Do you want to expand your business into neighboring Czechia or establish a completely new company?
Limited liability company (s.r.o.) is the most common legal form of business in the Czech Republic. It is suitable for both natural and legal persons and can be founded by a single founder or an unlimited number of partners. Thanks to a minimum capital contribution of 1 CZK, it is also attractive for aspiring entrepreneurs.
This article will guide you through the detailed process of establishing an s.r.o. in the Czech Republic – from document preparation to tax obligations – and highlight the specific requirements that Slovak citizens must meet as partners or executives.
If an Ltd. is founded by a single shareholder, they prepare the Memorandum of Association; if there are multiple shareholders, the Articles of Associationare concluded. Both must be signed before a notary in the form of a public deed. The document must contain:
Upon establishment, the document also specifies the contribution obligation, the names of the executive directors, and a description of non-monetary contributions with an expert valuation.
The company must have its registered office in the Czech Republic. For registration in the Commercial Register, it is necessary to submit written consent from the property owner (or an officially certified copy thereof), stating that they agree to the registered office being located there.
If an s.r.o. (limited liability company) is established for business purposes, it must obtain a trade license or other business permit. A trade license comes into effect for a legal entity registered in the commercial register on the day of notification; proof of this is an extract from the trade register.
Before submitting the application for registration of the s.r.o. in the commercial register, the following must be paid: at least 30% of the monetary contribution and 100% of the non-monetary contribution. Non-monetary contributions are valued by an expert selected by the founders. The contribution obligation must be fulfilled no later than 5 years from the company's establishment.
If the contributions of the partners (founder) exceed CZK 20,000, a temporary bank account must be opened, and the contributions deposited there. For lower contributions, the deposit can be paid directly to the deposit administrator.
The application for registration is submitted by all executive directors. For paper-based applications, signatures must be officially verified; electronic applications are signed with a recognized electronic signature or submitted via a data box. The company comes into existence on the day of its registration in the commercial register.
Deadline: the application for registration must be submitted within 6 months of signing the founding documents.
After registration in the commercial register, the following steps must be taken:
A Slovak citizen (natural person) or a Slovak legal entity can be a shareholder of an s.r.o. The law does not limit the number of shareholders or their nationality.
According to Czech law, a company must have at least one director. There are no requirements for Czech citizenship or permanent residency. – A Slovak citizen can also be the executive director. However, the executive director must meet these conditions:
All notarial deeds and submissions to the commercial register must be in Czech. Therefore, it is recommended to use the services of a translator or a lawyer who will ensure the power of attorney and submission of documents. Opening a bank account usually requires the personal presence of the executive director.
A uniform rate for all Ltd. companies 21 % of taxable profit. Dividends paid to residents and non-residents are subject to a 15% withholding tax. Under the EU Parent-Subsidiary Directive however, dividends are exempt from withholding tax if the parent company owns at least a 10% stake in the subsidiary for a minimum of 12 months (applies to EU, Norway, Iceland, Switzerland, Liechtenstein). When paying dividends to countries outside the EU/EEA or without a double taxation treaty, a 35% withholding tax applies.
A company becomes a mandatory VAT payer when its annual turnover exceeds 2,000,000 CZK; registration must be submitted within 10 days of exceeding the limit. If the turnover exceeds 2,536,500 CZK, it becomes a VAT payer immediately; for lower turnover thresholds, voluntary registration is possible. VAT rates in the Czech Republic are 21% (standard), 12% (reduced), and 0% for selected items.
If a Slovak executive works for a Czech s.r.o. and receives remuneration, they are obliged to pay Czech social and health insurance. Employment relationships with employees are governed by Czech laws.
Establishing a Czech s.r.o. offers many advantages for Slovaks – minimal initial capital, a simple process, and a stable tax environment. Although several administrative steps need to be completed (notarized documents, registrations, bank account), most of them can be handled via power of attorney, and personal presence is only required for setting up a bank account.
If you need professional assistance with establishing an s.r.o. or tax planning, please contact us. Our consultants will gladly prepare all documents, arrange translations, and guide you through the entire establishment process and subsequent registrations.
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