The Czech Republic is a land of opportunity, especially for the ones coming with fresh ideas. New, independent businesses are popping up everywhere in this country, originating from humble, inexpensive origins, like food trucks kitchens, home offices, co-working spaces, and apartment building cellars. Also, Czech Republic routinely ranks in the top 10 safest countries in the world.
Disclaimer: Be aware that this article is not a substitute for legal advice. Please always check official websites or seek legal advice before you take action.
What is a sole proprietor živnost in the Czech Republic?
Being a sole proprietor (OSVČ) entails a simple form for doing business in the Czech Republic. The registration procedure involves the natural person who wants to set up the activities in this country by using their own name. In legal terms, a person can establish the operations as a sole trader only starting with the age of 18, as the Trade Licensing Act defines it.
Živnost has many advantages: it is easy and fast to establish; accounting system, tax reporting as well as many other stages of business have been simplified; you can work without having a work permit in the Czech Republic. However, to register as a sole proprietor, you must possess a business visa even if you don’t plan to stay in the country.
How to set up živnost in the Chech Republic
First, you have to choose a type of activity. There are three kinds of licenses in the Czech Republic:
- Free*
- Professional (requires a diploma or any proof of qualification)
- Concession (is issued on the basis of a special permit from the Ministry)
*Free licenses cover 80 types of activities that do not require any proof of qualification. Some of the types included are wholesale and retail trade, hotel services, hosting, IT consulting, translation and teaching at language courses, estate agent services, etc. Most entrepreneurs choose this form.
Next, you need to apply to an agency of proprietor activity. For this step, you will need these documents:
- A certificate of no criminal records in the Czech language notarized by the court translator
- An agreement with the property owner on granting you the legal address and extract from the Real Estate Register
- Current visa or biometric card
Bring the set of documents mentioned above to any agency of proprietor activity. An agent will take the copies and fill the electronic registration form. This will cost 1000 CZK (Czech Korunas).
Within a week after registration at the Agency, you’ll receive the certificate with your registration number on it. Your certificate’s validity expires simultaneously with your visa.
This step can be done online, via the Trade Licencing Register website.
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Tax administration registration for sole proprietors in the Czech Republic
Within thirty days after receiving the certificate, you must register as a sole proprietor with the Tax Administration at the place of residence or your legal address. You should fill in a form and then submit it to a registration office. If you have a bank account set for the entrepreneurial activity, you should mention it in the form and attach a copy of the bank agreement on opening this account. Within a month, you will be issued a report with Individual Taxpayer Identification Number (ITIN).
Social security registration
Within eight days after receiving the certificate, you are obliged to register in the Social Security Administration. The procedure consists of filling in a form and submitting it to a registration office. Having been registered, you will get a mail with a personal registration number and the constant seal that you must provide when making monthly payments.
Health insurance
In the course of eight days after the certificate is received, it’s obligatory to register at any public Health Insurance Company. This is only required for permanent residents.
Registering as a sole proprietor in the Czech Republic may take approximately five days once the documents are drafted with the Commercial Register.
VAT and taxes in the Czech Republic
Taxes a sole proprietor must pay are the Social Insurance Tax (charged monthly and depends on the amount of profit) and the Income Tax at a rate of 15% on gross income up to CZK 1,935,552) and 23% above.
This type of business form can also be imposed with the Value Added Tax (VAT), which in the Czech Republic is applicable at the standard rate of 21%. However, companies can also qualify for reduced VAT rates, but this depends on the business activities developed by them.
Businesses in the Czech Republic can also be liable to the road tax, a type of tax that is applied to businesses using vehicles for various commercial purposes.
