Opening a Branch

Foreign legal entities are allowed to conduct trade activities under the same conditions and to the same extent as Czech entrepreneurs. They may become founders or cofounders of a company, or may join an existing Czech company. Foreign companies may operate in the Czech Republic, either by establishing a branch office registered in the Czech Republic or by establishing a Czech company. The following document provides useful information on the process of opening a branch in the Czech Republic.

A branch office of a foreign company is not a Czech legal entity, but functions as the representative of a foreign company and incurs obligations on the foreign company’s behalf. Branch offices must fully list their business activities on their application for registration in the Commercial Register, as they are only allowed to engage in the business activities listed. The branch office must have an appointed director who is entitled to act on behalf of the foreign company as regards the branch office. He/she must be registered in the Commercial Register.

Opening of branches offices is governed by the rules set out in the Civil Code (89/2012 Coll.), Trade Licensing Act (455/1991 Coll.), The Act on Commercial Codes of legal and natural entities (304/2013 Coll.) and partly also in the Act on business corporations (90/2012 Coll.) and the Act on International Private Law (91/2012 Coll.).

Types of branches

The secondary right of establishment includes the right to set up in another Member State:

  • agencies and branches (without legal personality);
  • subsidiaries

Branch without legal personality

Branches operating as organisational units are legally dependent entities, i.e. they do not have legal personality, although they have a certain "local" independence, an apparently independent management and their own accounts.

An organisational unit (a branch), as a standard legal person, enables a foreign company (the founder) to do business in the Czech Republic without having to establish a new company. It has the same rights and responsibilities as any Czech legal person with the exception of a simpler form of setup / dissolution and more advantageous tax arrangements.

The organisational unit of a company owned by a foreign entity is an independently operating, separately–owned part of the company, which is locally separate from the foreign legal person.

Legally independent branch (subsidiary)

Subsidiaries are an independent legal entity that is in some way routinely managed by a (foreign) parent company.

A subsidiary of a foreign parent company is, from a national law perspective, a company belonging to the state in which the subsidiary has its head office, which is subject to local laws regulating establishment and entry in the relevant Commercial Register.

Regular duties

Web site listed below contains a list of the basic obligations of entrepreneurs.

  • Basic duties of entrepreneurs 

Many of the requirements and procedures for opening branches correspond with the requirements for establishing a business.

Administrative procedures

Preliminary procedures

The procedure when setting up an organisational unit is as follows:

  • the founder (company) decides to set up the organisational unit,
  • an application is lodged with the relevant local trade licensing office,
  • an application is submitted for the entry in the Commercial Register.

The organisational unit is entered into the Czech Commercial Register and has a Czech identification number.

The organisational unit is created through the decision of the founder (company) and as a part of a foreign company it does neither have a founder’s deem, nor pays up basic capital or appoint an agent.

The name of the organisational unit is the same as the name of the foreign company, with the suffix "Organisational Unit".

Notifying a trade

Information regarding notification of a unqualified trade, professional trade, vocational trade, permitted trade of trades of legal entities is available on the following websites:

Application for entry into the Commercial Register

Applications for entry in the Commercial Register may be submitted only on the mandatory form and must include an officially verified signature. These mandatory forms are available on the website of the Ministry of Justice of the Czech Republic with instructions on how to fill them in.

The time period for submitting an application for entry in the Commercial Register is no later than 90 days from the date of receiving confirmation of fulfilment of the conditions for operating a trade (an abstract from the Trade Register).

Employment affairs in the Czech Republic for foreigners

Useful information, procedures and forms relating to employment issues for foreigners in the Czech Republic are available on the Integrated Portal of the Ministry of Labour and Social Affairs.

Other procedures, conditions and requirements

In most cases they conform with the general conditions and for doing business and setting up businesses.

  • Establishment and start of businesses  

Registration

Basic duties related to the registration of business in the Czech Republic can be found at the following website:

Many of the requirements and procedures for opening branches correspond with the requirements for establishing a business.

Further information can be found on the website:

Sources

Further information and useful services with regard to opening of a branch or set up a business are offered by the following governmental and non-governmental institutions and web portals.

Help and assistance

Assistance in establishing a branch can be obtained from the Chamber Commerce of the Czech Republic.

  • Information spot for entrepreneurs

CzechTrade offers assistance through its offices abroad.

  • Assistance service of CzechTrade offices

The SOLVIT network provides entrepreneurs with quick and practical help where they face problems doing business abroad as a result of incorrect application of EU market rules by public authorities.

  • Solvit - National centres

If you want to start setup up a business or to provide temporary cross-border services within the EU or EEA (28 EU Member States plus Iceland, Liechtenstein and Norway), consult the "single points of contact" - members of the EUGO network that will help you handle all necessary administrative procedures on-line! Get the necessary information and submit an application to the competent authorities online. No longer you have to worry about the necessity to contact gradually several authorities one by one - single points of contact will do this on your behalf!

Document created in co-operation between Your Europe - Business (EU portal for companies), CzechInvest organisation and BusinessInfo.cz and Lukas Poddany, attorney at Ambruz & Dark Deloitte Legal.