Setting up a subsidiary in the Czech Republic is a highly strategic. As a legal entity, a subsidiary is treated as a resident Czech company.
Business structures are governed primarily by the Czech Civil Code and the Business Corporations Act. Structures are divided in two main families:
- Capital companies
Limited Liability Company (Společnost s ručením omezeným – s.r.o.)
Joint-Stock Company (Akciová společnost – a.s.)
- Personal Companies / Partnerships
General Partnership (Veřejná obchodní společnost – v.o.s.)
Limited Partnership (Komanditní společnost – k.s.)
- Other Corporate Structures
Cooperative (Družstvo)
Branch Office of a Foreign Company (Odštěpný závod)
Sole Proprietorship / Freelancer (OSVČ – Osoba samostatně výdělečně činná)
The most common corporate structure chosen for a subsidiary is a Limited Liability Company (s.r.o.). due to its low capital requirements, quick setting up and flexible governance.
Limited Liability Company (Společnost s ručením omezeným – s.r.o.)
The s.r.o. is suitable for Small to Medium Enterprises (SMEs).
- Minimum Capital: 1 CZK. Prior to January 1, 2014, the mandatory minimum registered capital for an s.r.o. was 200,000 CZK and still nowadays the most entrepreneurs choose to deposit between 10,000 CZK and 200,000 CZK recommended for credibility with banks and suppliers. Up to CZK 20,000, the owner does not need to open a special capital account at the bank, and the money can be deposited in cash with the deposit manager.
- Governance: Managed by one or more managing directors (jednatel). A supervisory board is optional.
- Liability: Shareholders are liable only up to the amount of their unpaid capital contributions.
Joint-Stock Company (Akciová společnost – a.s.)
The a.s. is typically chosen for large-scale enterprises, capital-intensive projects, or businesses planning to publicly list shares.
- Minimum Capital: 2,000,000 CZK (or € 80,000).
- Governance: Can follow a dualistic system (Management Board + Supervisory Board) or a monistic system (Statutory Director + Administrative Board).
- Transferability: Shares are more easily transferable compared to an s.r.o.
The process of forming a subsidiary involves interaction with Czech notaries, banks, trade licensing offices, and the regional commercial courts. Setting up a subsidiary requires compiling specific corporate documentation such as:
Drafting the Deed of Association
The foundation of the company is the Deed of Association (or Memorandum of Association for a single shareholder), which must be executed in the form of a Notarial Deed by a Czech notary. The document specifies:
- The corporate name (must be unique and include the suffix “s.r.o.” or “a.s.”).
- The registered office address in the Czech Republic.
- The scope of business activities.
- The identity of the owner.
- The amount of share capital and the method of payment.
- The names of the first managing director(s).
Securing a Registered Office (Sídlo)
Every Czech company must have a physical registered office address. The landlord of the premises must issue a Written Consent with the Registration of the Office, which must bear a notarized signature and be no older than 3 months when submitted to the court. Virtual offices are legal and widely used by foreign investors during the initial launch phase. If the premises has more landlords, the majority of parts is required for the yes.
Opening a Corporate Bank Account & Depositing Capital
Once the notarial deed is executed, the executive director or authorized attorney opens a temporary technical bank account with a Czech bank to deposit the registered share capital. The bank will issue a Capital Contribution Certificate, which is required by the Commercial Court. After the company is fully registered, this account is converted into a standard corporate checking account.
Obtaining Trade Licenses (Živnostenské oprávnění)
Before registering with the Commercial Court, the company must apply for its trade licenses at the Trade Licensing Office (Živnostenský úřad). Trade Licences describes in fact the activities of the company.
- Unregulated Trades (Volné živnosti): Covers most general business activities (e.g., wholesale, consulting, IT services). No professional qualifications are required.
- Regulated/Professional Trades (Vázané/Řemeslné živnosti): Requires proof of professional qualification or a designated responsible representative (odpovědný zástupce) who possesses the requisite Czech certifications.
Registration in the Commercial Register (Obchodní rejstřík)
The final step of incorporation is filing a petition to enter the company into the Czech Commercial Register. This can be done directly by the notary who drew up the foundational deed, which speeds up processing times significantly (often within 24 hours). Upon successful registration, the company is issued an Identification Number (IČO), marking its official legal birth.
Requirements for managing directors (Jednatelé):
The individuals appointed as directors of the subsidiary do not need to be Czech citizens or residents, but they must fulfill these statutory criteria:
- Minimum age of 18 years.
- Full legal capacity.
- Clean Criminal Record: Foreign nationals must provide an official clean criminal record certificate from their country of origin (and country of residence, if different), translated into Czech.
- No disqualification from managing a business under Czech law.
Tax Registration and Fiscal Framework
Following registration in the Commercial Register, the subsidiary must fulfill its statutory tax registrations with the Czech Financial Authority (Finanční úřad) within defined legal deadlines as Corporate Income Tax (CIT). The standard Corporate Income Tax rate in the Czech Republic is 21%. Tax Registration Deadline is within 15 days of the company’s registration in the Commercial Register.
VAT Registration: Registration for Value Added Tax (VAT) is mandatory if your turnover exceeds 2,000,000 CZK, but many subsidiaries register voluntarily if they plan to do cross-border EU trade.
Other obligations or necessary informations
Data Box (Datová schránka): The state will automatically activate a secure digital communication box for your company. Checking this regularly is a strict legal requirement, as Czech authorities send all official notices here.
Ultimate Beneficial Owner (UBO) Register
The subsidiary must register its ultimate beneficial owners in the Register of Beneficial Owners (Evidence skutečných majitelů). For a wholly-owned subsidiary, this means tracing back the ownership structure to the natural persons who ultimately control the parent company. Non-compliance can lead to severe fines and voting right suspensions. To be registered properly into UBO register is crucial for the opening of the current bank account.
Employment & Social Security: If you hire employees, you must register the company with the Czech Social Security Administration (ČSSZ) and health insurance providers within 8 days of their employment start date.
Estimated Timeline & Cost:
If all company documents are prepared, typically takes 7 to 14 business days. The fees to the Commercial Register, if the representative of the company does the registration directly with the Commercial Register are 6,000 CZK (LLC) or 12,000 CZK (for joint stock company (approx. 250 € – 500 €).
In Czech Republic, the notary can directly register the company at the Commercial register. Direct registration by a notary is faster than registration by a registry court, because the notary directly performs the registration. The notary also collects any fee from the applicant, which is paid to the registry court, and files the required documents in the collection of documents. The registration by the notary is 2 700 CZK (108 €). The whole creation of the s.r.o. costs around 12 000 CZK (excluding other related costs as translation, legal costs, etc.).
The notary office can register the UBO too (recommended in the complicated corporate structure).
