Register as a Sole Proprietor in the Czech Republic

Live and work in the Czech Republic! It’s not too complicated if you know your rights.
One of the options for opening a business is through a sole proprietorship. However, what benefits lie in this kind of setup? Which rights does a sole proprietorship afford a foreigner?

What you need to know about the registration of a sole proprietorship in the Czech Republic:

Registration of a sole proprietorship in the Czech Republic

  • With the license, a person can independently run a business within the country; 
  • Registering a sole proprietorship is much cheaper than registering a company; 
  • Closing a sole proprietorship is easier and more cost-effective than liquidating a company;
  • Payable VAT is 15%, compared to the 19% observed by companies;
  • Licenses can be obtained for 80 different types of activity that don’t require special kinds of education or experience;
  • A sole proprietor has the same rights as a legal person when conducting business;
  • A foreign sole trader registered in the Czech Republic has a right to a permanent residence permit.

Our specialists will assist you in choosing the proper avenues of doing business in the country to ensure that taxes are optimized, taking into account your legal status. Almost the whole social system in the Czech Republic revolves around taxes paid by sole proprietors, which is clear proof that this route of doing business is developed and frequented.

Here’s a list of several basic advantages that come with a sole proprietorship (SP):

  • Authorized capital is not required for the opening of an SP; 
  • Opening and closing the SP is fast and easy; 
  • There is the possibility of hiring employees in the same way that a company does; 
  • Property involved in the business’ development is not charged; 
  • The order of business development is simplified (there is no need to set up protocols that companies are obligated to create);
  • There is an option to expand the quantity of licenses indefinitely, which would enable easy diversification; 
  • A foreign sole trader may acquire a 2-year residence permit with the subsequent right to permanent residency (within the EU).

On the other hand, here are some disadvantages of having an SP license in the Czech Republic:

  • As a sole proprietor, you have unlimited liability; 
  • The process of getting permanent residency in the Czech Republic as an SP, although possible, may be difficult. 
  • A foreign SP is unable to engage with the Medical Fund of the Czech Republic. This means that commercial insurance can be attained, but not state insurance.

To sum up, an SP is a good option for foreigners who intend to conduct business independently in the Czech Republic. The process of setting up, running or liquidating such a business is extremely simple. Tax accounting is also simplified and the proprietorship itself doesn’t imply many bureaucratic obligations. Indeed, this reduces financial and time-related expenditures.

We also suggest that students consider getting residence permits in the Czech Republic on the basis of a sole proprietor license. This is because a foreigner who resides in the Czech Republic on the basis of a student visa has the right to acquire permanent residency after 10 years, compared to ordinary foreigners, who are eligible after 5. However, replacing one’s student visa with that of a sole proprietor can accelerate the process of acquiring permanent residency in the Czech Republic, and by extension, the EU.

Sole proprietors in the Czech Republic, including foreigners, have the right to monthly pension fund contributions, which subsequently guarantees them pension grants.

Are you an individual entrepreneur in the Czech Republic? With DoMyTax, business is easy. Register your sole proprietorship in Prague from our website or via telephone at +420 228 229 092.