p17tb85kpn4am1jcl1n5h13maat24.pdf

usiness
Prague may be the cultural and tourist epicenter
of the nation but it’s also an economic hub, with
major international countries having established
offices here. Our guide to business know-how
in the Czech Republic covers the legalities of
company formation and taxation, as well as
important terminology related to conducting
business in the Czech Republic. Our suggestions
for sources of start-up capital, as well as listings
for the various Chambers of Commerce, will give
you a helping hand on the networking front.
tRAde licenSeS
One of the common routes to doing business in the Czech Republic
is through a sole proprietorship, often called a “trade license”. A sole
proprietor (osoba samostatně výdělečně činná or OSVČ) is a physical
person who has income from carrying out a business and/or selfemployment
(a “freelancer” or “entrepreneur”). Accounting records
must reflect these relationships.
To be self-employed, you must be 18 years of age, do business on your
own account and have a clean criminal record. Accounting records
may be kept using either the cash-basis or accrual accounting method.
There are significant tax advantages to working as a sole proprietor
(see below).
An entrepreneur may be a tradesperson registered with the Commercial
Court (Obchodní soud), trade license office (živnostenský úřad), or
someone who is self-employed and regulated under a special law, e.g.
notary, tax adviser, journalist, or farmer. Here we’ll focus primarily on
tradespersons registered with the trade license office.
FoRmAtion oF A Sole pRopRietoRShip
Sole proprietorships can be formed in 1–3 days after filing papers
with the trade license office. You will need to file the application on
a Monday or Wednesday, as other days are by appointment only.
Preparing forms in advance (downloadable from the Internet) is also
advised.
Generally, the applications will be processed while you wait, or
if the staff at the trade license office is busy, within a few days.
Comprehensive services in this area are provided by accounting
and business services firms, as well as many legal offices, but with
patience and determination you can do it on your own.
Fees for formation can vary depending on the level of hand-holding
provided, 5,000–10,000 CZK being representative. Unlike an s.r.o.,
there is no need to pay in any capital.
To form a sole proprietorship, the entrepreneur files with the trade
license office a registration form describing the full name and personal
details, a residential and work address (místo podnikání), and a list of
selected trade license fields. The application must also contain photo
identification, proof of citizenship or legal residence (usually long-term
or permanent residence), an extract from the foreign criminal record
or affidavit confirming you have no criminal record, depending on your
country of origin, a deed (výpis z katastru nemovitostí) and permission
of the owner (souhlas vlastníka) to carry out business at your work
address, and a stamp tax of 1,000 CZK.
In 2010 the Trade License Law was significantly changed, dividing up
the trades into free (volné) and regulated trades (vázané). Most trades
fall under the free category, but others, like accountants, interpreters
and medical professionals may require proof of higher education,
professional certifications, etc.
Another, simpler way of obtaining a trade license is via Czechpoint,
launched by the Czech government in 2009 to simplify the process of
obtaining a trade license criminal record extract. You can apply online
at www.czechpoint.cz (Czech only) or at Czechpoint contact points at
larger post offices.
The trade license office is entitled to obtain a criminal record extract on
your behalf from the Czech criminal register. Sole proprietors will need
to obtain the same extract, or a corresponding document from their
home countries or any other country where they have lived for more
than three years, or, potentially if such a document is not issued by their
home country or country of last residence, an affidavit declaring that they
have no criminal record, made at their embassy in Prague, or in front of
a notary in their home country. These documents cannot be older than
three months.
If the owner of the address where your sole proprietorship will be
registered is a company, it will be necessary to provide an extract from
the Commercial Register. The permission agreement must be signed by
the director, or a representative with a power of attorney from the director.
tAXeS And ReGulAtion
A sole proprietorship is regulated by a great number of government
entities, including the trade license office, tax authority, social security
authority, and a health insurance company. Employees of sole
proprietors are taxed in the same way as employees of an s.r.o.—
discussed in detail below. (See “s.r.o.s”, page 166).
Sole proprietors generally must file an income tax return (daňové
příznání) each year by March 31, and health insurance and social
security returns (Přehled o příjmech a výdajích OSVČ) by April 30.
Direct taxes are calculated from the taxable income base, which will be
either revenues less deductible expenses, or, under the percentage of
revenue option, generally 60% of revenues. You can keep accrual or
cash-basis tax evidence accounts and use the percentage of revenue
method.
Health and social security, representation expenses (meals and
entertainment), or poorly-documented expenses are not deductible.
Both health and social security contributions max out at 1,809,864
CZK of the taxable base.
The self-employed will need to register for income tax with the tax
authority within 30 days of obtaining a trade license. You may also
register for VAT if you want to be able to reclaim VAT on eligible
business expenses and road tax if you plan to operate a car as part of
the business. Income tax: 15% of the taxable base.
Sole proprietors must pay monthly advances on social security and
health insurance, which are netted against the annual liability due
in April. Each February the social security administration and health
insurance company provide a summary of advances received by the
payer.
In the first year of business, the advance will be set to the minimum
amount; in subsequent years, to the amount of tax paid in the previous
year. The amount of social security advances paid depends on whether
self-employment is your main or secondary source of earned income
(see health and social security section).
164 | expats.cz survival guide www.expats.cz