How to start business in Czechia, EU
The Czech Republic is increasingly becoming the target of foreigners’ interest in expanding their business. Our laws are relatively supportive of foreigners’ business and do not impose too many obligations on them. In this article, we will focus on three ways how foreigners can start business in our territory (we assume you are EU citizen or have permanent residence permit).
1) Cross-border provision of services
The easiest and fastest way to start a business in Czechia as a foreigner is cross-border provision. This way you can easily test the market. An EU business entity does not need in this case any permit from the Czech authorities. It is basically about one-time work on contracts, there should be no regular commuting to the Czech Republic. In this setting you can provide professional services, and sale and shipment of goods from abroad to the Czech Republic – for which an internet shop in Czech language and compliance with the Consumer Protection Act will be sufficient. If business grows, you will need to register for VAT and a Prague virtual office or contact point will make a difference.
If foreign entrepreneurs decide to do business in the Czech Republic regularly, they has another two options:
2) Self-employed person or Freelancer
If they want to establish a legal business entity, they can apply for a trade license. As a freelancer you must meet the same conditions as any Czech entrepreneur, i.e. integrity (which is verified in the Czech Republic and in their home country criminal report) and obtain consent of registered business address of their choice. Subsequently, they register with the Tax Office for income tax, with the Czech Health Insurance company and the Czech Social Security Administration or order Czech business set-up service from the Profi-kancelar.
3) Legal entity or Company incorporation
A legal person has its own legal personality and legal capacity. For the business company any number of owners is possible, and on its behalf act an appointed body or director(s). For its incorporation are required written Articles of association. Legal entity is established (born) on the day of registration into the Commercial or other register.
A foreign legal entity may register an organizational unit in the Czech Republic, which shall be governed by the law of the country in which the parent company has its business registered office. For an organizational unit incorporation is responsible manager, who must meet the requirements of the law essentially identical to the managing director of s.r.o. (Czech LTD). However, the manager is not its statutory body, so he does not have direct legal responsibility. Responsibility is always taken by the statutory body of the parent company, which is also responsible for the obligations of its organizational unit.
Another option is to establish a business entity, most often it is a company with limited liability – s.r.o.
A foreigner may execute the function of a partner or director regardless of whether he resides in the Czech Republic or not. For a partner, which may be a foreign legal subject or natural person, no specific claims are made. Likewise, a foreigner can be an executive, requirements on him are the same as on a citizen of the Czech Republic, i.e. especially integrity evidenced by an extract from the criminal record that is no more than 3 months old. For an EU citizen, this extract contains information from both the Czech Republic and his home country.
The first step that a partner must complete is a notarial deed in which he signs articles of association, partnership agreement, charter of the company. He can choose any notary office in the Czech Republic. The condition of the law is that the client and the notary must communicate in the same language, i.e. understand each other. If the founder – a foreigner does not speak Czech, he can contact a notary who is able to communicate in his language. If such notary is not available, a court interpreter, who translates the communication can be invited or will give a power of attorney to the person who will speak with the notary.
It is also necessary to obtain a trade license. They can apply for it at the Trade Licensing Office. There will be required the verified signed consent of the property owner with the location of the registered business office. Trades are divided into free, craft, and licensed. Free trades are enough to simply activate, others need a responsible representative with the appropriate education, possibly by practice and in the case of licensed trades another state administration body enters into the process, which grants the permit.
The last step is to apply for registration in the Commercial Register, which can be solved by direct registration by a notary, with whom a certifying document of supporting documents necessary for registration and application is signed. Eventually the fees required by law should be paid. Subsequently, the notary will ensure the entry of the company details in the Commercial Register.
All these steps of Czech business incorporation can be provided by Profi-kancelar on behalf of a client – see: https://www.profi-kancelar.cz/set-up-czech-ltd-company-sro
Foreigners who run a company established in the Czech Republic from abroad may empower Czech lawyers, tax advisors, accountants or other trusted persons to communicate with the Czech authorities. In that case it is not necessary to learn all Czech regulations. At the same time they should be sure they will not get into trouble with the authorities just because they do not understand the requirements.
