rights are well defined and protected, and contracts are generally honored. The independence of the judiciary system is largely respected.

Prifinance experts and company formation agents with vast expertise in company formation in the Czech Republic will assist you with company registration by directing how to follow some mandatory steps.

2. General Requirements for Company Formation in the Czech Republic. Business and Finance Regulations

Businesses can be incorporated in the Czech Republic without bureaucratic barriers. Reforms being implemented in the past years have reduced the cost and number of mandatory steps required to start a business.

Below are the main steps you’ll need to follow in order to start a company in Czechia:

1. Pick a legal form that will work the best for your type of business.
2. Do the company name search and pick several options to name your company.
3. Get documents you need to open a business bank account.
4. Draft the company’s by-laws: the M&AA or partnership agreements.
5. Get the company’s by-laws notarized in presence of a Czech public notary.
6. Once the company’s by-laws are notarized, proceed to registration of a new legal entity with the Commercial Register.
7. To get registered with the Commercial Register, file an application with the Registration Court -- an authority that keeps and administers the Czech Commercial Register.

3. Advantages of Czech law for a new Company Formation. Types of Companies in the Czech Republic

Business operations in the Czech Republic are covered by a number of legal regulations. The most important legal document establishing the companies' rights in Czechia is the Commercial Code, the second part of which lays out the following legal forms:

• A JSC that can be established either as a private JSC with initial investment at CZK 2 mln or public JSC with CZK 20 mln.
• An LLC is the most preferable business form in Czechia; initial share capital is set at CZK 1.
• A limited partnership to be incorporated by no less than two partners, in which one has full liability for the company’s obligations, while the other has limited liability.
• A cooperative to be incorporated by at least two legal entities or at least five physical persons.
• A sole trader to be incorporated by a single physical person/freelance professional.

4. Specifics of Taxation in the Czech Republic

The current CIT rate in the Czech Republic is 19% and applies to all business income, including capital gains. Certain investment funds are subject to a special 5% income tax rate, and a 0% rate is applicable to pension funds. The resident companies pay CIT on total income originated worldwide. Non-resident companies pay CIT on income generated only in the Czech Republic. CIT is applicable to profits generated by all types of companies, including branches.

AS of 2017, the VAT rate in Czechia is 21%. A business is mandatory for VAT registration if the turnover exceeds CZK 1 mln over twelve consecutive months. A reduced 15% VAT rate is levied on specific goods and services: food, construction, home improvement services, water and domestic fuel, livestock, books and newspapers, event admissions.

5. List of Required Documents For Company Formation in the Czech Republic

Your filing for incorporation in the Czech Republic should include a set of the following documents:

• Company by-laws,
• Partnership agreement,
• Proof of the initial investment deposit,
• Trade license or license to conduct other types of business,
• Office lease agreement,
• Police clearance documents for managing directors, and
• Company seal.

The above set of documents for filing is generic, it varies case by case.

6. Starting up a Business in the Czech Republic with the Support of Prifinance

For support with company formation in Czechia, please contact Prifinance lawyers and we would be delighted to assist you.