Czech Republic | Interstatus - Group of Companies Czech Republic – Interstatus – Group of Companies

General Jurisdiction Information:

The Czech Republic is a state in Central Europe. It boasts a very strategic geographical location, bordering Poland in the north, Germany in the west and north-west, Austria in the south and Slovakia in the east. The country has been a NATO member since March 1999 and joined the European Union on 1st May 2004. The Czech Republic is a member of the Schengen Area, the Organisation for Economic Cooperation and Development and the World Trade Organisation.

Development of the country’s economy is supported by the manufacture and distribution of hi-tech products whilst tourism accounts for around 10% of the local budget.

The Czech Republic’s population is around 10,500,000 and the capital city is Prague.

The official language is Czech and the official currency is the Czech Koruna (CZK).

The Czech Republic is not an offshore zone but its laws provide for flexible legal mechanisms for corporate and tax planning. The country enjoys an immaculate reputation and the potential for business operations in Europe.

In 2014, with a view to providing favourable business development conditions and an attractive investment climate, the Czech Republic passed the new Business Organisations and Companies (Business Companies) Law (Zakon 90/2012 Sb) and the new Civil Code. Because of these laws and regulations and the business practises of foreign investors in the Czech Republic, the most in-demand legal forms of companies are as follows:

  • limited liability companies (s.r.o.);
  • public companies limited by shares (A.S.);
  • European companies limited by shares, (S.E.: Societas Europaea), which are similar to companies limited by shares established within the EEC.

The European company limited by shares, a new legal form of company with its status regulated at the European level, was introduced by The Czech Republic in 2004 (simultaneously with the EU). At present, business administration through a European SE company is one of the most advanced, competitive and sought after types of business in the EU. Unlike the international company limited by shares, the European S.E. company enjoys the benefits of free foreign business operations and refunding of VAT.

An SE company offers convenience and efficiency, enjoys wide respectability and can provide a good image for the whole holding structure. Along with other numerous benefits, an SE has a unique feature: free re-domiciliation of the company’s registered office within the EU.

On 1st January 2014 a new law was passed to make companies incorporated in the Czech Republic undertake re-registration by 30th June 2014.

Advantages of The Czech Republic incorporated companies:

  • It enjoys a strategic geographical location along with the opportunity to obtain European company status with a clean reputation within the country.
  • There is high acumen for Czech companies at European level and a high level of trust for the company and its shareholders.
  • The benefits of conducting business in the Czech Republic and throughout the EU with various incentives.
  • Companies can be set up with just one shareholder (a corporate entity or a private individual) who can be a citizen of any country.
  • The use of nominee options by the company (director and shareholder).
  • Loyalty of tax authorities to the business.
  • No exchange controls.
  • The opening of accounts with prime European banks;
  • A vast network of Double Tax Treaties with countries including the Russian Federation, Cyprus, Ukraine, Belarus, Moldova and Kazakhstan.
  • No transfer pricing rules are applied to limited liability companies and a simplified application of the rules is applied to companies limited by shares.

The Czech Republic company incorporation process:

The Czech Republic incorporated companies are deemed as registered from the date of entry into the Commercial Register.

Limited liability companies (s.r.o.):

Following the adoption of new regulations in 2014 the incorporation procedure has been amended significantly.

The issue of incorporation documents now requires the personal presence of members and directors. The newly enacted Civil Code has cancelled the need of share capital (the contribution of CZK1 is just symbolic). The new legislation provides for liability of members on the debts of the company by their entire estate (unlike earlier regulations whereby only the company was liable with its capital and the value of the fixed assets).

The Law sets the following criteria for information to be stated in the Articles of Association:

  • the name of the company with reference to its legal form;
  • the registered office of the company;
  • business operations;
  • members of the company and their residence addresses;
  • directors with names, residential addresses and descriptions of their duties;
  • the amount of authorised capital;
  • the interest of each member (subscriber) in the equity;
  • the rights and obligations of the members.

The following documents are to be presented for registration of the company:

  • Memorandum and Articles of Association;
  • notarised minutes of the meeting of the members (shareholders);
  • the resolution of the members to appoint officers of the company;
  • confirmation of the registered office.

The Business Organisations and Companies (Business Companies) Law, passed on 1st January 2014, introduced the following main regulations governing this legal corporate form:

  • the minimum authorised capital is set at CZK1 (previously CZK200,000);
  • the formation of reserves in the s.r.o. is no longer required;
  • the subscriber may have several isolated shares in the capital;
  • one person may be a member of an unlimited amount of s.r.o. companies;
  • termination of the requirement for auditing of contributions of members to the capital of the company;
  • subject to certain conditions, the members may resign from the company at their own discretion.

Members:

Minimum 1 and maximum 50. Members may be private individuals or corporate entities and there are no residency qualification requirements. One member may own and manage the company.

Director:

A minimum of one director is required.

Secretary:

S.r.o. companies have no secretary requirements.

Share capital:

By Law the minimum share capital is CZK1 (previously CZK200,000). However, members should note that the share capital may have a potential material impact on the perception of the company by any future partners.

S.r.o. companies do not issue shares. Articles of Association fix the interests of each member (subscriber) in the capital.

Registered office:

Companies incorporated in The Czech Republic are required to have a registered office which is stated on the certificate issued by the Registrar. According to the Law the registered office address should correspond with the physical address of the company and official notices will be served at this address.

Companies limited by shares (A.S.):

“Companies limited by shares” is the main legal form of a business with a large investment.

Members:

An A.S. company, being a corporate entity, may be set up by just one member or by two or more private individuals and there are no residency requirements. Statutes of the company are executed in the form of a notarised deed.

Management structure:

The shareholders meeting has the final say in the running of the company.

The board is the executive body of a company and is made up of at least three members vested with the powers to manage the business of the A.S. and act on its behalf. Details of members of the board are registered in the Commercial Registrar.

The supervisory board is a mandatory body of the company made up of at least three members to control business operations of the A.S. and the exercise of duties by the board of directors.

Shareholder:

Companies must have a minimum of 1 shareholder who may be a private individuals and/or a corporation. The company must maintain a register of shareholders. Shareholders do not personally participate in the business of the company and are not liable for any obligations of the company but they undertake the risk of losses to the extent of the value of shares held. Meetings of shareholders are held on an annual basis.

Share capital of an A.S.:

The initial capital of the company is divided into a number of shares with a nominal value which distinguishes the rights of the shareholders. Minimum authorised capital of the company limited by shares (with no entitlement for public offering of the shares) is CZK2,000,000 (around €80,000). At least 30% of the share capital must be paid by the date of registration of the A.S. with the Commercial Registrar.

Only registered shares can be issued.

Bearer shares in the Czech Republic are prohibited by Law.

European company limited by shares (S.E.):

Being a country with advanced legislation and a clean reputation, the Czech Republic provides comfortable conditions for businesses and is a perfect option for the establishment and registration of a European company (S.E.).

The operation of an SE company is regulated by The Czech EU Council European Company Regulation No. 2157/2001 and The Czech European Company Status Law No. 627/2004.

There are a number of options for the incorporation of a European company limited by shares such as: a merger of companies with different legal forms and organisational structures, the registration of branches, the setting up of subsidiaries, the re-registration and restructuring of companies, incorporation by an existing European company of another company, etc.

Incorporated S.E. companies are available on EU Registrars’ websites and their details are registered in the national bulletins.

Structure:

Members:

SE companies can be established by corporate entities only.

Management bodies:

  • Meeting of Shareholders.
  • Management Board.
  • Supervisory Board.

Administration structure:

With the one-tier structure the management board operates alongside general meetings, the members of the board are appointed by the general meeting and the board is represented by one managing director.

With the two-tier structure the management board operates alongside the supervisory body, the members of the management board are appointed and removed by the supervisory body and the supervisory body controls the functions of the management board.

Share capital:

The minimum share capital is CZK120,000.

The board of shareholders fixes the value of the shares and allocates them to shareholders according to their contributions.

Registered office:

The address of the registered office of the incorporated European company limited by shares must be the same as the address of the head office of the company.

Registration period:

Around 2 weeks. Shelf companies are available.

Accounting and auditing:

Czech companies are required to maintain accounts and submit financial statements according to National Standards and IFRS. The financial statements are to be submitted to the local tax office of the registered office by 31st March (inclusive).

Large companies are required to submit quarterly financial statements.

By the newly enacted Czech Taxation Law, VAT registered companies are required to submit monthly reports.

Statutory auditing:

Financial statements of Czech companies are subject to financial auditing provided that the business of the company meets two out of the three following criteria:

  • the value of the company assets exceeds CZK40,000,000;
  • the annual turnover is in excess of CZK80,000,000;
  • the average number of staff exceeds 50.

Companies that do not meet the above criteria are exempt from the requirement to submit an auditor’s report to the annual financial statements.

Failure of or late submission of the financial statements will result in the imposition of significant penalties and fines.

Open information in the registers:

The Commercial Registrar of The Czech Republic is open to the public. Information such as the name of the company, its registered office, its registration number, its share capital and details of all members, shareholders and members of the management board are accessible to third parties upon request.

This information is available on the official website of the Ministry of Justice of the Czech Republic.

Taxation provisions in The Czech Republic:

The Czech Republic is not an offshore zone and applies medium and high tax rates.

Corporate profit tax:

The corporate profit tax rate is 19%.

Tax is applicable to the entire income of the company within The Czech Republic and internationally.

As a rule, a tax period is the calendar year.

Profit from investment and unit funds may be taxed at the reduced rate of 5%.

Capital gains tax makes part of the taxable income subject to corporate tax.

If capital gains are achieved as a result of the disposal of the material part of the share capital (from 10%), they are not taxable subject to specific provisions of the Law.

Taxation of dividends distributed by a Czech company:

Dividends are not taxable if:

  • the dividends are distributed by the Czech company or its subsidiary in the member state to the European Economic Area. Provided that the Czech company holds in excess of 10% of such company;
  • the dividends are distributed by the subsidiary which has paid income tax or tax withheld at source;
  • the dividends were not paid from offshore zones.

Tax withholding at source:

Dividends, interest and royalties paid to non-residents are taxed at source at the rate of 15% except when Double Tax Treaties contain no reduced tax provisions or tax exemption provided by the EU Directive.

The rate of 35% at source is applied subject to distribution to an offshore jurisdiction without a Tax Information Exchange Treaty with The Czech Republic.

Taxation of non-resident directors remunerations:

As of 2015 remuneration to non-resident directors is taxable at the source of origin at the rate of 15%. If the person is resident of a state without a Double Tax Treaty with The Czech Republic the rate of 35% is applied.

Value added tax:

The standard VAT rate is 21%.

Some groups of products and services are taxed at the reduced rate of 15%, 10% or are totally exempt from tax.

VAT registration of a company is mandatory as soon as the taxable income of the company exceeds CZK1,000,000 (around €37,000) over 12 consecutive months (this threshold is expected to reduce to CZK750,000).

Voluntary registration is allowed notwithstanding the fixed threshold.

Emoluments tax:

  • The social insurance rate is 31.5% (25% payable by the employer and 6.5% by the employee).
  • The medical insurance rate is 13.5% (9% payable by the employer and 4.5% by the employee).
  • The income tax rate is 15%.

In 2012, The Czech Republic introduced a cohesion tax of 7% applicable to private individuals with a monthly income in excess of CZK106,444 (details correct as of 1st January 2015).

Since 1st May 2015 government duty on company incorporation in The Czech Republic is CZK2,700 (it was previously CZK6,000). The duty may be paid to the notary.

Double Tax Treaties:

The Czech Republic maintains a network of Double Tax Treaties with over 70 countries including Belarus, Kazakhstan, Cyprus, Latvia, Malta, Moldova, the Netherlands, Poland, Russia, Ukraine, Estonia and others.

The Czech Republic also maintains Tax Information Exchange Treaties with the Bermuda Islands, British Virgin Islands, Jersey, Isle of Man and San Marino.

For detailed information on the administration of companies incorporated in the Czech Republic or other jurisdictions please contact us. 

1st year

BASIC
3600
  • Company Incorporation
  • Corporate Documents with Apostille
  • Government License Fees
  • Registered Office
  • Company Stamp
  • Courier
STANDARD
4600
  • Company Incorporation
  • Corporate Documents with Apostille
  • Government License Fees
  • Registered Office
  • Company Stamp
  • Courier
  • Nominee Director
  • Power Of Attorney with Apostille
  • Nominee Shareholder
PREMIUM
5100
  • Company Incorporation
  • Corporate Documents with Apostille
  • Government License Fees
  • Registered Office
  • Company Stamp
  • Courier
  • Nominee Director
  • Power Of Attorney with Apostille
  • Nominee Shareholder
  • Bank Account Opening

2nd year

BASIC
200
  • Registered Office
STANDARD/PREMIUM
1100
  • Registered Office
  • Government Fees
  • Nominee Director
  • Power Of Attorney with Apostille
  • Nominee Shareholder

* Please contact us for a detailed price list and additional information.