Starting a business in Czech Republic as a foreigner

The establishment of an LLC by a foreigner is essentially similar to the establishment of an LLC by a Czech citizen, although there are some peculiarities.

Documents originating from abroad (e.g. power of attorney, manager’s statement, etc.) usually need to be translated by a court translator for the purposes of setting up an LLC. It is also often necessary to provide them with an apostille or, in some cases, even super-legalisation. Information on apostille or superlegalisation requirements can be easily found on the website of the Ministry of Foreign Affairs or ours.

Until 1 July 2023, it should also be remembered that a company director who is not domiciled in the Czech Republic must provide an extract of the criminal record from his/her country of citizenship. From 1 July 2023 this requirement will be replaced by the register of excluded persons.

Depending on the country of origin of the company founder, the notary may also be required to carry out additional checks under the Law on Certain Measures against Money Laundering, especially if it is a country subject to international sanctions.

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

Natural and legal persons can do business in the Czech Republic under the same conditions as Czech citizens. This means that you will always need a trade licence to do business in the Czech Republic.

You can keep it for business as an individual or set up your own trading company. Essentially, depending on the type of business, you will have to either fulfil the general conditions (over 18 years of age, good faith, capacity and no debts to public institutions) or provide proof of relevant education and experience.

Foreigners to do business in the Czech Republic also need to fulfil conditions arising from the field of foreign law, especially the law that focuses on the issue of visas and permanent and temporary residence permits if you plan to stay in the Czech Republic during your business activities.

Staying in the Czech Republic for third-country nationals

A third-country national needs a visa in order to stay legally in the Czech Republic. If a foreigner wants to do business in the Czech Republic, he/she must apply for a long-term visa, i.e. a visa for a stay of more than 90 days.

The applicant does not have to appear in person, the conclusion will be known within 90 days. Applications are reviewed by the Ministry of Interior and submitted 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 means for the stay in the Czech Republic in the amount of CZK 110,000;
• proof of residence for the entire period of stay in the Czech Republic, which must also contain a certified signature of the provider
• Extract from the Register of Criminal Records (or similar document) of the state of which the foreigner is a citizen, as well as states in which the foreigner has resided permanently for more than 6 months during the last 3 years, confirmation is not required from a foreigner under 15 years of age
• travel health insurance of at least 60,000 euros covering the territory of the Czech Republic
• If requested by the GI, it may also be necessary to provide a document proving that the requirements of the measures taken prior to the introduction of the infectious disease have been fulfilled.

It is also possible to apply for a long-term residence permit for business purposes if the foreigner has already been residing in the Czech Republic for a long time on a visa for the same purpose.

At the same time, you can submit 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?

Economic activity – i.e. performing work or business in the Czech Republic – is one of the most frequent reasons for the arrival of foreigners in the Czech Republic.

Employment or entrepreneurship is an important prerequisite for the economically and socially independent life of foreigners in the Czech Republic and thus for their successful integration into Czech society. Besides existence in the form of (regular) income, it creates a suitable space for social interaction with Czech citizens, compatriots and other foreigners.

Migration projects in the Czech Republic

Migration projects are used to facilitate access of selected employees (especially specialists and managers) from abroad in order to strengthen the competitiveness of Czech companies.

When communicating with authorities and institutions, a foreigner with insufficient knowledge of the Czech language or insufficient familiarity with the Czech environment may appoint a person to provide either interpretation or basic assistance along with interpretation. Other conditions for appointing an interpreter depend on the nature of the meeting and the competent authority.

The foreigner as well as the institution (authorities, local government, schools, hospitals, etc.) can, at their own expense, use the services of registered court interpreters or intercultural workers/community interpreters (who, in addition to interpreting, also provide basic assistance) from the database of the Association for Intercultural Work, or work in Integration Centres or some non-profit organisations – these services may be free of charge depending on other circumstances.

Mongolian and Vietnamese nationals and all those in contact with these foreigners living here can use the Hotline in Vietnamese and Mongolian.

When submitting foreign documents to authorities and institutions (e.g. diplomas, birth certificates, extracts from criminal records), it is usually necessary to submit a certified copy (legalised) of the document drawn up by a Czech notary and translated by a Czech court translator. . A certified (court) translation of a document can only be issued by a court-appointed translator.

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.

If a foreigner from a third country resides in the territory, he/she can do business in the Czech Republic under the same conditions as Czech citizens:

• He reports self-employment at any sales office (the article only talks about self-employment).
• They will pay an administrative fee.
• Presents a valid residence permit.
• Provides a criminal record extract from the country of origin (not older than 3 months).
• It documents the location of the business.

Foreigners from third countries do not have to have a specific type of residence, e.g. a long-term visa for the purpose of doing business, in order to obtain a business permit. A business permit can be applied for with other forms of long-term residence, such as a permanent residence or employee card, but the original purpose of stay, such as study or employment, must be respected. The key point is that the foreigner must have long-term residence in the Czech Republic.

Liabilities for taxes and levies in the Czech Republic

The amount of tax liability affects tax residency. A tax resident taxes his worldwide income in the respective country (if applicable, he applies the double taxation avoidance method), while a non-resident only taxes income from sources in the country. In any case, activities carried out physically from the Czech Republic on the basis of a trade licence are considered self-employment income, taxable and insurable in the Czech Republic. As part of the process of applying for a trade licence, it is also possible to carry out the relevant registration/notification of the commencement of business activities to the relevant institutions.

Self-employment income is then taxed on an annual basis through personal income tax returns and insurance premium summaries. Alternatively, the taxpayer may opt for a flat tax rate regime. If the business is the main source of the taxpayer’s income, the taxpayer is obliged to pay a minimum amount of advance payments of insurance contributions from the start of the business.

What does a foreigner need to start a business in the Czech Republic?

Even for foreigners, acquiring a business is somewhat easier than setting up an LLC. Foreigners over the age of 18 can apply for a trade licence at any trade representative office or at Czech POINT, which can be found at selected branches of the Czech Post Office.

Documents required to start a business in the Czech Republic for a foreigner:

• passport
• Criminal record extract from the country of birth (officially confirmed and under 90 days old),
• proof of legal residence (valid for foreigners outside the European Economic Area),
• proof of payment of the administrative fee (in the amount of CZK 1000),
• consent to the place of business (if the foreigner himself is not the owner of the premises),
• proof of professional competence (if not free trade).

Foreigners who do not have a long-term residence permit in the Czech Republic and who come from countries outside the EEA will also need to complete an application for a long-term residence permit for the purpose of doing business in the Czech Republic.

You must notify the health insurance company and the district social security office within 8 days of setting up the business. You must also register with the tax office within 30 days.

What does a foreigner need to open an 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 various peculiarities in more detail in the article Founding a s.r.o. by foreigners . In brief, 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 following steps must be taken when setting up an LLC:

• Drafting a partnership agreement or memorandum of association
• Trade licence
• Composition of authorised capital
• Registration of the company in the commercial register

A notary will guide you through the process and help you complete many of the requirements quickly and safely.

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

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

We have also prepared for you the exact procedure of what you need to do if you intend to start a business in the Czech Republic and already have a long-term residence.

1. When starting a business, you go to the sales office where you live.
2. There you will fill out a single registration form.
3. You will receive an extract from the commercial register, you still need to be assigned a registration number, the so-called IČO.
4. You will be registered in the commercial register of the regional court at your place of permanent residence.
5. On the day of registration in the commercial register, you acquire the right to conduct business and receive an identification number.
6. You will visit the foreign police.
7. You visit the tax office where you register using the service number.
8. You report it to the appropriate social security office.

The documents you will need to apply:

• Passport
• Long-term residence permit (a document proving that you have the right to reside in the Czech Republic).
• A criminal record extract from your country of origin, which must not be older than ninety days and must be officially translated into Czech.
• Consent to the place of business from the property owner (by law, the business certificate must include the address to which correspondence will be sent. That is, it must be the place where you as an entrepreneur process all documents ).
• 1000 CZK for an extract from the commercial register.
• If you are applying for a craft, bonded or licensed trade, you will also need to provide a certificate of professional competence (if it’s a free trade, you don’t need anything).
• 5000 CZK for registration in the commercial register.

Documents you will need for the foreign police:

• The green form is the form used for all types of stays and visas.
• Passport
• Certificate of eligibility to engage in trading activities.
• Extract from the commercial register not older than 180 days.
• Confirmation from the tax office on the status of tax arrears.
• Confirmation from the county welfare office that no debt is owed.
• Confirmation that you have the possibility to stay in the Czech Republic.
• Proof of guaranteed accommodation for the duration of your stay in the Czech Republic.
• Two photos
• Confirmation of health insurance contract for foreigners.

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

The trade mission will issue you a confirmation that you fulfil the general and special business conditions. You 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 applicant will also receive a request from the trade mission to provide proof of residence in the Czech Republic. The deadline for the documentation is six months and the trade mission may carry out a check.

Duties you must fulfil each year as a self-employed person

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

In the case of permanent residence and doing business under a trade licence you will be able to use public health care, but in addition to social security you will have to pay health insurance.

The amount a foreigner pays in taxes is always individualised depending on your earnings. In general, you will have to decide whether your business is a so-called main activity, i.e. you will pay monthly social security contributions.

Where it is only a subsidiary activity (a certain type of regular supplementary income) where you only pay all tax amounts after the end of the year after filing your tax return.