Your guide to doing business in the Czech Republic
The Czech Republic is situated at the heart of Europe, landlocked and bordered by Germany to the northwest, Poland to the northeast, and Austria and Slovakia to the south and southeast respectively. The Czech Republic has been an economically-important nation for several centuries, but only really stepped out onto the global business landscape in the late 20th century, when it emerged from a period of Communist rule. The modern Czech Republic has a developed, high income, export-oriented economy, which saw 2.4% growth in 2017. Major industries include automotive, engineering, pharmaceuticals, steel production, communications and IT, while car production accounts for around 28% of the country’s manufacturing output. Energy production also has a significant economic presence: the Czech Republic currently has an electricity surplus, and exports a substantial amount of its excess to Europe. The Czech Republic is an influential regional power - and is a member-nation of NATO, the EU, and the OECD. In 2018, the Czech Republic was ranked 30 on the World Bank’s Ease Of Doing Business Survey.
Why invest in the Czech Republic ?
Interested investors should target the Czech Republic for numerous reasons including:
When it comes to attracting foreign investors, the Czech Republic is one of the most successful states in the EU. Located in the heart of Europe, with its significantly enhanced rail network, the Czech Republic has direct links to almost all major European cities. The Czech Republic offers investors a competitive economy, supported by a highly educated and skilled workforce.
A company is required to have a legal entity established in order to process a payroll.
For companies that are looking to process payroll in the Czech Republic, the company registrations to the Tax, Health and Social Security Authorities includes:
The timeline for processing depends on the Registering Authority. According to experience, this can take up to two weeks.
The key legislative authority in the Czech Republic varies depending on where the Employer is located.
It is mandatory to make payments to the authorities from an in-country bank account.
Generally, banks are open to the public from 09:00 to 17:00 hours on weekdays. Some banks in the centre of larger cities are often open until 20:00 on weekdays.
The working week in the Czech Republic is Monday to Friday, working 40 hours on average per week. The working day for commercial offices is typically from 09:00 to 18:00 hours.
The Czech Republic is actually the conglomeration of three historical territories: Bohemia, Moravia, and Silesia. The territory which became known as the Czech Republic first became a nation in the 9th century, and was known as the Duchy of Bohemia. As a sovereign state, Czech territory has been contested throughout history, up until the 20th century and its liberation from Soviet occupation in 1989. Today, the Czech Republic is a developed and stable parliamentary republic with a progressive welfare state and high standards of living. Like the rest of central Europe, the Czech climate is mild and temperate, and the country is home to a variety of landscapes and environments, including flat western basins, and hilly and mountainous regions in its central and eastern regions. Capital city, Prague, is scenic and historic - and an extremely popular tourist destination.
Full Name: Czech Republic (Česká republika)
Population: 10.56 million (World Bank, 2016)
Primary Language: Czech
Main Religion: Christianity
Monetary Unit: Czech Crown (CZK), in Czech typed Kč (Koruna česká)
Main Exports: Machinery and transport equipment, raw materials and fuel, chemicals
GNI per Capital: US $26,740 (World Bank, 2013)
Internet Domain: .CZ
International Dialing Code: +420
Good morning Dobré ráno
Good evening Dobrý večer
Do you speak English? Mluvíš anglicky?
Good bye Na shledanou
Thank you Děkuji
See you later Na shledanou
Dates are usually written in the day, month and year sequence. For example, 1 July 2017 or 1/7/2017.
Numbers are written with a decimal coma. For example, 2,07 CZK, 2458,50 CZK, etc. The monetary unit is written after the number.
The tax year runs from 1st January to 31st December.
Monthly income tax contributions must be paid by the 20th day of the following month.
Tax allowances = 0 (no children, no wife/husband without a taxable income)
Therefore, basic tax allowance only totals CZK 2,070 per month.
Employees tax = 15% (individual income tax) calculated for “super gross” salary which is a gross salary plus social and health insurance contributions paid by an employer.
Therefore, an effective tax rate is 20,1% from a gross salary.
Monthly social security contributions must be paid by the 20th day of the following month. The typical penalty awarded for late submission and payment of tax and social security contributions are:
Social and Health Insurance: 0.05% per day
Tax Office: Repo rate of a Czech National Bank + 14%
Pension Scheme: The employer can contribute to an Individual Employee’s Pension Account up to CZK 50,000 per year. This amount is tax deductible for the employer and is not considered as a benefit in kind for the employee (therefore no subject for further taxation). Individuals Employee’s Account can be opened by a registered bank fund only.
A company must be licensed to make any tax and/or social security filing on behalf of a client, a power of attorney must be signed by the client.
When an employee is hired, they must be registered with local authorities within eight days of starting the new job, this applies to expat new starts as well.
If the new start is an expat, they will be required to provide the following: -
EU citizens - no working permit is required, only mandatory registration and authorized confirmation in the country the employee is registered.
Redundancy payments are free of social and health insurance contribution. Typical redundancy scheme is 2 (termination notice) +3 (redundancy payment). Final payment has to be done within a regular salary payment date.
Entitlement for redundancy is paid only in case of termination by the employer for organizational reasons.
In the case of termination by the employee, there is not entitlement for redundancy.
Employment shorter than 12 months – 1 month salary
Employment for 12-24 months – 2 month salary
Employment for more than 240 months – 3 month salary
Social and health insurance authorities must be notified when an employee leaves.
In the Czech Republic, employers have withholding obligations towards their employees’ salaries during the payroll process. In practice, this means withholding income tax and social security contributions (pension, sickness, health, and unemployment insurance) at the following rates:
Residency status is relevant to the Czech payroll process: while residents are taxed on all domestic and worldwide income, non-residents are charged only on domestic income. Employers may provide an online payslip with the written approval of the employee, and payroll reports must be kept for a minimum of 30 years. The complexity of the Czech tax landscape means many international employers choose to engage a global payroll provider in order to ensure efficiency, accuracy and legislative compliance.