Setting up a business presence in the Czech Republic

In the Czech Republic, establishing and conducting business or trading activities are regulated mainly by the Commercial Code and the Trade Act. According to Czech law, any natural person may start conducting trade activities if s/he complies with conditions set out by relevant law. These conditions may be divided into two groups: general requirements and specific requirements. The general requirements must always be met. These are that the natural person: (1) has attained the age of 18, (2) has legal capacity, and (3) has an unimpeachable character. The specific requirements may consist of providing evidence of professional capability, an experience record or a consent, approval, examination etc.

Business activities may also be carried out by legal entities (companies). The legal entities are being governed in particular by the Commercial Code from their establishment to their liquidation, except for the bankruptcy (when the Insolvency Act applies). Czech law stipulates that the legal entities may generally be founded by both natural persons and/or legal entities. In some cases, sole founder is also allowed. Legal entities start to exist as soon as they are registered in the Commercial Registry or in some cases in other registries.

Czech law generally allows foreigners to conduct trade activities under the same conditions and to the same extent as Czechs, except for the fact that both foreign legal entities and foreign natural persons must be registered in the Commercial Registry and for a sole trader to obtain a trade licence the appropriate residency permit is required.

An exception is a person with residence within the EU-member states or other states that fall into the ambit of the European Economic Area (i.e. Norway, Iceland and Liechtenstein) or Switzerland. These persons may either temporarily render services (i.e. whatever kind of business) on the basis and to the extent defined in the trade licence, issued in the state of their residency, or apply for a trade licence in the Czech Republic. For a trade licence such persons do neither need a residency permit nor to be registered in the Commercial Registry.

There could also be other differences imposed by specific laws i.e. foreigners have to fulfil certain conditions set out in law to acquire a real estate property in the Czech Republic. This does not apply to EU residents who may acquire a real estate property, with certain exemptions (such as agricultural land), under the same conditions as Czech residents.

Foreigners may become founders or co-founders of a Czech company, or may join an existing Czech company. They are also allowed to carry out business activities as sole traders. Foreigners with business operations abroad may also conduct trade activities in the Czech Republic provided that they own an enterprise or a branch office in the Czech Republic.

Foreigners are allowed to make investments in the Czech Republic while there is no upper limit on the foreign investment. Foreign investors also may apply for and obtain investment incentives.