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 company’s 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 company’s obligations. A shareholder is entitled to a share in the company’s 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 company’s 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 partnership’s 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.