Attractiveness of the Czech Republic

established economic transition
proven productivity growth potential
government investment support policy
strong international inward investment record
highly skilled labour force and low "on-cost" benefits
acceptable levels of inflation, a decreasing tax burden
favorable position enabling easy access to other east and west European countries

The companies which has invested into the Czech Republic are very surprised how skilled and educated the local labour force is. They also talk about very short period the Czech workers need to learn the new technology and processes. In recent years, legislation guaranteeing the security of foreign investors has been strengthened, and these investors are now considered fully equal to native entrepreneurs. There are no restrictions on the amount of foreign investment in the Czech Republic. In order to be better than the other competitors it is inevitable to invest abroad and the Czech Republic is presumably the best starter for further investment activity to the east. The economic relations in the Czech Republic are safer and have more west standards than e.g. in Russia or other post communistic countries.

Doing Business in the Czech Republic

Opportunities for Legal Entrepreneurship in the Czech Republic:

The Commercial and Trade Code offers the following forms of business in the Czech Republic:

foundation of a branch establishment of a foreign company

entrepreneurship of physical entities on the basis of a trade license:
- general conditions: age above 18 years, full competence for legal acts, probity
- special conditions - e.g. certification of training in the field or experience is necessary for small businesses

establishment of one of the following types of companies:

General Commercial Partnership - defined as a company which includes at least two physical or legal entities in a common undertaking under a common trade name.
Limited Partnership - defined as a company in which one or more partners guarantee the commitments to the amount of an initial deposit as written in the Commercial Register (limited partners) and one or more partners with their entire assets (general partners).
Limited Liability Company - in which the partners participate through their investments (of money or by other sources), which constitute the basic capital of the corporation. The basic capital must be at least CZK 100,000 (USD 2,500) and the minimum investment of a partner is CZK 20, 000 (500 USD).
Joint Stock Company - in which shareholders participate in the undertakings with their investments, which constitute the basic assets. The value of the capital stock cannot be less than CZK 1,000,000 (25,000 USD). The number and nominal value of the shares are dependent on the decision of the founders.
Cooperative - defined as a community of an indeterminate amount of people who can unite not only for the purpose of the undertaking, but also for the protection of their economic, social, and other needs. The basic capital of a cooperative, which must be at least CZK 50,000 (1,250 USD), constitutes the total investment of the members of the cooperative.

COMMERCIAL REGISTER
All entrepreneurial subjects in which foreigners participate must be registered in the Commercial Register. The Commercial Register is a public document administered by the courts, which registers companies on the basis of an application together with:
- a trade license
- a founding document of the corporation
- confirmation that the start-up capital has been deposited in one of the Czech banks
- a lease contract for commercial spaces
- a residence permit for foreigners

TAXES
Since January 1, 1996, a new tax system, which is based on the principles implemented in the tax systems of EC countries, has been valid in the Czech Republic. The most important aspects of the tax system are value added tax (VAT); consumer tax; import tax; tax on incomes of physical and legal entities; road tax; property tax; gift and inheritance tax.

Tax Rates on the incomes of Physical Entities (2000 version)

Taxation on the Incomes of Legal Entities:
- Currently there is a 35% corporate income tax rate. It has undergone a constant decrease it was 45% in 1992, 42% in 1994, 41% in 1995, 39% in 1996 and 1997, and 35% in 1998. Future tax reform will result in a reduction of direct taxes paid by companies as the Czech government aims at shifting the tax burden away from enterprise onto indirect taxation.

Value-Added Tax (VAT)
- The value-added tax is levied on all goods and services which are ordered in the Czech Republic, and also on imported goods. Goods which are exported from the Czech Republic are not taxed. The tax rates are 22% - basic rate and 5% - most food, fuels, pharmaceutical products, services.

DUTIES
- The Czech Republic is a founding member of GATT (the General Agreement on Tariffs and Trade) and all import taxes are in agreement with international treaties.
- The mean customs rate incidence is 7% (10.7 % for imports of agricultural produce and foodstuffs, 5.9% for imports of other products).

REAL ESTATE PROPERTY
The foreign currency law sets out certain limitations for foreigners who wish to acquire rights to real estate while residing outside the territory of the Czech Republic. A common means of purchasing real estate is the establishment of a corporation registered in the Czech Republic.