The following document provides detailed information about the Czech Republic, such as its investment climate, investment opportunities, description of the labour market, educational system, system of taxation or procedures of setting up a business. Potential investors also find information on how to relocate their business to the Czech Republic, the situation in the property market, transport infrastructure or description of the customs system.
The Czech Republic has attracted a large amount of foreign direct investment (FDI) since 1990, making it one of the most successful transition countries in terms of FDI per capita. The introduction of investment incentives in 1998 stimulated a massive inflow of foreign direct investment in greenfield and brownfield projects. The Czech Republic's accession to the European Union in 2004 further boosted investment.
The Czech Republic is one of the most successful transition economies in terms of attracting foreign direct investment. The introduction of investment incentives in 1998 has stimulated a massive inflow of FDI into both greenfield and brownfield projects and since 1993 more than EUR 100 billion in FDI has been recorded.
The Czech Republic is a fully-fledged parliamentary democracy, and is one of the faster growing economies as well as one of the ten countries that entered the European Union on 1 May 2004. The country's economic policy is consistent and predictable. A strong and independent central bank (the Czech National Bank) has maintained an extraordinary degree of currency stability since 1991. The Czech Republic was the first CEE country to be admitted into the OECD. The country is a member of NATO and is fully integrated into other international organisations such as the WTO, IMF and EBRD.
Investment incentives are available not only to investors launching or expanding production, but also to technology centres and business support services centres. Thanks to the amendment to the Investment Incentives Act that came into force on 1 May 2015, investors can now apply for more types of investment incentives.
For companies/investment projects that for any reason do not fulfil the criteria for the national Investment Incentives Scheme described in the previous fact sheet, there are other forms of support available. However, none of the schemes includes tax breaks.
The Czech Republic covers the area of 78,864 km2. In 2017, its population reached 10.6 million and the labour force 5.4 million people. The official language is Czech, the capital of the CR is Prague, and the official currency is the Czech koruna (crown, CZK).
According to the Labour Force Survey, employment grew by 1.7% YoY, mainly due to an increase in the number of employees of 2.0%. The biggest contribution to this result came from the manufacturing and public services sector. The unemployment rate according to the LFS has been decreasing since the beginning of 2013, in particular thanks to the fact that short-term unemployed persons were successful at finding jobs.
In comparison to other CEE countries, Czech Republic has very well educated, skilled and multi-lingual labour force. Over the past five years average annual wage has grown around 3% but it is coming from much lower base compared to Western Europe. More over the weaker CZK to EUR/USD exchange rate has recently made salaries more favourable and is expected to remain relatively stable at these levels.
Employment contracts must be concluded in writing with the following minimum mandatory content: place of work, starting date of employment and type of the work. Employees have to be informed in writing about their duties and rights, such as holiday entitlement, wage and payment dates, working hours, job description, notice period, information about collective agreements, etc., within one month after concluding an employment contract if such information is not stated in the contract.
The Czech Republic combines an outstanding level of general education with strong science and engineering disciplines. For generations the Czech education system has generated high-level, technical problem-solving skills in environments where standard solutions are inadequate.
For many years the former Czechoslovakia produced the highest percentage of science and technical graduates in the world. This tradition continues in the Czech Republic: in 2008 the proportion of university degrees awarded in science-related fields (engineering, manufacturing and construction) was among the highest in Europe (see below). The government is committed to sustaining this by maintaining or increasing funding in these areas.
The Czech Republic is home to a motivated workforce with a high degree of responsiveness to training and interest in continual professional and personal growth. The Czech Republic is already recognized as a prime location for European services-sector expansion and hosts an increasing number of businesssupport, research and customer-oriented services including expert solution centers, data processing and call centers as well as regional headquarters, value-added distribution centers and technology parks. Employment in high-tech services and manufacturing is also very prominent in the Czech Republic, providing input for the innovation activities of other firms in all sectors of the economy.
The system of taxation is derived from the Czech tax legislation effective on 1 January 2017 and may be modified by a particular Double Taxation Treaty. The current tax system was introduced in January 1993. The legislation is subject to frequent amendments and changes due to rapid developments in the economy.
Corporate income tax is levied on income from the worldwide operations of Czech tax residents and on Czech-source income of Czech tax non-residents. Czech tax residents are considered to be entities with their registered office or place of effective management in the Czech Republic. The tax base is calculated from the accounting profit/loss shown on the relevant financial statements prepared according to the Czech Accounting Act and Czech accounting standards and is further adjusted by non-deductible costs and nontaxable revenues and other non-accounting adjustments. Czech legislation allows taxpayers to change their accounting period/tax period from calendar year to fiscal year and vice versa by notifying the Tax Office about such a change. When changing the accounting period/tax period, taxpayers are required to enter into a transition period that could be shorter or longer than 12 months.
On the first day of the Czech Republic's membership in the EU, the country's customs authorities abolished routine customs checks of goods transferred across the internal borders, i.e. the common border between the Czech Republic and other EU member states. Any trade between EU member countries is considered intra-Community trade, which is not subject to routine customs checks or duties or other fees collected in relation to the importation or exportation of goods. Goods are transferred freely across internal EU borders.
The Czech Republic possesses one of the most advanced transport networks in Central and Eastern Europe. Its geographical position at the very centre of Europe makes it a natural crossroads for major transit corridors. An extensive network of transport routes serves not only the Czech Republic but also links the country to neighbouring and other European states, and the density of the transport network ranks the Czech Republic among the world's most advanced countries. The significance of the Czech Republic as a transit hub has grown since the Czech Republic became a member of the EU Single Market currently covering the area of 28 countries in Europe with more than 500 million customers in total.
The new Act on Electronic Communications implementing the regulatory framework of the European Union came into force on May 1, 2005. The electronic-communications sector in the Czech Republic has been fully liberalized. Every natural person or legal entity that fulfills the conditions stipulated by law can enter the market and provide electronic-communications services or operate a public communications network.
The Czech property market is increasingly attractive for foreign investors due to the fact that the availability of space for production facilities has been boosted by a major government programme designed to support the construction and development of industrial zones, brownfield regeneration and development of speculative buildings, premises for R&D and shared-services centres. Major international and Czech developers are still seeking opportunities for development of industrial, logistics and business parks.
Building a new plant in the Czech Republic is a similar procedure as in other European countries. The Czech Republic offers an effective planning process and rapid construction capabilities. In most cases, it takes between one to two years to go from a completely vacant greenfield site to completion of a new facility. This time span can be shortened to less than one year in municipal industrial zones, where land plots and infrastructure are already prepared and local officials have been trained by CzechInvest to effectively support investors.
On 1 January 2006, the Czech electricity market was fully liberalised; households as the last customer segment became eligible customers and won the right to select their supplier. It is typical of the Czech open electricity market that there is no longer any regulation of activities in which competition is feasible. Only activities of a monopoly nature continue to be regulated. That same day saw the completion of the restructuring of major players on the electricity market, which had been commenced in 2003 - the merging of distribution companies, outsourcing of certain services and splitting-off of assets related to these services into separate companies.
The Czech Republic is divided into 14 regions (Higher Territorial Self-governing Units), which came into effect on 1st January 2000. The Basic Territorial Self-governing Unit is the municipality. In the Czech Republic there are three categories of municipalities. These categories differ in the range of selected competencies that have been transferred from the central government.
Foreign legal entities are allowed to conduct trade activities, including the acquisition of real estate, under the same conditions and to the same extent as Czech entrepreneurs. They may become founders or co-founders 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. There are four different legal forms of companies; the most common are limited liability companies (s.r.o.) and joint-stock companies (a.s.). The other forms - a limited partnership (k.s.) and a general commercial partnership (v.o.s.) - are sometimes used for tax reasons (in most cases by investors from German-speaking countries).
The conditions applying to a foreign national's entry to the Czech Republic and its long stay in the country are set by Act No. 326/1999 Coll., on the residence of foreign citizens in the Czech Republic, as amended. By signing the Schengen Agreement in 2004, the Czech Republic applies common rules concerning the movement of persons in the entire Schengen area, including the conditions for crossing external borders since December 2007.
The Czech Republic ranks 22nd of 61 countries in the worldwide quality-of-life index and has the best result among the countries of Central and Eastern European. Although the life in the Czech Republic has been rapidly approaching Western standards of living in most respects, the costs of living remain substantially lower than in Western Europe.
25. Useful Contacts
Here you can find useful contact information for organizations and institutions like Czech ministeries, CzechTrade, Czech National Bank, Prague Stock Exchange, The Czech Private Equity and Venture Capital Association, Confederation of Industry of the Czech Republic, Association of Czech Entrepreneurs, Association for Foreign Investment and many more...