Company Formation in Czech Republic
A company formation in Czech Republic
The Czech Republic became the integral part of the European Union in 2004 and since that it has been very zealously complying with all standards accepted on its territory. Today, the country may boast with the high standard of living, well-developed infrastructure, and the business climate. The excellent geographical location should be also noted, thanks to which the country keeps excellent relations with both western and eastern partners, including the former USSR.
Over the past few years, the Czech Republic has become the country that has the most attractive micro-environment to do business. It has no “offshore” status and due to that every businessman can avoid the undesirable attention from different regulatory authorities. At that, the tax legislation is known for its higher loyalty and openness for those who intend to do business in the territory of this country. We should also mention the fact that people doing business there have the chance to get the permanent residence status that will help to realize all national benefits in terms of business interests, and as a resident.
Business environment – convenience and comfort
By choosing the Czech Republic, you may get the chance to operate within one of the best jurisdictions throughout Europe. Registration of a wide variety of activities is available here, including the use of European credit line. You should never disregard the opportunity to engage in banking operations in US dollars and Euro with minimal expenses for servicing.
It is not feasible to open the classic offshore on the territory of this country. All registered legal entities have to pay tax liabilities with reporting on their activity until April 1 of the next year. Tax rates are high, but there are compensatory benefits for international investors.
Thus, the rate of VAT is 21%, but based on the variety of activities it may be reduced to 15%, or even excluded.
The rate reduction is applicable to the income derived from activities in the field of medicine, food, printed products, heating and social housing.
Yet, VAT payments are zero for newly established companies in the Czech Republic. They get the VAT number with certain obligations only if there is the annual turnover of 40,000 Euro or 1 million Czech crowns. However, it is not relevant for non-residents. Companies that operate outside the country are also exempted from VAT payment , though they keep on reporting. Zero rate (0%) also applies to export services or goods from EU countries.
VAT reporting is monthly, although it may be submitted every three months; this should be agreed with the tax authority.
The income tax applies to the profit of residents, regardless of the country where they operate, and those non-residents who profited from Czech sources. The rate is 19%, although it may be completely reduced if properly arranged.
Thus, it is possible to credit up to 60% of profit to cover production costs. It does not matter whether or not they are available or not at all. The tax in this case is paid in terms of remaining 40%. An offshore and the Czech company can merge transferring 1% profits to the other that also eliminates the need to pay fees. It is enough to conclude a contract only between companies or transfer the offshore as the founder. This is a very profitable tool to reduce the tax rate that allows unlimited business opportunities in high-prestige jurisdictions, opening global accounts for each company without restrictions.
A variety of double taxation agreements cannot be disregarded concluded between the Czech Republic and other countries. Among them are Austria, Hungary, Russia, Malaysia, Baltic countries and others.
Legal corporate form forms and their variability
The Czech legislation allows incorporation of companies of different types and formations. It can be the limited partnership, a cooperative or an open commercial company. Limited liability companies and joint stock companies have the greatest relevance.
To register a JSC, a single founder is enough and the natural person or a legal entity may function as the former. The largest number of shareholders is not restricted; any legal or natural person may function as that regardless of their jurisdiction, including offshore.
The most sought-after is the OJSC there. The lowest value of their share capital can be only 1 crown. Only a natural person of any nationality may be a director. The binding is no criminal record. It should be noted that the current legislative norms of the Czech Republic do not allow restrictions on the lowest level of wage, so the payroll budget may be disregarded when doing business.
Speaking of advantages of companies registered in the territory of the Czech Republic, the fat should be remembered that the most of their reporting is not subject to audit. It is mandatory for those companies only that engage in specialized activities. These may include insurance, financial and other operations. For the remaining, the whole process of interaction with the supervising bodies is reduced only to submission of electronic declarations. Since 2015, there has been no reporting on hard copy at the territory of that country.
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