Setting up an s.r.o. company in the Czech Republic

The minimum share capital is CZK 1. Before the s.r.o. is entered in the commercial register, at least 30% of each monetary contribution and the entire share premium must be paid up. The articles of association may require more or all contributions to be paid before registration. Non-monetary contributions are valued by an expert appointed by the founder or managing director; the expert is paid by the company. The contribution obligation must be met within 5 years of incorporation. Late payment of a monetary contribution carries default interest at twice the statutory rate unless the articles provide otherwise. A shareholder who fails to pay even after being called upon may be excluded from the company.

A taxable person with a seat, place of business or fixed establishment in the Czech Republic must register for VAT if their turnover for a calendar year exceeds CZK 2,000,000 (roughly €80,000). Voluntary registration is also possible. A foreign trader selling goods at a distance to non-VAT-registered persons in the Czech Republic must register if the value of those transactions exceeds €10,000 per year — the alternative is the OSS scheme with a single EU return. A person registers as an identified person for tax when receiving services from suppliers outside the Czech Republic with the place of supply in the country, when supplying services with the place of supply in another EU state, and when acquiring goods from another EU state. Several connected persons may register as a single VAT group.

Shareholders of a Czech s.r.o. may be both natural and legal persons. They are liable for the obligations of the company only up to the amount of their unpaid or promised contributions to the share capital. The company may be founded by a single legal or natural person.

The standard VAT rate is 21%. A reduced rate of 12% applies to specific goods and services — for example food and tap water, medical and pharmaceutical products including medicines and vaccines, public transport, hotel accommodation, catering and admission to cultural and sporting events.

Czech regulations require s.r.o. companies to hold at least one bank account. Opening a current account requires the personal presence of the person authorised to use it — usually the managing director. This follows from European legislation setting strict anti-money-laundering requirements.

A data box is a secure, state-guaranteed electronic communication portal for dealing with authorities, courts and other entities, including private ones. It is a kind of mailbox set up when each company is registered. As part of our service we can manage your data box and inform you about received messages and any action required. The data box interface is available in Czech only.

After incorporation there is generally an obligation to obtain a business licence — either a trade licence or another type of authorisation. A legal entity entered in the commercial register obtains its trade licence on the day of notification, to the extent of the registered business activities. The proof of a trade licence is an extract from the trade register; until it is issued, a counterpart of the notification with confirmation of delivery to the trade licensing office serves as proof. Other types of business are evidenced by an authorisation issued by the competent authority under special regulations.

The company name is the name under which the entrepreneur is entered in the commercial register. Since all companies are entered in the register, they must have a company name, and an entrepreneur may not have more than one. Each legal form has a statutory suffix (e.g. s.r.o., a.s.), which forms part of the company name by law. The name must not be misleading and must not be confusable with another — including phonetically — anywhere in the country; the legal form suffix alone is not enough to distinguish it. The regulations do not set a minimum number of letters, but in practice registry courts usually require at least three characters. A name containing the same abbreviation or distinctive element as another company is often considered confusable.

A foreign natural person may act as the managing director. The director must provide a criminal record extract from their home country.

The corporate income tax rate is 21%.

The beneficial owner is any natural person who directly or indirectly holds more than a 25% share in the share capital or voting rights, or is entitled to more than 25% of the profit, or exercises effective control over the company on other grounds (for example under the articles of association). Czech law does not set an exact deadline for registering the beneficial owner — it states that it should be done without undue delay, which in practice usually means within two weeks of incorporation.

Dividends paid to residents and non-residents are subject to withholding tax of 15%. Under the EU Parent-Subsidiary Directive, however, they are exempt if the parent company holds at least a 10% share in the subsidiary for a continuous period of at least 12 months. The same regime applies to dividends paid by a Czech subsidiary to a parent company seated in Norway, Iceland, Switzerland or Liechtenstein. A withholding tax of 35% applies to dividends paid to countries outside the EU and EEA, or to states with which the Czech Republic has no double taxation treaty.