Information on basic legal requirements for starting and performing a trade

30. 8. 2019 | Source: Ministry of Industry and Trade of The Czech Republic

The chief aim of this documents is to provide information for entrepreneurs looking to start a business as self-employed ‘tradesmen,’ but also for entrepreneurs who may already perform one of trades as defined in Act No. 455/1991 Coll., on Trade Licensing (Trade Licensing Act, or TLA), as amended, in a clear and comprehensive manner, with regard to basic legal requirements connected therewith, whether at the start of the process or during performance of a trade.


2. Starting a business — natural person

2.1. CRM functions

Any natural person wishing to start a business in form of a trade under the TLA can register at any trade licensing office, also called a central registration point (CRM), as CRM allows to make official registrations with respect to other administrative authorities such as the social security or health insurance centrally; these offices are located in 227 municipalities across the Czech Republic.

At CRM, the following registrations may be made, using the Uniform Registration Form (URF):

With respect to the trade licensing office:

  • Registration for a trade (notification)
  • Application for a concession

With respect to the Czech Social Security Administration (CSSA):

  • Notification on starting or ending self-employment (commonly abbreviated as OSVČ in CZ – an independent gainfully active person)
  • Application for sickness insurance and retirement savings for self-employed persons (OSVČ)

With respect to health insurance providers:

  • Notification on starting or ending self-employment (OSVČ)

With respect to the Labour Office:

  • Notification of available job positions (or the fact that a position has been filled, if notified as open prior)

With respect to the Tax Authority, registration at CRM may be filed only if the natural person is not subject to the obligation to file reports to the Tax Authority in electronic form. However, when using CRM services, applicants need to fill in a Ministry of Finance form, which may be used to make the following registrations:

  • Registration for income tax – natural person
  • Road tax
  • Registration of the payer of income tax: income tax arising from dependent activities; income tax collected in the form of withholding using special tax rate securing income tax payment
  • Registration of payer’s organizational unit (till).

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2.2. Obtaining a trade license

2.2.1. General and special conditions for performance of a trade

The following conditions need to be met by applicants in order to obtain a trade license:

  • Full legal capacity; if minors apply for license their capacity needs to be demonstrated by court’s assent to the legal guardian’s approval that such minor may carry on with a trade independently
  • Good standing — this is demonstrated by presenting an excerpt from the Czech Criminal Registry, and this is processed by CRM (unless there is a duty to submit such excerpt also from a foreign country).

For trades requiring that special conditions be met prior (professional qualification), applicants will need to submit documentation demonstrating such qualification, i.e. education certificates, practical experience-related certifications, attestations, authorizations or permits, as may be required for each specific trade:

  • Vocational trades — professional qualification requirements must be met as per Section 21 and Section 22 TLA
  • Professional trades and concessions — qualification requirements are outlined in Section 24, respectively Section 27 and in Annexes 2 and 3 to TLA
  • some of the concessions may require additional documentations to be submitted for purposes of obtaining additional consent(s) from other state administration authority.

Should an applicant (for a concession) not meet professional qualification requirements himself or herself, he or she may appoint a responsible representative who meets such qualification requirement(s). Such persons’ written consent with appointment will need to be submitted along with the application for a trade or concession (applicants may use the “Declaration of Responsible Representative” form to do this).

Applicants for trade or concession and their potential responsible representatives may not be subject to any restrictions that would disqualify them from carrying on with a trade; these are defined in Section 8 TLA and include bans imposed to perform certain activities, obstacles related to insolvency proceedings, or obstacles arising in connection with earlier revocation of a trade license due to a serious breach of the law.

Should an applicant’s business address differ from his residence address, he or she shall be prepared to submit documentation demonstrating legal title to use premises where such business address would be located (for instance a lease or consent given by the building owner). This document needs to be provided also in cases where the applicant’s residence is registered (for administrative purposes) at the municipal office where the trade application is being submitted, or at another administrative body or special registry office.

Fee for the issue of trade license is 1 000 CZK when starting a trade, and 500 CZK when notifying another trade or applying for another concession; there is an additional 50 CZK fee for using CzechPOINT services (CzechPOINT is a contact point for public administration purposes).

2.2.2. Establishment of a trade and demonstrating authorization to carry on with a trade

The right to carry on with a trade is established by:

  • by and on the date of notification at CRM (trade licensing office) if all necessary documents are submitted without defect; if there are errors in the notification form or documents are missing or not without defect, the trade licensing office will ask you to correct these; if these are corrected within the deadline specified, the right / authorization to carry on with a trade is deemed to have been granted on the original notification date;
  • for trades requiring a concession, the right to carry on with such a trade arises on the date when the decision to grant the concession will have become legally effective.

Entrepreneurs demonstrate their authorization by:

  • an excerpt from the Trade Registry
  • in the interim, before this excerpt is issued, entrepreneur may present a copy of the notification to start a trade showing delivery stamp (this also applies to notifications filed at CzechPOINT, see paragraph 2.3 below) or by a final decision granting the concession.

2.2.3. Foreign natural persons (not residing in the Czech Republic)

Foreign citizens need to provide additional documentation demonstrating good standing, as follows:

  • EU Member States or EEA citizens, Swiss citizens and their family members and other persons listed in Section 70 (1) TLA, demonstrate their good standing by producing an excerpt from the criminal registries in their home country or from the country of their last long-term residence; if such a country does not issue these certificates, then an affidavit to that effect shall be made before a notary or another body in such country and submitted with the application; these documents may not be older than 3 months; these persons may also submit an excerpt from the Czech Criminal Registry, if such excerpt contains an annex with information that may be (or rather that is not) recorded in criminal registries in the home country or country of their last long-time residence;
  • Third-country applicants (i.e. all others except for those above mentioned), who do not have a residence permit in CZ, shall demonstrate their good standing from their home country evidence of criminal offences; again, if their home country does not issue such certificates of good standing in criminal matters, an affidavit made before a notary or another competent authority in their home country, or country of their last long-time residence, will need to be submitted, plus the Czech Criminal Registry except that will be produced by CRM; none of these documents may be older than 3 months.

Third-country applicants will also need to demonstrate that they have been issued with a visa to enter and stay in the Czech Republic for more than 90 days, or a long-term stay permit for the Czech Republic.

Foreign natural persons coming from third countries are subject to a different process with respect to establishment of their authorization to carry on with a trade: if they have demonstrated fulfilment of all conditions for the trade license, except for a visa, their authorization to carry on with a trade will be established on the date when they submit a document proving that they had been issued with a visa or long-term residence permit to the trade licensing office where the trade was first notified (or where the application for concession was filed); this document needs to be submitted within 3 working days from the date this foreign person holding such visa registered for residence in the Czech Republic pursuant to Section 93 of Act No. 326/1999 Coll., on the Residence of Foreign Nationals on the Territory of the Czech Republic, as amended, and, simultaneously, within 6 months of the date of issue of a document proving that prior notification of trade has been made by the trade licensing office.

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2.3 CzechPOINT functions

Any filings with trade licensing office and other administrative bodies listed in paragraph 2.1. may be made (sent) using the public administration contact points, called CzechPOINT; the contact points include notaries, regional and designated municipal offices, the post office or embassies.

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3. Starting a business — legal entity

3.1.  Establishment of a corporation

Any person, or persons, wishing to enter into a business as a legal entity need to establish a corporation; such corporation may be established by a founder’s deed, or memorandum of association, if more persons are involved. The most usual forms of corporations governed by the TLA are limited liability companies, joint stock companies, public commercial corporations or public partnerships, and cooperatives. Establishment of these types of corporations is governed by Act No. 90/2012 Coll., on Corporations and Cooperatives.

A corporation is established by a founder’s deed / memorandum of association signed by all founding members and it can take the form of either a memorandum or articles. All founders’ signatures need to be notarized. Limited liability company and joint stock company founding documents need to be prepared by a notary; single member limited liability companies also need to be founded by a notary.

Notarial fees are set out in Decree 196/2001 Coll., (Notarial tariff), as amended. The fees to be paid to a notary for establishment of a corporation or cooperative or verifying the fact that such a corporation had been established relates to the amount of registered initial capital of the corporation (see annex to the Decree — notarial tariffs, item A).

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3.2. CRM functions

Registration-related obligations of persons starting business governed by the TLA may be taken care of at any municipal trade licensing office – central registration point (CRM), and these offices are located in 227 municipalities across the Czech Republic.

The following registrations may be processed at CRM using the Uniform Registration Form (URF):

With respect to the trade licensing office:

  • Registration for a trade (notification)
  • Application for a concession

With respect to the Labour Office:

  • Notification of available job positions (or the fact that a position has been filled, if notified as open prior)

With respect to the Tax Authority, registration at CRM may be filed only if the legal entity is not subject to the obligation to file reports to the Tax Authority in electronic form. However, when using CRM services, applicants need to fill in a Ministry of Finance form, which may be used to make the following registrations:

  • Registration for income tax – legal entity
  • Value Added Tax registration
  • Road tax
  • Registration of the payer of income tax: income tax arising from dependent activities; income tax collected in the form of withholding using special tax rate securing income tax payment
  • Registration of payer’s organizational unit (till).

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3.3. Obtaining trade license

3.3.1. Conditions for obtaining a trade license:

  • Memorandum of association or a founder’s deed or articles
  • Document proving title to use premises, where registered office will be located (such as lease, consent of the building owner etc.)
  • Non-existence of obstacles to carry on with a trade pursuant to Section 8 TLA.

For trades (concessions, vocational or otherwise qualified) requiring that special conditions be met prior (professional qualification), legal entities will need to appoint a responsible representative who meets such qualification requirements and submit documentation demonstrating such qualification, i.e. education certificates, practical experience-related certifications, attestations, authorizations or permits, as may be required for each specific trade, as well as document proving non-existence of obstacles to carry on with a trade (see 2.2.1 above):

  • Vocational trades — professional qualification requirements must be met as per Section 21 and Section 22 TLA
  • Professional trades and concessions — qualification requirements are outlined in Section 24, respectively Section 27 and in Annexes 2 and 3 to TLA
  • some of the concessions may require additional documentations to be submitted for purposes of obtaining additional consent(s) from other state administration body.

Legal entities need to file a document proving that the responsible representative consents with his or her appointment, applicants may use a “Declaration of Responsible Representative” form to do this.

Fee for the issue of trade license is 1 000 CZK when starting a trade, and 500 CZK when notifying another trade or applying for another concession; there is an additional 50 CZK fee for using CzechPOINT services.

3.3.2. Establishment of a trade and demonstrating authorization to carry on with a trade

Legal entities, which are obliged to be registered with a Commercial Registry (which includes corporations and cooperatives), or other public registry (for instance registry of associations) may start trading on the date when duly registered with such registry. Legal entities shall file applications to register with the Commercial Registry or other public registries via a filing to a court in whose district they have their registered seat.

First-time registration of a joint stock company is subject to a 12 000 CZK court registration fee, first-time registration of other types of corporations or associations is subject to a 6000 CZK fee (see item 11 in Annex to Act No. 549/1991 Coll., on Court Fees, as amended).

The application for registration into Commercial Registry or other public registry shall be filed no later than within 90 days from receiving the licenses from the trade licensing office, which confirms that all conditions for starting a trade had been met.

An entrepreneur demonstrates its authorization to trade:

  • by an excerpt from the trade licensing registry
  • in the interim, before this excerpt is issued, entrepreneur may present a copy of the notification to start a trade showing delivery stamp (this also applies to notifications filed at CzechPOINT, see paragraph 3.4 below) or by a legally effective decision granting the concession.

3.3.3. Foreign legal entities (legal entities not having a seat registered in CR)

Foreign legal entities wishing to pursue business activities in the Czech Republic shall establish an organizational branch in the Czech Republic through which they may pursue the said business activities.

Differences in documents submitted by foreign legal persons as opposed to Czech legal entities:

  • Legal entity, which does not have a seat, administrative headquarters or principal place of business in any of the EU Member States, EEA or Switzerland shall be obliged to file an excerpt from a commercial or similar registry that is maintained in the country of its seat (this document shall not be older than 3 months) and a document demonstrating operation of an enterprise abroad.
  • Legal entity, which does have seat, administrative headquarters or principal place of business in any of the EU Member States, EEA or Switzerland shall be obliged to file only an excerpt from a commercial or similar registry that is maintained in the country of its seat (this document shall not be older than 3 months).
  • Legal entity with a seat outside of the Czech Republic demonstrates non-existence of an obstacle to carry on with a trade pursuant to Section 8 (5) TLA by presenting an excerpt from criminal registry or similar equivalent document issued by competent court or administrative body in that country. If such certificate is not being issued in that country, legal entity shall file an affidavit to that effect made before a notary or other competent body in that country.

Foreign legal entities may begin trading on the date their organizational branch will have been registered in the Commercial Registry. Foreign legal entity shall file the registration application with a court in whose jurisdiction the branch has a registered seat.

The application for registration into Commercial Registry or other public registry shall be filed no later than within 90 days from receiving licenses from the trade licensing office, which confirms that all conditions for starting a trade had been met.

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3.4. CzechPOINT functions

Filings to be made with trade licensing office and other administrative bodies listed in paragraph 3.2. may be made (sent) also using the CzechPOINT offices.

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4. Additional information regarding other duties relating to business activities

4.1. Notifications of changes

Any entrepreneur – whether natural person or legal entity – shall be obliged to notify any changes in its information during its existence to the trade licensing office and other administrative bodies. Entrepreneurs may use CRM to notify change in their prior applications or notifications as per 2.1 and 3.2 above; this applies to the trade licensing office as well as other concerned administrative authorities (in cases of the Financial Authority only in case such person is not obliged to make filings thereto in electronic form).

Changes in information need to be notified to a trade licensing office within 15 days from their change, with the exception of changes and additional information that are recorded in basic registries, Commercial Registry, information systems - registries of inhabitants and foreigners.

Entrepreneurs may suspend trading. Any such suspension is effective on the date of its notification to the trade licensing office or on the later date as specified in such notification. Trade licence issued for a definite period of time may be suspended only for the duration of its term. When a trade license is suspended, certain duties will be suspended as well, see Section 31 (11) TLA; these duties include, for instance, the obligation to meet professional or other requirements. If an entrepreneur wishes to resume trading prior to the suspension end date, he or she shall notify the trade licensing office accordingly.

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4.2. Establishments

Obligations relating to operating an establishment (see Section 17 and 31 TLA):

  • Obligation to notify that an establishment will be opened or closed to the trade licensing office prior to taking such step (does not apply to establishments which have already been specified in the notification for a trade or application for concession, vending machines and mobile establishments)
  • Establishments need to meet conditions for carrying out specific trade (i.e. have the proper occupancy or usage permits)
  • Establishments need to be properly marked
  • A person who will be responsible for operation of such establishment needs to be appointed
  • A person with sufficient knowledge of Czech (or Slovak) language shall be appointed for establishments selling goods or providing services to customers
  • At the request of the trade licensing office, entrepreneurs need to be able to demonstrate legal title to use the establishment, i.e. ownership title or a lease to premises where the establishment is located (does not apply to mobile establishments and vending machines)
  • For mobile establishments, the trade licensing office may ask for authorization to locate such establishment at its site
  • Establishments need to issue to customers receipts documents that goods were sold or services provided
  • Entrepreneurs need to be able to demonstrate, to an inspecting authority, origin of goods or materials used within a given period of time
  • Entrepreneurs need to observe all obligations stipulated by TLA with respect to used goods or goods without documented origin; this specifically concerns purchases, accepting goods, arranging sales in pawnshops and second hand stores.

There are other specific conditions for opening establishments for certain trades, for instance a concession for ‘Managing registries’ — the establishment for that particular trade needs to be approved by the local state archive.

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4.3. Bank accounts

Although entrepreneurs are not obliged to open a bank account, it is more convenient for practical purposes, whether for payments between business partners or between an entrepreneur and state authorities, to have a bank account. In addition, Act No. 254/2004 Coll., on Limiting Cash Payments, as amended, stipulates certain restrictions and mandates that certain payments be made by bank transfer only.

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4.4. Basic information on entrepreneur registrations under special laws

These two laws regulate the duty to make certain notifications for payers of health insurance and for insurance payments.

Under Act No. 48/1997 Coll., on Public Health Insurance, the insured person, who is self-employed, is obliged to notify his or her health insurance provider of the start or end of  his self-employment-related gainful activities within 8 days from relevant date. Insured persons performing a trade on the basis of a trade license fulfil this obligation even by making such a notification to a trade licensing office.

Commencement of self-employment is considered the date when a person begins ‘trading’ with intent to gain ‘income’ (i.e. issues orders, invoices, signs contract(s) etc.). The act of obtaining a trade license is in itself not considered to constitute self-employment per se.

Under Act No. 592/1992 Coll., on Premiums for General Health Insurance, a self-employed person shall be obliged, no later than within a month from the date when he or she should have filed a tax return, to submit an overview of his income and expenses. Any additional payment of insurance premium is then payable within 8 days from filing a tax return. Any changes to information already notified to health insurance provider shall be notified within 8 days from the person learning about them, and any overdue insurance needs to be paid within 30 days from the date person learned thereof. When doing so, the payer shall also fill in a adjustment report.

Registration duty applies to all tax subjects (taxpayers) who become obliged to submit an application to register for any individual tax.

Income taxpayer – natural person – who is a tax resident will be required to submit an application to register for personal income tax with the relevant tax administrator within 15 days of the date on which he or she began performing an activity which represents the source of his income from independent activities, or received actual income from such independent activities. Income tax payer – natural person – who is tax non-resident will be required to submit an application to register for personal income tax in the Czech Republic if he or she started to perform activities in, or received income from sources in the Czech Republic. Income taxpayer – natural person – who is tax non-resident will be required to submit an application to register for personal income tax with the relevant tax administrator within 15 days of the date on which he or she established a permanent establishment in the Czech Republic or obtained a permit or authorization to perform an activity that is a source of income; such permit or authorization is understood to be issued by the Czech public authority.

Income taxpayer – a legal entity / corporation – who is a tax resident will be required to submit an application to register for corporate income tax with the relevant tax administrator within 15 days of the date of its creation. Corporate taxpayer that is tax non-resident, which created a permanent establishment in the Czech Republic, shall be required to submit an application for registration for corporate income tax with the relevant tax administrator within 15 days of this establishment being created. Corporate taxpayer that is tax non-resident shall be required to submit an application for registration for corporate income tax within 15 days of the date on which it started to perform activities on the territory of the Czech Republic which constitute a source of income, or received income from sources in the Czech Republic, or obtained a permit or has been authorized to operate a business, which is a source of income, which had been issued by the Czech public authority.

Tax subject operating under a trade license may fulfil this registration requirement by notification made to the respective trade licensing office, on a form issued by the Ministry of Finance, or in the form of computer-printed document containing data, other content and data arranged identically with such a form, assuming the taxpayer has no legal duty to submit applications / registrations / notifications to the tax administrator electronically. The obligation to submit electronic filing relates to entities / persons or their representatives, who have a statutory access to a data box or are under a legal duty to have their financial statements audited.

In their registration applications, taxpayers shall provide all required data that are needed for tax administration.

If there are any changes with respect to information that taxpayers are required to provide during registration, including termination of their tax obligation for any of the taxes, such change shall be notified to the tax administrator within 15 days of its occurrence; this includes applications for deregistration, if there exist sufficient reasons.

When deregistering, taxpayers are obliged to submit to the tax authority with which they registered all relevant documentation demonstrating its discontinuation, or other documents which manifest a decision on termination of a permit or authorization under which the taxpayer was registered; such documents shall be filed within 15 days of taking receipt of such document, or from the date it was confirmed; a public authority's decision to revoke a license, permit etc., or decision on termination of a permit or authorization under which the taxpayer is registered shall be filed within 15 days from the date on which it was delivered; this procedure does not apply if the taxpayer already informed his tax administrator of these facts prior; contracts for purchase of a business establishment, or part(s) thereof, shall be filed within 15 days of their conclusion. The above-mentioned notification obligations do not apply to data which the tax administrator may access and change using automated methods of accessing relevant registers or records; the extent of this data are disclosed by the tax administrator on its official notice board and in a manner enabling remote access – website (Section 127 of the Tax Code).

Taxes are paid to the relevant tax administrator in the Czech currency. If a payment is remitted in foreign currency, the tax administrator shall record it on the personal tax account of the tax subject in the amount it was credited to that account in the Czech currency. Taxpayers are obliged to specify to which tax the payment is being made, and the tax administrator shall accept such payment with respect of such specified tax. Payments made without sufficient specification shall be recorded by the tax administrator on account for unclear payments, and the tax authority shall request that taxpayer clarifies the purpose within a given deadline. The tax administrator will receive any payment of tax even if not made directly by the taxpayer, and shall treat it in the same way as if it had been made by the taxpayer (Section 163 and Section 164 of the Tax Code).

Self-employed persons are obliged, under Section 48 of the Act, to notify the locally competent District Social Security Administration (DSSA) on the start day (or resumption) of self-employment or cooperation in the form of self-employment (hereinafter referred to as "self-employment") specifying the date from which the self-employed person became entitled perform such activity; self-employed persons cooperating in the exercise of self-employment with another shall be also obliged to notify the name, permanent residence and birth number of self-employed person(s) with whom he or she cooperates; notification shall be made with respect to the date of termination of self-employment (termination of self-employment shall be also considered any suspension of activities under the conditions set out in Section 10 (6) letter a) second sentence of the Act on Pension Insurance), same as the date on which the right to exercise self-employed terminated, or date when such self-employment was suspended. These notifications shall be made by the 8th day of the calendar month following the month in which any of these events occurred.

According to Section 35a of this Act, employers are required to keep necessary records about facts that may be decisive for entitlement to pension benefits, i.e. about their amount and payment, and to submit such information to competent social security administration bodies. Any changes that are decisive for such entitlement to benefits and their duration and amount and payment thereof shall be notified by employers in writing, unless otherwise specified, within eight days of such changes occurring. When invited by social insurance administration authorities, organizations are obliged to file reports and submit records within the time specified by such authority, and if no deadline is specified, within eight days from receipt of such an invitation.

Employers may notify their local Regional Labour Office if there are any open positions and descriptions of such positions (Section 35 of the said Act). Available job positions are any newly created or open positions, for which the employer intend to hire employees.

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