Setting up a business in the Czech Republic

Do you want to lead a business in Europe, attract foreign investment and perform on the international entrepreneurial stage? Then you should consider setting up shop in a country at the very center of the European continent – the Czech Republic.
This country has a population of 10 million and takes first place in terms of safe living, low prices, business convenience and location.

Why the Czech Republic is perfect for business:

Setting up a business in the Czech Republic

  • Due to the fact that the Czech Republic is a member of the European Union, a local company is considered to be a European one with rights and access to the free-trade zone of the EU;
  • The Czech Republic has never been on any blacklists;
  • Czech banks have never been included on any blacklists;
  • The country is a member of the European Union and the Schengen Agreement which means that citizens are allowed to have European health insurance and travel freely across European territory ;
  • The Czech State provides each account with insurance at local banks;
  • Czech banks offer low prices for international transactions;
  • Foreign entrepreneurs are eligible for a 2-year Schengen visa with all the rights of a European resident, with the possibility of replacing this visa with a permanent residence permit in due course;
  • Relatives of the foreign founder of a Czech company are allowed to move to the Czech Republic on the basis of family reunion; Friends of a founder can, for instance, move on the basis of employment in the founder’s company;
  • A foreign holder of the Czech temporary residence permit has almost all the rights a Czech citizen has (except the right to serve in the military, the right to vote and the right to be voted for);
  • It is possible to get state-funded education for one’s whole family in the Czech Republic (some specialties also allow the classes to be taught in English and German) for each level including post-graduate education;
  • There is a very low level of corruption;
  • The Czech economy is one of the most rapidly developing ones in the EU (in terms of development speed, the Czech Republic takes third place after Slovenia and Ireland);
  • The country’s economy is stable;
  • There is a high concentration of foreign-led companies;
  • In 2016, the Czech Republic took ninth place in terms of low living costs;
  • The Czech Republic is not an offshore tax haven, but it still offers convenient conditions for doing business. A lot of entrepreneurs start avoiding offshore companies, because of the amount of undesirable attention they receive, and choose the Czech Republic instead;
  • A Czech company is able to open accounts with European banks.

Registration or purchase of an LLC in the Czech Republic

A foreigner can register a brand new company in the country (an LLC) and become its founder with the purpose of doing business in the Czech Republic. It is also possible to purchase a firm that already exists and was set up by the previous owner (or a group of owners). Existing companies in the Czech Republic are sold with clear histories and re-registration takes only a few days. A new LLC in the country also can be registered within a week. Prices and service details regarding the registration of a sole proprietorship or an LLC can be found here.

Idiosyncrasies of doing Czech business:

  • Many types of activity do not require a license (there are 80 kinds of free licenses) both for companies and for individual entrepreneurs;
  • A license for special types of business can be obtained within 2 months on the basis of education or a long-term work experience;
  • According to law, the authorized capital of a Czech company can be equal to one koruna (however, it is not recommended that foreign founders register this sum as the authorized capital due to its implications on potential business partners’ and clients’ trust. We suggest submitting a sum in the amount of 200 000 korunas – this capital must be presented as being on the company’s account during registration). 
  • Czech companies and sole proprietors are entitled to hire employees;
  • While performing business activity, a company that develops a brand that can be sold (successful companies are expensive). An individual entrepreneurship has no name and cannot be sold;
  • The liquidation of a company in the Czech Republic is very complicated from a bureaucratic standpoint. It is also a costly process, which is why founders prefer to resell companies. On the other hand, closing a sole proprietorship is quite an easy procedure.

There are cases when a foreigner should consider individual entrepreneurship instead of setting up a company. Usually, this scheme works for foreign students or people who would like to work independently.
Students are eligible for permanent residency in the Czech Republic only if they have lived in the country for 10 years (other foreigners can apply after 5 years of living in the Czech Republic). Therefore, registering a sole proprietorship and getting a business visa on that basis can be a convenient and guaranteed way to speed up the process.

A sole proprietorship in the Czech Republic has the following idiosyncrasies:

  • A sole proprietorship can be registered faster than a company;
  • The liquidation of an SP is much easier when compared to that of a company;
  • A foreign sole proprietor in the Czech Republic has no right to state medical insurance and financial coverage of chronic illnesses. However, they do have the right to a pension;
  • Accounting is much simpler than in a company;
  • Income tax for a sole proprietor is less than that of a company (15% compared to 19%);
  • Purchases related to company infrastructure shall not be taxed (e.g. a vehicle, a computer, a mobile phone, etc.);
  • A Czech company can purchase property, whereas the license of a sole proprietor does not allow this (an entrepreneur should make this purchase as a physical person).

Prices and service details regarding the registration of an SP or an LLC can be found here.

To obtain explicit information regarding the difference between setting up a firm and registering an individual entrepreneurship in the Czech Republic, you are welcome to contact us. You’re more than welcome to get started with one or more of our services.
DoMyTax provides the possibility of conducting business in the Czech Republic under a Czech lawyer’s supervision.