Free movement of services and freedom of establishment (the right of a EU citizen to do business and live in another country) are, together with the free movement of goods, free movement of capital and free movement of persons, the basic freedoms of the common EU internal market. The text sums up basic information about providing services in the Czech Republic and other EU countries.
What do I find here?
In addition to basic information about providing services you can find here information about possibilities, rights and rules connected to free movement of services, especially the difference between providing cross–border services and setting up a business. There is also a practical advice how to proceed step by step when setting up a business.
Providing cross–border services or setting up a business in the Czech Republic?
Free movement of services means that an entrepreneur from one member country has the right to provide services in the territory of a host Member State temporarily and on occasion based on an authorisation issued in the place of the business`s registered office, without the entrepreneur`s intend to settle in the host Member State.
The period of time when a company may provide cross-border services without establishing its seat in the host country is not defined in detail. A temporary service that can be freely provided is a service typically provided for a fee, which is limited with respect to duration, regularity, repetition and continuity of the activities and is based on a contract between the company providing the service and the entity from another Member State to whom the service is provided. In some countries this period may be three months, elsewhere six months, or the period might not be defined in detail.
An entrepreneur who wants to provide cross-border services needs to find out the prescribed procedures by country and the area where he/she wants to do business for a limited period of time. He/she needs to find out whether the profession is regulated in the target country and whether his/her qualifications need to be recognised.
Posting workers or providing services?
Another important point is whether an entrepreneur provides services in person or whether employees of the company are sent to another state; there are differences in application of these two methods.
Certain common principles apply in both cases (providing services in person or posting of workers):
- In case of temporarily post of workers, or activities of self-employed persons for up to 183 days in the accounting year, the company pays an income tax in the country in which the company was established.
- If the period of time exceeds 183 days, the company pays the income tax in the target country, at a financial office in the location where the order was completed.
- The total period of activity in the host country should not exceed one year, or, as an exception, two years. Otherwise, the company becomes liable for registering for social security and health insurance payments in the host country, whereas up to that time such premiums are paid in the country of origin.
- In some cases, and depending on the relevant contract for prevention of double taxation, the company might need to establish an organizational unit in the host country.
Establishment of a company
Freedom of establishment allows for the establishment of a company with the purpose of commercial, industrial or agricultural activity or conducting free enterprise in another Member State. Freedom of establishment is not limited to intermediary periods, as permanent activity in another Member State is assumed. Entrepreneurs from EU Member States have the right of establishing a company in another EU Member State under the same conditions that apply to domestic entities.
In case of establishment, host Member States can require that all conditions applying to their own citizens regarding the establishment of a company are met. On the other hand, providers of temporary services should not be subject to all conditions, except for the necessary ones, and those justified by public interest.
Points of Single Contact
Points of single contact (PSCs) are aimed at helping entrepreneurs in the field of provision of services. The basic role of PSC is to simplify the process of starting a business in the Czech Republic and in other Member States. PSC have two main functions. Firstly, they provide entrepreneurs as much information as possible and secondly, they help him/her contact the appropriate administrative body authorizing the respective service.
You can can contact the PSC and send your inquiry concerning business activities in the Czech Republic or another EU member state via this form.
The following governmental and non–governmental institutions and web portals offer further information and useful services related to providing services in another member state and export in general.
The Enterprise Europe Network is an extensive network providing information and advice to entrepreneurs through its local partners.
SOLVIT 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.