Czech Republic is becoming a hotspot for all expanding entrepreneurs

It has many reasons why entrepreneurs want to expand their business to Czech Republic, but every entrepreneur thinks differently. The geographical proximity, historical past, cultural affinity and also the expansion costs. If we ask any entrepreneur they will only say pros about Czech Republic so often that they forget to tell the cons, or to develop a relevant business plan as we do when entering a more complex foreign market.

The results of the companies attempting to expand to the Czech Republic are generally different, but the way to go is basically the same. Like every other, the Czech market is showing its specifics – excessive sensitivity to pricing policy and also strong patriotism – The buying behavior of the customers is oriented mainly on Czech products, causing cuts in our planned revenues. Despite this, the Czech Republic can be looked at as a positive challenge. The average Czech citizen monthly earns 27,589 CZK (about 1021 EUR) which is 10% higher than in Slovakia for example. The GDP growth rate was set at 4.3% in 2015, the Slovak Republic grew by 2.5% in 2015 so you can see the difference.

Trends and industries

According to current trends, we need to pay special attention to the city of Brno. While Prague plays a dominant political and historical role, in Brno many international technology and financial companies are more and more interested. This is because of the strong base of the universities, and from this comes a highly qualified workforce. The information technology area (IT) is definitely the most dominant in Brno. In connection with this it is very possible to apply for many other companies in various area of ​​services, gastronomy or retail. The Czech Republic has a strong presence in the automotive industry, automotive related industries, as well as chemical and food industries. Tourism also plays an important role. The technical revolution also plays a big part in the growth of the e-commerce and information technology sector.

Business electronization and EET

We can also see a significant growth rom the point of business administration in the Czech Republic. A well-functioning system of electronic mailboxes – a so-called ” Databox” is also proving that the country is moving fast to electronize all the bureaus. A revolutionary innovation from the Ministry of Finance is the so-called ” EET (electronic revenue record). However, domestic entrepreneurs criticize this convenience of modern technology.

To talk a little bit more about the responsibilities in relation to the authorities. The most basic and important duty of every entrepreneur is bookkeeping in any countries. In the Czech Republic it is a dual based accounting. We can say that that in terms of functioning in the most essential aspects, such as VAT, income tax, levies, etc., The Czech accounting can be compared to any European accounting.

The process of establishing a company is relatively simple with respect to other countries in Europe. In the Czech Republic, this act is carried out in the form of a notarial record, so a personal visit to the notary is necessary. The duration of this entire agenda is estimated about 2 weeks, the total cost of creating a simpler version of s.r.o. should not exceed 25,000 CZK. A very interesting document is the so-called stem list. There is still much to be learned about this institute, the stem list is a valuable and transferable document issued by the company itself, all the details about the company are listed on this document. One of the purposes of this document is to allow the transfer of the right of ownership by a written or verbal agreement at the time of its handover.

It is important to note that limited liability companies in the Czech Republic may be based on a basic capital of 1 CZK. Each partner’s contribution is also minimized to 1 CZK.When founding an s.r.o. the tax administrator’s consent is not required. Other legal forms such as a.s. and so on are more complicated and they are very close to the European standards.

Income tax and VAT

The basic tax rates are important indicators. From the profit earned in 2016, the treasury takes 19% away from it. If a company does not make a profit or vice versa – it loses profit, there is no need to pay any tax license or any other form of minimum tax. At this time, we have no information that there would be any change in this in the coming years.

The standard rate of value added tax is set at 21%. Reduced rates of VAT, 15% and 10% are related to selected goods such as medicines, books or children’s food. For goods delivered or services provided domestically, entrepreneurs should track if the value of the products or services do not exceed 1,000,000 CZK in 12 consecutive months, if they do exceed it they should register for VAT. It is important to note that there is also the so-called “voluntary VAT registration” in the Czech Republic. Unfortunately, this process is administratively very complicated and time consuming. On the other hand, compared with other countries in Europe, when applying for VAT, there is no need to worry about the obligation to lodge a guarantee.

In today’s growing e-commerce industry, it is essential to pay special attention to the so-called mail order sales. It is not a prerequisite for a company that expands abroad to set up a form of business entity, however it is necessary to monitor the revenue that is achieved through the e-shop in that country. Otherwise if the revenue is not monitored properly abroad than the company is exposed to the risk of sanctions by its tax authority. Each state has its own boundary (limits), VAT threshold, the Czech Republic has its limit at 1,140,000 CZK for 2016. An entrepreneur should regularly monitor his abroad sales for his own interest.

Cost of work and levies

In 2016 the minimum wage was increased to 66 CZK per hour in the Czech Republic , which is 11,000 CZK a month. Of which the net wage is based around 9,640 CZK,In current calculations the super-gross wage is based around 14,740 CZK. This information can be very important and decisive from the entrepreneur’s point of view because it is the total cost for 1 employee.

Just like in other countries, an employee from Europe can also be employed in the Czech Republic. The conditions for the employee remain almost the same, the only important thing is that the employee must have his social and health insurance paid.

At first glance Czech Republic can appear quite manageable, but even here it is really important to have a good and fully elaborated business plan. If you have all that than opportunities and, ultimately success is waiting for you in Czech Republic.