Starting a business in Czech Republic as a foreigner

Establishment of LLC by a foreigner is in its core identical with the establishment of LLC by a citizen of the Czech Republic, though there are certain peculiarities.

Documents issued abroad – such as a PoA, manager’s statement, etc. – usually have to be translated by a court translator for the purposes of establishing an LLC. It is also often necessary to provide these with an apostille or, in some cases, even super-legalisation. Information about the apostille or super-legalisation requirements is easily available on the website of the Ministry of Foreign Affairs or ours.

It should also be remembered that up to 1 July 2023 a company director who does not have permanent residence in the Czech Republic shall be obliged to submit an extract of the criminal record from the state of his/her citizenship. The requirement is to be replaced by the register of excluded persons as of 1 July 2023.

In the case where the founder of the company is a foreigner, depending on his state of origin, the notary is obliged to carry out supplementary controls also under the Law on Some Measures against Money Laundering, in particular, whether it is a state under international sanctions.

How can a foreigner start a business in the Czech Republic?

Entities and natural persons can practice an activity in the Czech Republic under the same conditions as those provided for citizens of the Czech Republic. This, of course, implies that in all cases you will require a trade license to do business in the Czech Republic.

You can hold it yourself for business or establish a trading company, a trade company of your own. Basically, according to the type of business, you need to fulfill either the general conditions-over 18 years of age, good faith, capacity, and no debts to public institutions-or proof of education and experience in the particular field.

The foreigners who want to conduct their business activity in the Czech Republic also have to comply with conditions which result from the area of foreign law, first and foremost with the law which deals with the issue of visas and permits for permanent and temporary residence, in case you will plan to stay in the Czech Republic during your activities.

Residing in the Czech Republic – for third-country nationals

A third-country national needs a visa to stay legally in the Czech Republic. If a foreigner plans to pursue business activities in the Czech Republic, he/she has to apply for a long-term visa, i.e. a visa for a stay over 90 days.

The presence of the applicant is not required. The final result will be known within 90 days. Applications are examined by the Ministry of Interior and are submitted for approval to the relevant territorial office. The following will be required:

• travel document
• 2 photos
• completed visa application form
• proof of registration in the relevant register, list or registry; usually an extract from a commercial or trade register
• financial resources of the stay in the Czech Republic in the amount of CZK 110 000;
• document proving the accommodation for the whole stay in the Czech Republic; it is also necessary to attach a notarized signature of the provider.
• a document similar to the Register of Criminal Records listing the foreigner’s country of citizenship, and countries where the foreigner has resided continuously for a period longer than 6 months in the past 3 years; a foreigner younger than 15 years does not need to provide such a document
• health insurance that covers the foreigner’s stay in the territory of the Czech Republic at least for the amount of EUR 60,000
• if the GI requests a document on meeting the requirements of measures adopted prior to the introduction of the infectious disease.

It is also possible to apply for a long-term residence permit for business purposes in the event that the foreigner has already resided in the Czech Republic for a long period on a visa for the same purpose.

At the same time, you can file this application if you want to stay here temporarily for more than 1 year and if the purpose of your stay remains the same. If you are not sure how to handle everything well, use our services – we have a lot of experience.

Why do foreigners start a business in the Czech Republic?

One of the most frequent reasons for arrival is the performance of work or business, understood as economic activity, within the Czech Republic.

Employment or entrepreneurship is an important precondition of the economic and social independent life of foreigners in the Czech Republic, thus their successful integration into the Czech society. Besides providing a livelihood in a form of regular income, it provides an appropriate space for social interaction with fellow citizens, compatriots, and other foreigners.

Migration projects in the Czech Republic

The objective of migration projects is to provide easier access for selected employees, mainly specialists and managers, from abroad with the view to enhance the competitiveness of the Czech companies.

A foreigner who has insufficient knowledge of the Czech language or is insufficiently familiar with the Czech environment may appoint a person to provide either interpretation or basic assistance along with interpretation when communicating with authorities and institutions. Other conditions of appointing an interpreter depend on the nature of the meeting and the competent authority.

The foreigner and the institution – authorities, local government, schools, hospitals etc. – may also, at his or its own expense, use the services of a registered court interpreter or intercultural worker/community interpreter – who, besides interpreting also provides basic assistance – from the database of the Association for Intercultural Work, or working in an Integration Centre or certain non-profit organizations, and such services may be free depending on other circumstances.

The Hotline is provided in both Vietnamese and Mongolian, allowing both Mongolian and Vietnamese nationals, and all those foreigners in contact with these living here.

Documents prepared and/or certified/legalized by a Czech notary and translated into Czech by a translator appointed by the court must, as a general rule, be submitted whenever foreign documents are submitted to the authorities and institutions. A certified translation of a document can be issued only by a translator appointed by the court.

Under what circumstances can foreigners from third countries do business in the Czech Republic?

For those who, on the basis of the above, decide to obtain a business licence under the Trade Act, the following is a summary of the necessary requirements.

Provided a foreigner from a third country has residence in the territory, he/she shall be entitled to conduct business in the Czech Republic on an equal footing with a citizen of the Czech Republic:

• He declares self-employment in any sales office. Actually, the article only refers to one aspect, which is self-employment.
• They are subjected to an administrative charge.
• A valid residence permit is produced.
• A criminal record extract from the country of origin not older than 3 months is availed.
• It also documents the location where he conducts his business.

When it comes to residence, a third-country foreigner does not need to have a specific type in order to apply for a permit of business; let’s say, a long-term visa for the purpose of doing business. Other forms of residence can be possible for application in applying for a business permit, such as permanent residence or employee card, but the original purpose of stay, for example, should be observed, such as studying or employment. The basic factor is the long-time residence of a foreigner in the Czech Republic.

Tax and Levy Liabilities in the Czech Republic

Tax liability in its amount affects the tax residency. The tax resident taxes his income acquired worldwide in the respective country – if possible, he applies the double taxation avoidance method – whereas the non-resident only taxes the income from sources coming from the country. In any event, activities practiced and exercised physically from within the Czech Republic based on a trade license constitute self-employment income that is taxable and insurable in the Czech Republic. Within the application procedure for a trade license, it is also possible to affect relevant registration/duty notification of the commencement of business activity with the relevant authorities.

Later, the self-employment income is subjected to annual taxation by way of personal income tax returns along with insurance premium summaries. The taxpayer can also opt for a flat tax rate regime. In case the business is the main source of income of the taxpayer, he/she is under obligation to pay the minimum amount of advance payments of the insurance contributions starting from the commencement of the business.

What does the foreigner need to begin business in the Czech Republic?

Acquiring a business is even for foreigners a bit easier than founding of the LLC. Foreigners over the age of 18 apply for a trade license at any trade representative office or at Czech POINT; the latter can be found at selected branches of the Czech Post Office.

Documents, which are needed for being able to start the business in the Czech Republic by a foreigner:

• passport,
• Criminal record extract from the country of birth – officially confirmed, less than 90 days old,
• proof of legal residence – valid for foreigners outside the European Economic Area,
• the proof of payment of an administrative fee – in the amount of CZK 1 000,
• consent to the place of business – in case a foreigner is not an owner of the premises,
• proof of professional competence – if free trade is not applied.

Foreigners who have no long-term residence permit in the Czech Republic yet and who come from countries outside the EEA will further be obliged to file an application for a long-term residence permit for the purpose of residence of a foreigner in the Czech Republic with the aim of doing business.

Within 8 days from the establishment of the business, you have to report at the health insurance company and district social security office. You also need to register within 30 days with the tax office.

What a foreigner needs to open LLC?

Even in the case of establishing a s.r.o. the differences between the obligations of Czech citizens and foreigners are minimal. We have discussed the particulars more in detail in the article Founding a s.r.o. by foreigners. In short, it is basically about the fact that documents from abroad must be translated by a court interpreter for the purposes of company formation. If the founder does not speak Czech, he cannot do without an interpreter even at the notary’s office.

The formation of LLC proceeds via the following steps:

1. Amendments in partnership or a memo of association
2. Trade license
3. Structure of authorized capital
4. Registration in the commercial register

A notary will be present with you and will guide you through all formalities, thus allowing many of the requirements to be performed efficiently and securely.

Among the advantages of trading are smaller administrative requirements, both at the time of opening and in the subsequent business. However, you should take into consideration that in this case, you are responsible with all your assets. With “eseróčka”, you guarantee only the sum of unpaid deposits, your business seems a little bit more reliable, and among the pluses let’s also mention better tax optimization possibilities. However, this is its disadvantage in a higher financial and administrative burden or in more complicated payment of profits.

Business start-up procedures for foreigners with long-term residence in the Czech Republic

Procedure in case of opening business for foreigners without permanent residence in the Czech Republic

The trade mission will be issuing to you confirmation that you meet the general as well as special business conditions. You will attach these conditions to your application for long-term residence for the purpose of doing business at the embassy outside the Czech Republic, or at the embassy of the state of which you are a citizen. The trade mission will also ask the applicant in writing to prove his residence in the Czech Republic. The deadline for the documentation is six months and the trade mission may carry out a check.

Obligations you have to meet every year as a self-employed

As a self-employed, the foreigner has always to file a tax return on 31 March and pay social security. In case of long-term stay, you will need to take out comprehensive health insurance for foreigners.

Permanent residence, in a case of doing business under a trade licence, entitles you to use the public health care, but you must pay health insurance in addition to social security.

Whereas the amount a foreigner pays in taxes always refers to you as an individual concerning your earnings, generally speaking, you will have to make a decision if your business is a so-called main activity, i.e., you will pay monthly social security contributions.

Where it is only a subsidiary activity, which means some sort of regular supplementary income, you will only have to pay all tax amounts after the end of the year after you file your tax return.