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Set up a Sole Trader in Czech Republic
Updated on Friday 12th April 2019 Rate this article
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A sole trader in Czech Republic, also known as a sole proprietorship, represents the simplest business form available in this country. A sole trader is registered by a natural person who wants to perform business activities in his or her own name. Those who are interested in company formation in Czech Republic under this type of business form will be taxed for the company’s activity under a different taxation scheme than the one applicable to commercial companies. Our team of company formation representatives in Czech Republic can assist on the procedure of opening a Czech sole trader.
The advantages of a Czech sole proprietorship
Since this business form was designed to represent the commercial activities of a natural person, the tax requirements, as well as those related to the administration of the entity, are much simpler than in the case of other legal entities available in Czech Republic.
In terms of administration, a sole trader is not required to hold an Annual General Meeting, as the company is represented by only one person. Moreover, the accounting system for a sole trader does not have to be registered with the Commercial Register.
The only accounting procedures applicable to a sole trader refer to the income and expenses matters. Those who want to open a company in Czech Republic as sole traders have many advantages in terms of the taxes that must be paid, but they can also benefit from lower fees imposed by the local authorities.
Our team of specialists in company formation in Czech Republic can assist investors with more details related to the main benefits of the sole trader, but it is necessary to know that this type of entity does not differentiate between the investor and the company and, thus, the businessman will be fully liable for the business’ debts.
Registration requirements for a sole trader in Czech Republic
Persons who want to open a Czech company will have to provide a set of documents for the Trade Register. The investors will need to present the following: personal details, the residential address, the business address and the business activities carried out under the sole trader.
It is also necessary to prepare recent photos and provide a document stating the person’s citizenship. If the applicant lives in the Czech Republic, he or she can provide information on his or her residency documents. Any applicant interested in opening a sole trader must also have the minimum legal age necessary for this activity, which is 18 years old.
What are the main steps in opening a sole trader in the Czech Republic?
One of the first aspects that have to be prepared when opening a company in the Czech Republic as a sole trader refers to choosing a company trading name and deciding on the activities that will be carried out through the sole trader.
This type of business entity can be used for a wide set of business purposes and, in certain cases, specific licenses have to be obtained. In most of the business activities that can be initiated by natural persons, there is no need to obtain a designated license, but in certain cases investors may need to provide a proof regarding their qualification in the respective sector.
Persons who want to start a sole trader in the Czech Republic as accountants, medical professionals, lawyers and others will have to provide documents attesting their higher education in respective fields of activity; our specialists can offer more information on other types of activities that can require licensing.
After this, the investor has to register with the Agency of Proprietor Activity, but in order to do so, certain documents have to be obtained. In this particular case, the applicant has to provide a certificate stating that the person does not have any criminal records (in the case of foreigners, this certificate has to be translated into the Czech language and notarized at a local notary), a document stating the person’s legal address, an extract from the Real Estate Register and the person’s identification documents.
Please note that the registration with this institution is bound by the payment of a fee of CZK 1,000. Further on, the institution will issue a certificate of registration in a period of one week since the applicant sent all the necessary documents. In a period of maximum 30 days since this certificate is issued, the sole trader has to register with the Tax Administration; the institution will release an Individual Taxpayer Identification Number (ITIN).
Once the ITIN is issued, the sole trader has to be registered with the Social Security Administration and for health insurance purposes. Our team of consultants in company registration in Czech Republic can provide further information on other steps of the incorporation procedure.
Why start a Czech sole trader?
As a natural person interested in starting a company in the Czech Republic, the sole trader is the most advantageous way to enter the business market, if the investor plans to have a small business. We have presented above some of the main advantages of the Czech sole trader, but investors must also know that this entity also provides the following:
- • it benefits from a simplified registration process and it can also be closed down following a simpler procedure compared to other business forms;
- • it does not require the investor to deposit a minimum share capital;
- • is has a simple accounting system and the tax reporting is comprised only of few requirements;
- • it can be registered in a period of approximately one week;
- • the investor does not need to hire additional staff, as this type of business can be carried out only by its founder.
What types of taxes can be applied to a Czech sole trader?
Since the sole proprietorship is set up in order to develop commercial activities, it will also be liable to taxation. The sole trader in the Czech Republic is taxed on its income with the income tax applicable to natural persons, at a rate of 15%.
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. Thus, if the sole trader uses a vehicle for its business purposes, it can be imposed with this tax; our team of consultants in company registration in the Czech Republic can offer more information on any additional taxes.
Businessmen are invited to contact our team of company formation consultants in Czech Republic for more details on the registration of a sole trader. Our specialists can assist with advice on the tax requirements applicable for a sole proprietorship in the Czech Republic and can offer information on the accounting principles addressed to this structure.
Meet us in Brno
Call us at +420 721 565 868 to set up an appointment with our specialists in company formation in Brno. Alternatively you can incorporate your company without traveling to Czech Republic.
As an CorpexLab client, you will benefit from the joint expertize of local experts and international consultants. Together we will be able to offer you the specialized help you require for your business start-up in Czech Republic.
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