How To Start A Business In Czechia

Czechia is famous for its tennis, beer and its old Town Hall, one of the most visited monuments.

But Czechia is also becoming an increasingly popular destination for entrepreneurs. This is due to its highly skilled population, affordable cost of living and its proximity to markets across Europe.

But before diving into starting a company in Czechia, it’s worth considering a few things. Here, we talk through everything you need to consider before jumping in.

 

Why Start A Business In Czechia?

 

Before actually starting a business in Czechia, it’s probably worth figuring out why. Czechia is becoming a hub of entrepreneurship for a number of reasons, including:

Location: Czechia is located right in the heart of Europe, giving businesses easy access to EU markets.

Cost of living: Like many countries in Eastern Europe, Czechia has a low cost of living, making it affordable for living and hiring employees.

Skilled workers: The population in Czechia is known for being proficient in tech, which can be great for companies looking to hire in the country.

 

Tax Rates in Czechia

 

Another major benefit of starting a business in Czechia is the tax rate. Corporate tax rates currently sit at 19%, which is lower than other countries in Europe. This makes it an appealing move for businesses looking to be more tax efficient.

Like many EU countries, the VAT stands at 20-21%, however there are reduced rates for essentials like food and drink. Businesses must register for VAT once their annual turnover rate exceeds CZK 1 million, which is roughly €40,000.

However, Czech companies are also liable to worldwide income tax.

Companies in Czechia that are considered resident companies are taxed on their worldwide income, while non-resident companies are taxed only on their Czech-source income.

There are also special tax rates. For example 15% tax for dividend income received by Czech tax residents from non-resident companies, and a huge 60% corporate income tax (windfall tax) will be applied to large banks and energy companies from 2023 – 2025.

 

 

Visa Options For UK Citizens Looking To Start Businesses In Czechia

 

For UK citizens wanting to start a business in Czechia, you will need a Long-Term Residency Visa to live and work in the country. However, this does depend on the type of business structure being set up.

For example, if a business is opening a branch of an international company, then they may be allowed to sponsor working visas from the get go.

For startups looking to break into this economy, there are Startup Visas available that focus on bringing more businesses and skilled workers into the country.

 

How To Start A Business In Czechia

 

Choose Your Business Structure

Czechia has a number of business structures to choose from, such as:

• General Commercial Partnership (v.o.s.) – Where 2 companies trade under 1 name.
• Limited Partnership (k.s.) – Liability limited to share capital.
• Limited Liability Company (s.r.o.) – The most popular option. SROs must have a minimum registered capital of CZK 200000.
• Joint Stock Company (a.s.) – best for businesses looking to publicly trade shares.
• Branch Office – a foreign businesses registered office for business in Czechia.

Depending on the type of business you want to set up, you may have different registration rules. Here, we will focus mostly on S.R.Os as the most popular option.

 

The Registration Process

Whilst registration is relatively straightforward, it’s important to make sure you have all the documents before starting.

Once you have the documents, the business registration process can be done in person or online through the Commercial Register.

Documents you will need include:

1. Police Records: Clean police records for all directors.
2. Tax Compliance Document: Confirmation from the revenue authority that there are no outstanding tax obligations for any business partners.
3. Declarations and Signatures: Formal signatures for all directors.
4. Articles of Association: Including all business information.
5. Trade Licensing Office Registration Documents: If you need a licence to run your business, you will need to visit the Trade Licensing Office and get any applications underway.

Within 90 days of starting your company, you will need to take all of the documents above to the Commercial Register. You will also have to register with the Revenue Authority within 30 days after registration.

Alongside this, you will also need to register with the Social Security Administration and select a health insurance provider within 8 days of company registration.

 

Employee Law In Czechia 

 

The Czech Republic has strong laws around employee protection.

The typical work week is 40 hours of work distributed over 5 days, and overtime work is regulated with additional payment and time off.

Employees are also entitled to paid leave and sick leave, as well as maternity leave. Employers must also contribute to their employees’ social security and health insurance.

 

Should You Start A Business In Czechia?

 

Starting a business in Czechia comes with tons of advantages, from a central location in Europe to a skilled workforce and affordable cost of living.

Once you have all your documents and visas together, you should be able to start a company quickly.

Good luck!