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Czech Republic

HISTORY AND POLITICAL STRUCTURE

The Czech Republic is a landlocked country in Central Europe. The country is bordered by Poland to the northeast, Slovakia to the east, Austria to the south, and Germany to the west and northwest.

The Czech state, formerly known as Bohemia, was formed in the late 9th century as a small duchy around Prague, at that time under dominance of the powerful Great Moravian Empire. After the fall of the Empire in 907, the centre of power was transferred from Moravia to Bohemia, under the Premyslids. During the rule of Premyslid dukes/kings and their successors, the Luxembourgs, the country reached its greatest territorial extent. Life in the country was significantly affected by the Hussite wars, during which it faced economic embargo and crusades from all over Europe. Following the Battle of Mohacs in 1526, the Crown of Bohemia was gradually integrated into the Habsburg monarchy as one of its three principal parts alongside the Archduchy of Austria and the Kingdom of Hungary. The Bohemian Revolt (1618-20) led to the further centralization of the monarchy including forced recatholization and Germanization. During radical reforms in the 18th century the Bohemian Crown was even de facto abolished (1749). In the 19th century the Czech lands became the industrial powerhouse of the monarchy and the core of the Republic of Czechoslovakia which was formed in 1918, following the collapse of the Austro-Hungarian Empire after World War I.

After the Munich Agreement, Polish annexation of Zaolzie and German occupation of Czechoslovakia and the consequent disillusion with the Western response and gratitude for the liberation of the major portion of Czechoslovakia by the Red Army, the Communist Party of Czechoslovakia won the plurality in the 1946 elections. In a 1948 Czechoslovakia became a communist-ruled state. In 1968, the increasing dissatisfaction culminated in attempts to reform the communist regime. The events, known as the Prague Spring of 1968, ended with an invasion by the armies of the Warsaw Pact countries, the troops remained in the country until the 1989 Velvet Revolution, when the communist regime collapsed. On 1 January 1993, Czechoslovakia peacefully dissolved into its constituent states, the Czech Republic and the Slovak Republic.

The Czech Republic is the first former member of the Comecon to achieve the status of a developed country according to the World Bank. In addition, the country has the highest human development in Central and Eastern Europe, ranking as a “Very High Human Development” nation. It is also ranked as the third most peaceful country in Europe and most democratic and healthy country in the region.

The Czech Republic is a pluralist multi-party parliamentary representative democracy, with the Prime Minister as head of government. The Parliament is bicameral, with the Chamber of Deputies and the Senate.

The President of the Czech Republic is selected by a joint session of the parliament for a five-year term, with no more than two consecutive terms. The president is a formal head of state with limited specific powers, most importantly to return bills to the parliament nominate Constitutional court judges for the Senate’s approval and dissolve the parliament under certain special and unusual circumstances. He also appoints the prime minister, as well the other members of the cabinet on a proposal by the prime minister.

The Prime Minister is the head of government and wields considerable powers, including the right to set the agenda for most foreign and domestic policy, mobilize the parliamentary majority and choose government ministers.

ECONOMY

The Czech Republic possesses a developed, high-income economy with a GDP per capita of 80% of the European Union average. One of the most stable and prosperous of the post-Communist states, the Czech Republic saw growth of over 6% annually in the three years before the outbreak of the recent global economic crisis. Growth has been led by exports to the European Union, especially Germany, and foreign investment, while domestic demand is reviving.

Most of the economy has been privatised, including the banks and telecommunications. The current centre-right government plans to continue with privatisation, including the energy industry and the Prague airport.
The country is part of the Schengen Area, having abolished border controls, completely opening its borders with all of
its neighbours, Germany, Austria, Poland and Slovakia, on 21 December 2007. The Czech Republic became a member of the World Trade Organisation.

The last Czech government led by social democrats had expressed a desire to adopt the euro in 2010, but the current centre-right government suspended that plan in 2007. An exact date has not been set up, but the Finance Ministry described adoption by 2012 as realistic, if public finance reform passes. However, the most recent draft of the euro adoption plan omits giving any date. Although the country is economically better positioned than other EU Members to adopt the euro, the change is not expected before 2013, due to political reluctance on the matter.

WHY CHOOSE CZECH REPUBLIC WHEN STARTING A BUSINESS?

Prague is at the geographical heart of Europe and offers some major advantages over most other European countries that are relevant to any business start-up - a solid infrastructure, a highly educated and skilled workforce, lower wage costs when compared to Western Europe, favourable tax rates compared to western Europe, favourable tax incentives for strategic services such as call centres, shared services centres, and others.

Advantages of the Jurisdiction of Czech Republic

  • Corporate tax in the Czech Republic is relatively low, with companies subjected to a standard rate of 19%, significantly lower than in other major European countries.
  • Czech Republic company formation requires just one director and one shareholder, who can be of any nationality. The shareholder does not need to be resident in the Czech Republic.
  • The Czech Republic ranks positively as the world’s 38th most competitive country in the World, according to the World Economic Forum in its Global Competitiveness Report 2011-2012.
  • No restrictions are imposed on foreign entities or individuals with regards to their business activities after undertaking Czech company incorporation.
  • It is easy to open global corporate bank accounts to support Czech company formation.
  • The Czech Republic has a wide network of double tax agreements with other countries, including China, India, Singapore, and the UK.

How to form a Czech Republic Company

To be registered in the Commercial Register, a trade license must be obtained and must also maintain a reserve fund (which is principally a bookkeeping entry) to cover losses. A limited liability company is required to contribute 5% of its net profit annually to the reserve fund (10% in the first year of making a profit, but not in excess of 5% of the registered capital) until it reaches 10% of the company’s registered capital. A reserve fund can only be used to settle a company’s loss if such a loss does not exceed 10% of the registered capital of a limited liability company.

Another, thing you have to do when starting a business, is to decide what will be the name of the company. When the names are decided then proceed with the approval and the relevant documents for incorporation.

The documents required to establish the company is the articles of association, document registering the owners and directors of the company, trading licences appropriate to the company’s activities, documents to open bank accounts and capital subscriptions.

In addition, the documents include confirmation of a registered office address for the company, and for the director, a police clearance record from the country of origin/residence.

Requirements for the Registration of a Czech Republic Company

  • Director: Directors may be of any nationality and may reside anywhere. Only one director is required, although there may be several. Directors can be residents or non-resident. Corporate directors are allowed. Nominee directors are allowed.
  • Shareholder: Shareholders may be of any nationality and may reside anywhere. Only one shareholder is required. This can be the same person as the director. Shareholders can be residents or non-resident.
  • Shares & Capital: The minimum capital requirement for the establishment of a limited liability company is a share capital of EUR 8,000 ordinary shares at a nominal value of EUR 1 per share which one share is required to be issued. Bearer shares are not permitted.
  • Name of the Company: The name of the company must end with a.s., akc. spol. plc, s.r.o., spol. s r.o. ,v.o.s and k.s.

Required Documents to register the company:

  • Name of the company, registered office
  • Shareholders (their names and addresses of their residences or registered offices)
  • Purpose of the company
  • Amount of share capital, the amount to be paid up by each shareholder, and the manner and time for payment  (share capital may be also non-monetary therefore there must be description of the non-monetary shares, value of the non-monetary shares has to be stated by an expert appointed by court)
  • Names and addresses of first Executives and the manner in which they act on behalf of the company.
  • Names and residential addresses of the members of the Supervisory Board, if established
  • Determination of the administrator of shares to the company’s share capital

The strength of the economy owes a lot to the continuing high levels of foreign direct investment that flows into the

country and this is testament to the growing importance of Prague as a central business location in Europe as a whole. 


GENERAL OVERVIEW

Location

The Czech Republic lies mostly between latitudes 48° and 51° N (a small area lies north of 51°), and longitudes 12° and 19° E.

Time zone

"CET (UTC+1) - Summer (DST) CEST (UTC+2) “

Population

10,535,811

Capital

Prague

Airport(s)

Ruzyne International Airport in Prague

Language

Czech

Currency

Czech koruna

Political system

Pluralist multi-party parliamentary representative democracy.

International dialling code

420

Legal system

Civil Code of the Austrian Empire

Centre’s expertise

Banking, Advanced Economy, International trade traffic, Car manufacturing and electrical engi­neering.

TAX

Personal income tax

15% personal income tax.

Corporate income tax

15% corporate income tax.

Exchange restrictions

No exchange control on foreign currency transactions.

Tax treaties

Some Countries are: Cyprus, Spain, Italy, France, Austria, Netherlands, Denmark, Greece, Russia, Hungary.

SHARE CAPITAL

Permitted currencies

In any foreign currencies.

Minimum authorised capital

LLC - Euro 8,000 Joint Stock Company - Euro 80,000

Minimum share issue

LLC - Euro 8,000 Joint Stock Company - Euro 80,000

TYPE OF ENTITY

Shelf companies

Available

Timescale for new entities

Registration Process approximately 5 days.

Incorporation fees

LLC EUR 1,100 - Joint Stock Company EUR 2,800.00

Annual fees

EUR 800.00

DIRECTORS

Minimum number

One

Residency requirements

No Residence Requirements.

Corporate directors

Meetings/frequency

Yes, at the discretion of the companies

SHAREHOLDERS

Disclosure

Bearer shares

Not allowed

Minimum number

One

Public share registry

No

Meetings / frequency

Yes, as the discretion of the companies

ACCOUNTS

Annual return

Filed annually.

Audit requirements

Yes

OTHER

Registered office

The principal office of a Czech Republic company must be in Czech Republic.

Domicile issues

Change in domicile is permitted.

Company naming restrictions

There are no major restrictions on the name of the company in Czech Republic. It is important that the name has not been yet taken

Effectiveness

The most effective way to achieve right relations with our clients

is to look for their best interest.