SPECIFICS OF DOING BUSINESS IN THE CZECH REPUBLIC
The Czech Republic was ranked 17th out of 165 countries in the Economic Freedom of the World report published by the Canadian Fraser Institute in 2022. Moreover, compared to the last year, it improved its position by ten lines at once, ahead of Germany and Great Britain. This indicates positive trends in the country, improving living standards and business conditions.
Registering a company in the Czech Republic is not very troublesome; both residents and non-residents are eligible to do it. Foreign businessmen here have the same rights and conditions for conducting business as Czech citizens. Small individual enterprises are widespread in this country, and family businesses are frequent. Foreign businessmen are entitled to obtain a residence permit on the condition of starting a company in the territory of the Czech Republic or participating in the business as a partner.
Taxation in the Czech Republic is formed according to the European model, and the norms of local tax legislation synchronise with the norms and requirements of the European Union more and more every year. The basic income tax rate in the Czech Republic is 19%, but there are several legal options for lowering it. VAT ranges from 10% to 21% and is mandatory for companies with turnover of more than 1 million CZK per year. Some services (for example, medical) are exempt from value-added tax. Contributions to various insurance funds (by the employer) amount to 33.8% of the total sum of wages paid. Capital gains in the Czech Republic are taxed at 19%.
All persons and entities planning to do business in the Czech Republic must obtain a trade licence (živnostenský list). It gives the right to do business in the country, but nothing more. Many activities require special permission from the state. There are 4 types of licences in the Czech Republic: free, professional or craft, special, and concession. As a rule, businessmen do not have any difficulties obtaining an activity permit, but different types of licences have subtleties that foreign businessmen need to consider when submitting documents.
Companies are required to submit their annual report by March 31st. For the convenience of the residents of the country and the transparency of potential partners, financial statements of companies must be published and freely available on the Internet. Relevant documents must be submitted to the Commercial Register for this purpose. If a company does not publicly disclose its financial statements, the Law of Accounting imposes a penalty of up to 3% of the company’s total assets.