Setting up business, Initial consultation, Branch, Subsidiary, Share capital, Incorporation, Tax rates, Statutory audit
1 Pros and cons of branch versus subsidiary
Subsidiary is the most common way to go forward. The parent is not exposed to the business and tax risks accumulated in the subsidiary.
Branch is easier and faster to wind up. It enables tax free profit transfers to non-EU founders.
2 Minimum share capital
CZK 2 million for joint stock and CZK 1 for limited liability company. In practice, LTD mostly opt for at least CZK 20.000 share capital.
3 Taxation of director’s remuneration
Director’s remuneration is taxed same as employee’s including local social and health insurance changes unless in a cross-border situation. Director’s do not need to receive remuneration.
4 Incorporation documents
Foreign shareholders and directors most commonly will need to provide:
- Extract from penal register
- Extract from commercial register
- Copy of passport
- Landlord approval for registered seat
- Signatures on POAs and affidavits
5 Physical presence during incorporation
Physical presence of director is not required until regular bank accounts shall be opened.
6 Local director requirement
Appointment of local director is not required. It may be considered for practical purposes, e.g. for bank account opening in times of travel restrictions. Nominee directors are used for operating businesses where local employees cannot be appointed to fill in the director role. General proxy or ‘procurist’ solutions are also possible.
7 Time schedule for incorporation
- Collecting documents and signatures from shareholder and directors – usually 2-4 weeks
- Drafting POAs and affidavits – usually runs in parallel
- Notarization of articles of association – plus 1 week
- Obtaining business license (only needed for certain trades) – time requirement depending on trade – no extra time for basic trades, several weeks or even months for regulated trades
- Setting up of basic capital bank account – few days in parallel
- Registration in commercial register – plus 1 week
- VAT registration – plus 2-4 weeks from application, application requires documents proving substance of business (collection of these may delay the process)
8 Virtual or real office
Registering a seat does not require rental contract. Using a virtual address is very common. Registered seat at a very popular ‘virtual address’ may slow down VAT registration.
9 Which local bank to choose for bank account
Most popular among our clients are local subsidiaries of:
- Belgian KBC (CSOB),
- French Societe General (Komercni Banka),
- Austrian Erste Bank (Ceska Sporitelna) and
- Austrian Raiffeisen Bank (operating under same brand in Czechia).
10 Important tax rates
Standard Corporate Tax Rate – 19%
Standard VAT Rate – 21%
11 VAT refund practices
VAT refunds are usually distributed automatically and on time by the tax authorities (30 days after the filing deadline of 25th day of the following month). In some cases the tax authorities require scans of invoices and excel reports or in the worst cases proof of supplies and their purpose and use for business.
12 Statutory audit requirement
Statutory audit of an LTD is required after exceeding thresholds of 2 out of 3 criteria in 2 consecutive years – 50 employees, CZK 80 million turnover, CZK 40 million balance sheet value.