CZECH REPUBLIC 2016

Web Site: www.shermannigretti.it

E-mail: info@shermannigretti.it
Tel. +39 (0)2 7722951
Mob. +39 335 6030346
Twitter: @ShermanNigretti
Linkedin: Gianmauro Sherman Nigretti

GEOGRAPHY AND POPULATION

CAPITAL:

PRAGUE

POPULATION:

10,6 MILION

POLITICAL SYSTEM:

PARLIAMENTARY DEMOCRACY

CURRENCY:

CZECH CROWN (CZK)

FORMS OF BUSINESS ORGANIZATIONS

The Act on Business Corporations differentiates between several types of company used for
business:
Unlimited liability company
Limited partnership company
Limited liability company
Joint-stock company
Co-operative association
Capital interest dormant partnership
European company, European cooperative company
LIMITED LIABILITY COMPANY A limited liability company is a company whose share capital is
created by the members contributions. The minimum base capital is CZK 1. The limited liability
company can also be established by a sole person. A limited liability company can have a sole
member as the only founder, or the sole member of another company.
JOINT-STOCK COMPANY - A joint-stock company can be created by one person (legal entity or
individual).The base capital must be at least CZK 2 million or EUR 80,000 if the company keeps its
accounts in EUR. The companys base capital is divided into a certain number of shares. The
company guarantees its obligations with all of its assets. A shareholder is not held liable for the
companys obligations. A shareholder is entitled to a share in the companys profit (dividend)
approved by a general meeting.

UNLIMITED LIABILITY COMPANY - An unlimited liability company is a company in which at least

two people carry on the business under the same corporate name. Both a legal entity and a
natural person can be its members. Members guarantee the companys obligations jointly with
their assets. The law does not prescribe an obligation to create a base capital.
LIMITED PARTNERSHIP - A limited partnership is formed by two or more persons (individuals or
legal entities). At least one of the partners must be a general partner, with unlimited liability for
the debts of the partnership. At least one partner must be a limited partner, liable for the
partnerships debts only up to the amount of unpaid contributions recorded in the Commercial
Register.

ACCOUNTING
Accounts, as well as financial statements, must be principally kept in Czech local currency and
in Czech language. Assets and liabilities denominated in foreign currencies must also be
recorded in those foreign currencies.
A natural person/ entrepreneur with a turnover of more than CZK 25,000,000 (approximately
EUR 901,700) and persons registered in the commercial register (including branches of
foreign entities) must keep accounts.
The accounting period can be the calendar year or a financial year which differs from the
calendar year. Accounts must be kept in the Czech currency and in the Czech language.
Financial Statements, Annual Report and Report of Control Czech financial statements include
the balance sheet, the profit and loss account, the explanatory notes, cash-flow statement
and statement on changes in equity. Explanatory notes must include the following
information, relevant for the particular accounting period:

Information regarding assets, liabilities, financial position and economic results;

Accounting policies, valuation methods and depreciation rates;
Explanation of changes in accounting policies and estimation methods, reasons for
changes and effect of the financial position.

AUDITING
Audits are compulsory for:

large accounting units;

medium accounting units;
small accounting units that are joint-stock companies and that, in both the current and previous
accounting period, have met at least one of the following criteria:

net turnover exceeds CZK 80 million per annum;

total assets exceed CZK 40 million;
the average number of employees exceeds the 50 units;
all other small accounting units that meet at least two of the above criteria in both the
current and previous accounting period; foundations and certain other non-profit
organisations.

Audit requirements also apply to annual reports:

The auditor expresses an opinion on whether the annual report is consistent with the financial
statements for the same financial year and whether it was prepared in accordance with legal
requirements;
the auditor issues only one report which comprises their opinion on both the financial
statements and the annual report. The Act on Auditors defines the responsibility of the
Chamber of Auditors, which authorises auditors and sets the standards for audits.

CORPORATE TAXATION
Company tax is payable by Czech resident companies on income derived from worldwide sources.
Non-resident companies are required to pay the tax on income sourced in the Czech Republic.
Resident companies are those which have their registered office, or place of management located,
in the Czech Republic.
The corporate income tax rate is 19% for 2015 and this is applied to all taxable profits of a business,
including capital gains from the sale of shares (if not exempt under the participation exemption
regime).
A 5% and 0% tax rate applies to income from defined investments and pension funds respectively.
A special tax rate of 15% applies to dividend income received by Czech tax resident entities from
non-resident entities (unless a participation exemption applies).
A company may choose either a calendar year or an accounting year as its tax year. Tax returns are
due within three months of the end of the tax period (or within six months for audited entities or
entities represented by recognized tax advisor).
Tax is required to be paid within three months of the end of the tax period (or within six months
for audited entities or represented by recognized tax advisor). Estimated company tax payments
(advance tax payments) are paid semi-annually or quarterly.

INDIVIDUAL TAXATION
Income tax is payable by Czech resident individuals on income derived from worldwide
sources. Non-resident individuals are only required to pay tax on Czech-sourced income. Tax
residence is determined by reference to permanent home or where the individual has spent
at least 183 days of the relevant calendar year in the Czech Republic. Income tax is payable
on total tax base from different kinds of income. Taxable income of individuals includes
employment income, business income, certain capital gains, dividend income, rental
income, interest income; annuities and other income including benefits in kind related to
such income.
For 2015, the personal income tax rate is 15%.

VAT
Value Added Tax (VAT) is charged on the domestic provision of goods, transfer of real estate,
provision of services, including the transfer or use of rights and importation of goods.
There are three rates of VAT; basic rate 21% and lower rate 15% and, from 2015, 10 %.

The 21% rate applies generally to supplies of goods and most services with some exceptions
while the 15% rate applies to selected services and some goods such as foodstuffs
accommodation, restaurant, and transport services.
The 10 % rate applies namely to pharmaceutical products, printed books, to certain children
nutrition and to qualified mill products.

DISCLAIMER
This publication must not be regarded as offering a complete explanation of the taxation and
corporate matters that are contained within this publication.
This publication has been prepared on the express terms and understanding that the publishers are
not responsible for the results of any actions which are undertaken on the basis of the information
which is contained within this publication.
The publishers and the authors expressly disclaim all and any liability and responsability to any person,
entity or corporation who acts or fails to act as a consequence of any reliance upon the whole or any
part of the contents of this publication.
Accordingly no person, entity or corporation should act or rely upon any matter or information as
contained or implied within this publication without first obtaining advice from an appropriately
qualified professional person, and ensuring that such edvice specifically relates to their particular
needs.