SETTING UP BUSINESS IN
THE CZECH REPUBLIC
General Aspects
The Czech Republic is situated in the heart of Europe, bordering four other countries. It is part of the European Union. The monetary unit is the Czech crown (CZK). With about 78,866 square kilometres the Czech Republic belongs to the smaller European countries. The total population is almost 11 million people. The official language is Czech, but many people, especially in business life, speak English and German as well. The capital of the Czech Republic is Prague, a beautiful and historic city.
Legal Forms of Business Entities
Legal
form Feature
Branch Office
(organizační složka)
Partnerships without legal identity (společnost)
Has no legal identity, but is part of the head office business and its organization. Branch of the foreign company performing its business in the Czech Republic must be entered in the Commercial Register.
An association of individuals or enterprises connected by certain activities and/or assets for the achievement of a joint contractual purposes. Their liability for the partnership’s debts and liabilities is generally unlimited and personal, including all private assets.
There are the following personal business corporations in Czech law:
General Partnership (veřejná obchodní společnost)
Partners can be individuals or enterprises. The partners are liable for the partnership’s debts and liabilities by their entire private assets jointly and severally.
The company must be entered in the Commercial Register.
The partners are not required to make any minimum capital contributions.
Remarks
Suitable for foreign companies looking for a presence in the Czech Republic to initiate business or maintain contacts with business partners, especially in cases of uncertain success.
Appropriate for small or new companies. A written agreement is not necessary but recommended. The association of assets requires for its validity a written list of the respective assets.
Appropriate for small and medium-sized business.
Limited Partnership (komanditní společnost)
A legal form between the general partnership and the limited liability company.
The general partner („komplementář“) is personally liable without limitation, as well as with his/her private assets (as with partners in a general partnership).
The liability of the limited partners („komanditisté“) is limited to their respective share of the partnership capital (as with shareholders of a limited liability company).
All partners must also be registered in the Commercial Register.
Suitable for medium-sized companies seeking additional start- up capital from persons who prefer a limitation of liability. The limitation of the limited partners’ liability takes effect only when the registration of the limited partnership and the subscribed partnership contribution has been entered in the Commercial Register.
There are the following capital business corporations in Czech law:
Limited Liability Company (společnost s ručením omezeným)
In order to be valid, the limited liability company must be entered in the Commercial Register.
The minimum registered capital of a limited liability company is CZK 1.00 (if the aggregate of all monetary contributions does not exceed CZK 20,000, a special bank account does not have to be opened, and such monetary contributions may be paid e.g. in cash to the contribution administrator). At the time of registration 30% of the financial contribution has to be verifiably contributed.
The company exists independently of its shareholders, who are liable for the company’s debts only up to the total amount of unpaid contributions as registered in the Commercial Register.
The legislation also enables to the companies to define various types of ownership interests, each might be referring to different scope of rights and obligations according to the company’s discretion.
Executives are appointed by the company’s general meeting. Executives are responsible for managing the company and must also be registered in the Commercial Register. Executives may be individuals as well as corporations, but corporations must appoint a single individual to represent the corporation in the position of the executive of the limited liability company.
The company is not required to create a reserve fund.
Joint Stock Company (akciová společnost)
The joint stock company comes into existence upon registration in the Commercial Register. The minimum registered capital of a joint stock company is CZK 2,000,000 or EUR 80,000.
A joint stock company exists independently of its shareholders, who are not liable for the debts and obligations of the company.
There are several types of shares, the companies may define shares with specific scope of rights and obligations according to the company’s discretion.
The legislation enables two systems of joint stock company’s management structure: (i) the monistic system represented by the administrative board; (ii) dualistic system represented by the board of directors and supervisory board. If a corporation is a member of the body, it must appoint a single individual to represent the corporation in the position of the elected body.
The company is not generally required to create a reserve fund. A special reserve fund is required only in specific cases (e.g., in connection with treasury shares reported on the asset side of the balance sheet).
The most popular legal form for corporations, with high flexibility and relatively few obligations.
The company is required to publish its annual financial statements.
Shares can be transferred easily (depending on the type), the joint stock company can be listed publicly on the stock exchange.
The company is required to publish its annual financial statements.
Cooperative (družstvo)
Established for the purpose of mutual support of its members or third parties, or for business purposes.
This form of legal entity exists especially for the economic and social benefit of its members (e.g., housing cooperatives).
A cooperative must comprise at least three members. Members are not liable for any obligations of the cooperative, the statutes may stipulate an obligation to contribute to payment of the cooperative’s losses.
Organizational Questions
Topic Feature
Commercial Register Companies of all legal forms must be entered in the Commercial Register („obchodní rejstřík“), except persons engaged in partnerships without legal entity („společnosti“) and freelance professionals („svobodné povolání“)
The Commercial Register is administered in electronic form (https://or.justice.cz/ias/ui/rejstrik).
Trade Register Notification In general, any business activity to be performed by the company requires specific authorization.
The activities cannot be legally carried out or registered in the Commercial Register before obtaining the authorization.
It is important to take into account that any stipulated activities may require special permits or licenses.
Bank Account To open a bank account individuals need a valid passport.
Companies need an excerpt from the Commercial Register and the articles of association of the company.
Remarks
N.B.: If a company is legally required to be registered, but takes up business operations before being entered in the Commercial Register, the partners are personally liable for any losses up to the point of registration.
Any special conditions required for particular trades and other details are specified individually for each trade.
There are also activities for which a trade license is not required or for which special permits or licenses are not required.
Transfer of Goods and Machinery
Within the EU goods and machinery can circulate freely. Imports from non-EU states to the Czech Republic cause customs, Value-added tax (VAT), and in some cases special excise taxes; import VAT applies regardless of value, for customs duty, consignments with a value up to EUR 150 are generally duty-free, however, this EUR 150 customs duty relief is to be removed from 1 July 2026.
If the aggregate of all monetary contributions in a limited liability company does not exceed CZK 20,000, a special bank account for payment of contributions does not have to be opened and such monetary contributions may be paid, e.g., in cash to the contribution administrator.
There are several customs exemptions to be considered.
Visa and Residence permit
All EU citizens can set up business and take up self-employed work in the Czech Republic without the requirement of any permit, unless provided otherwise in specified cases.
Most of the non-EU nationals need a visa to enter (https://www.mzv.cz/jnp/cz/informace_pro_cizince/prehled_viz/index.html).
In the time of setting up business a Schengen Travel Visa (Business Visa) may be sufficient, which enables its holder to stay in the Czech Republic for up to 3 months per half year. For a longer stay a residence permit is needed.
Employment
Topic Feature
Work permit Citizens of the European Union, the European Economic Area (=EEA), or Switzerland can work in the Czech Republic without any restrictions.
Nationals from all other countries (with some exceptions) need a work permit (or other similar document) to work legally in the Czech Republic.
Labour law In the Czech Republic there are detailed employment regulations.
A minimum of 4 weeks of paid holiday is guaranteed. This amount is based on 5 working days per week and is added to public holidays.
Normal working hours are 40 hours in 5 days per week.
Social system The social security system consists of social insurance and health insurance.
The social insurance consists of pension insurance, sickness insurance and contribution to the state employment policy.
Social insurance is paid by the employer for its employees and the employee pays part of his/her salary for this purpose.
Remarks
The official authority to file an application for the work permit is the Labour Office of the Czech Republic (“Úřad práce České republiky”) having offices in every city of the country.
Statutory limits on working time are part of extensive health and safety regulations. The employment contract concluded for an indefinite period may be terminated by the employer only for specific reasons as stated in the Czech Labour Code. Special provisions for protection against unfair dismissal offer great protection for employees.
Social insurance for employees amounts to 31.9% of the assessment basis. This includes a contribution of 7.1% from the employee and 24.8% from the employer. The employer’s contribution is broken down as follows: 2.1% for sickness insurance, 21.5% for pension insurance, and 1.2% for the state employment policy. The employer deducts the employee’s contribution from their salary. For 2026, the maximum assessment basis for social security is set at 48 times the average salary, which amounts to CZK 2,350,416.
An employee’s health insurance is 13.5% of the assessment basis, of which the employee pays 4.5% and the employer pays 9%. The minimum assessment basis equals the minimum wage, which is CZK 22,400 for 2026, i.e., the minimum health insurance is CZK 3,024 in 2026.
The employer must register for the social security (which is referred to in Czech law as „the Register of Employers“) within 8 days of the date when the first employee starts work. From 2026, the unified monthly employer report (JMHZ) is being introduced in phases and it replaces up to 25 employer filings (excluding health insurance reporting).
The employer must register for the health insurance within 8 days of the date when first employee starts work. It is possible to do so online, although each health insurance company has its own websites.
Taxation
Taxes are divided into 3 basic groups - direct taxes, indirect taxes and other taxes. The Czech Republic also has a broad network of double taxation treaties with both EU and non-EU countries. These double taxation treaties are based mainly on the OECD Model Tax Convention.
Direct taxes consist of: (i) personal income and corporate income taxes governed by the Czech Income Taxes Act and (ii) property taxes governed by the Czech Real Estate Tax Act and Act on Road Tax.
Tax Feature
Corporate Income Tax
Indirect taxes include: (i) value added tax governed by the Czech Act on VAT, (ii) excise tax governed by the Czech Act on Excise Taxes, (iii) customs duties governed by the Czech Customs Duty Act, (iv) ecological taxes, governed by a special Law on taxes from energy sources.
Other taxes consist of mandatory contributions into the Czech social security and public health insurance systems, governed by a variety of Czech Laws, and municipality fees, usually governed by local by-laws.
The standard corporate tax rate is 21%. A special tax rate of 5% is applied to certain collective investment funds, to pension funds C.
Withholding taxes on income of non-residents 35/15/0%, according the type. The withholding tax rates may be reduced by double tax treaties.
Remarks
Corporate income tax applies to the profits generated by all companies, including branches of foreign companies. Corporate partners in general partnerships (i.e. unlimited) and corporate general partners (i.e. unlimited) in a limited partnership are subject to corporate income tax on their share of the profits in the partnership.
Czech resident companies are required to pay corporate income tax on income derived from worldwide sources. Non-resident companies are required to pay corporate income tax on income sourced in the Czech Republic.
Personal Income Tax
Two tax rates for personal income tax are:
(i) 15% for a tax base up to 36 times the average salary; and
(ii) 23% for earnings exceeding the limit stated in point (i).
Czech tax residents are generally subject to Czech income tax on their worldwide income.
Tax non-residents are generally taxed only on income considered Czechsource income.
Value Added Tax
Standard VAT rate 21% - most products and services.
Reduced VAT rate 12% - basic foodstuffs, certain pharmaceutical products, newspapers, certain medical equipment, heating, social housing.
VAT rate 0% - books, etc.
Property Tax
The property tax in the Czech Republic consists of two main components:
Land Tax - This tax is paid based on the area of the land and its category (e.g., gardens, arable land, building plots). The tax rates vary by type of land and are set by municipalities within a legal framework.
Building Tax - This tax applies to buildings and residential units. Its amount depends on the built-up area and the number of floors.
Tax returns are filed annually, and taxpayers are required to pay the tax by a specified deadline. Tax rates can be adjusted by municipalities within set limits.
The calculation of this tax depends on several factors; however, its amount is relatively low compared to OECD averages.
Tax on the Acquisition of Real Estate
Abolished since 2019
Energy Taxes Energy taxes apply to natural gas and other gases, electricity and solid fuels.
Only supplies of these products delivered within the Czech Republic are subject to energy taxes.
There is a wide range of exemptions (e.g. for energy used in metallurgic or mineralogical processes). In order to claim an exemption, approval needs to be obtained from the customs authority.
Consumption Tax Alcohol - Tax on beverages containing alcohol, varying by type and alcohol content.
Tobacco products - Excise tax on cigarettes, cigars, and tobacco.
Fuels and oils - Tax on motor fuels, such as gasoline and diesel, as well as certain mineral oils.
Energy products - Applies to certain energy sources, such as natural gas and electricity, although specific energy taxes are also in place.
Road Tax Since 2022, the road tax for passenger cars has been abolished. Road tax is generally payable by the operator of a vehicle registered in the Czech Republic. The road tax is only paid for trucks over 12 tons and their trailers, and its amount depends on the weight and number of axles of the vehicle; the annual rate can be up to CZK 14,000.
Inheritance and Gift Tax Since 2014, there is no inheritance tax. Gifts are subject to income tax except for those between close relatives.
The guide has been prepared by BURIL PARTNERS, an independent membre of Antea
BURIL PARTNERS
Burzovní palác, Rybná 682/14 110 00, Praha 1 +42 0777888575
jan.buril@burilpartners.cz www.burilpartners.cz
SETTING UP BUSINESS IN THE
CZECH REPUBLIC
Antea members in The Czech Republic:
PRAGUE (Legal Services)
Contact partner: Jan Buril
Tel.: +42 0777888575
Mail: jan.buril@burilpartners.cz
Web: www.burilpartners.cz
PRAGUE
Contact Partner: Michal Větrovec
Mail: michal.vetrovec@aspekt.hm
Tel.: +420732590399
Web: www.aspekt.hm
Mallorca, 260 àtic
08008 – Barcelona
Tel.: + 34 93 215 59 89
Fax: + 34 93 487 28 76
Email: info@antea-int.com www.antea-int.com
This publication is intended as general guide only. Accordingly, we recommend that readers seek appropriate professional advice regarding any particular problems that they encounter. This information should not be relied on as a substitute for such an advice. While all reasonable attempts have been made to ensure that the information contained herein is accurate, not Antea Alliance of Independent Firms neither its members accepts no responsibility for any errors or omission it may contain whether caused by negligence or otherwise, or forany losses, however caused, sustained by any person that relies upon it.
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