- If you have a trade or a company, you are required to keep accounts, either in a system of single-entry (only possible for trade) or double-entry bookkeeping.
- The accounting period is a calendar year (from January 1st to December 31st) or the so-called marketing year (any other 12-month period). The marketing year starting in April to June is suitable for holding companies, as you will be able to pay a dividend to shareholders over a period of months.
- The company is obliged to prepare financial statements as of the last day of the accounting period and to deposit them in the register of financial statements within 6 months of its preparation.
- The financial statements approved by the relevant body of the company (in the case of a limited liability company, it is the general meeting) are already stored in the register of financial statements.
- However, if it has not yet been approved, it may be filed unapproved and notification of its approval shall be sent to the registry within 15 days of its subsequent approval.
- However, the accounts must be approved and the notification sent to the registry no later than 12 months after the date on which they are approved.
The Czech Republic
- In the Czech Republic, legal entities, (companies and entrepreneurs registered in the commercial register) perform accounting, while self-employed and natural person-entrepreneurs not registered in the commercial register, who did not exceed the turnover of 25 mil. CZK in a calendar year, keep tax records. These are the records necessary to determine the tax base, i.e. overview of income and expenses, assets and debts.
- The general meeting of the company will discuss the financial statements no later than 6 months from the end of the accounting period and will publish them in the collection of deeds of the commercial register within 30 days of its approval, but no later than 12 months from the end of the accounting period.
We recommend that you find a skilled accountant who will keep your accounts. As part of Sparring, we offer complete CFO Support on a monthly subscription basis, within which we also cover accounting.
2. Reserve Fund
- A reserve fund is an on-the-side financial reserve of a company, which serves to cover its losses.
- It is obligatorily created by a limited liability company and a joint-stock company.
- A limited liability company has the option of creating a reserve fund when the company is incorporated. If not, it is obliged to create it from the company’s first profit on the basis of regular financial statements (increase will be decided by the general meeting when approving the financial statements from which the profit is achieved).
- The minimum amount is 5% of the net profit, the obligation to replenish the fund applies until 10% of the share capital is reached.
- Companies are free to dispose of funds from the reserve fund above the minimum limit.
- If the reserve fund is not created, the court may dissolve the company.
The Czech Republic
- In the Czech Republic, a reserve fund is not obligatorily created in any company, except in specific cases of a joint-stock company.
3. The Registration of Ultimate Beneficial Owners / Real Owners
- All private companies registered in the commercial register must also register their ultimate beneficial owners (UBOs) in the commercial register (this does not apply if the company has its UBOs registered in the register of public sector partners).
- Newly incorporated companies submit a proposal for registration of UBOs in the commercial register together with a proposal for registration of the company in the commercial register (existing companies in Slovakia were obliged to register by 31 December 2019).
- Failure to comply with the obligation may result in a fine of up to EUR 3,310. The data needs to be updated after changes.
- The court fee is not paid for registration in Slovakia. Data on ultimate beneficial owners are not public and therefore are not listed on the official extract from the commercial register, nor on www.orsr.sk.
The Czech Republic
- In the Czech Republic, real owners are entered in a register called Evidence of data on beneficial owners (in Czech Evidence skutečných majitelů) through a registry court or notary.
- Existing companies were required to do so by 1 January 2019, and companies registered in the commercial register after that date should do so without undue delay after their registration in the commercial register.
- A fine up to the amount of CZK 500,000 can be imposed on a person who has not registered or registered incorrect data. Such non-registered persons may also face a temporary suspension of voting rights and rights to share profits. Complications of participation in a public contract or in the process of applying for a grant may also have indirect consequences for non-compliance.
- The registration fee is CZK 4,000.
- Some data on real owners (e.g., name and surname, residency state) are public and therefore listed in the Evidence of data on beneficial owners on https://issm.justice.cz/.
4. The Registration of Corporate Changes
You must register any change in shareholders, directors or members of other bodies of the company, registered seat, business name and other corporate changes in the relevant commercial register.
In this context, the interesting question is when corporate changes are effective. The answer is, it depends. The law specifies exactly those changes that are effective only by an entry in the commercial register (e.g. change of business name, reduction of the company’s registered capital). Changes that are not legally effective until entry in the commercial register (e.g. change of a director) can be accepted with an earlier effective date, but not earlier than the date of adoption of the decision to change. Even in the case of these changes, however, the company is obliged to enter the changes in the commercial register.
- You must submit a proposal to change the entry in the commercial register within 30 days from the effective date of the decision on the change, or since the decision was taken by the company’s competent authorities (in most cases it will be a general meeting).
- The fee for registering a change in the commercial register is EUR 33 (an electronic submission).
The Czech Republic
- You must submit a proposal for entry of a change in the commercial register without undue delay from the decision that caused the change.
- The registration fee is CZK 2,000, regardless of the form of submission (electronically or on paper).
Remember to have well-established contractual relationships with your team members from the very beginning of the cooperation. You can find more on this topic in our article on How to contract your internal team.
If you are an employer, there are the following basic obligations in relation to social security contributions:
- Register in the register of employers no later than the day before the day on which you start employing at least one employee and remove yourself within 8 days from the day on which you no longer employ any employees.
- Report each employee no later than the day before the commencement of the employee’s activity.
- Submit monthly premium statements within the due date of the paid premium.
- Pay monthly social security contributions for each employee in the amount of 25.20% of the tax base (valid for 2022).
- You can find a more detailed overview on the website of the Social Insurance Company.
The Czech Republic
In the Czech Republic, the same principles of employer obligations apply, except for the following differences:
- The employer must report each employee to the Czech Social Security Administration (in Czech Česká správa sociálního zabezpečení) no later than 8 calendar days after the commencement of employment.
- The amount of the employer’s contributions is a total of 31.30% of the tax base, with 24.8% being paid by the employer and 6.50% paid by the employee.
- You can find more detailed information on the website of the Czech Social Security Administration.
The following basic obligations apply in relation to healthcare contributions:
- Report to the health insurance company that they become a payer of health insurance advances for their employee within 8 working days from the beginning of the employment relationship. The period of 8 working days also applies when unsubscribing from the payment of these advances.
- The same principle of double payment of contributions applies to the payment of healthcare contributions, specifically by the employer in the amount of 10% of the super-gross wage, and subsequently 4% of the gross wage for the employee.
- A more detailed overview is also provided by each health insurance company on its website, e.g. Slovak Všeobecná zdravotná poisťovňa.
The Czech Republic
- The amount of the insurance premium is 13.5% of the tax base.
- The employer must also report the employee to the employee’s health insurance company within 8 working days of entering into employment. The employer must also unsubscribe the employee within 8 working days.
- You can find more information on the websites of specific health insurance companies, e.g. Všeobecná zdravotní pojišťovna.
Employment taxes paid by the employer:
- The employer is also obliged to pay income tax on dependent activity at a minimum of 19% of the employee’s tax base (depending on their income), by tax advances on gross wage after deducting social security and healthcare contributions and the non-taxable part of the tax base. The employee then receives their salary already tax deducted – net salary.
- The prerequisite is the registration of the employer as a payer of income tax on dependent activity in the online form at the Slovak Financial Administration.
- After the monthly calculation of wages, or the deduction of the aforementioned advances, the employer will send the Financial Administration a notification of the amount of the deducted advances and will pay the income tax from dependent activities for all employees together by bank transfer to the assigned account.
The Czech Republic
- The employer is also obliged to pay an advance on the employee’s income tax in the amount of 15% of the employee’s tax base. Be careful! With the year 2021, the super-gross wage was abolished. The income tax rate remained the same, but the basis for its calculation changes. The tax is now calculated directly from gross wages.
- The employer is obliged to register with the Financial Administration.
- The employee can sign the Taxpayer’s Declaration with the employer, thus applying to the employer a discount on the taxpayer or other discounts that may apply to the employee (e.g. student discount). As a result, the discount will be applied when the salary is paid and the employee will receive a higher net salary.
- The employer also issues a Certificate of Taxable Income to employees or they can file a tax return on behalf of the employee.
Within 30 days of obtaining a trade licence, you are obliged to apply to the Financial Administration of the Slovak Republic for the assignment of a tax identification number (DIČ) for the purposes of income tax (tax on profits) using an online form. The tax administrator will assign the DIČ within 30 days of submitting the application.
Legal persons with a 12-month turnover of over EUR 49,790 are obliged to register as payers of value-added tax (VAT) (DPH). If this amount is not reached, they can also register voluntarily. The tax administrator will assign a VAT identification number (VAT ID) (IČ DPH).
Voluntary VAT payers can claim a VAT refund on purchased goods and services in the amount of 20% of the invoiced amount, but at the same time, they must pay VAT on goods and services sold, every month or quarterly. It follows that being a voluntary VAT payer pays off only if the trader’s costs are higher than their income.
The entire communication with the Financial Administration of the Slovak Republic is electronic, through the use of an identity card with a chip, or certified electronic signature (more information is offered by the website of the Financial Administration of the Slovak Republic). Such communication is necessary, either due to the registration of the employer as a payer of income tax from dependent activity, or when applying for a VAT number or VAT ID.
The Czech Republic
In the Czech Republic, electronic communication with the financial administration is also possible.
The income tax payer (self-employed or company) is obliged to register for income tax within 15 days from the incorporation of the company (i.e. from registration in the commercial register) or in case of self-employed entrepreneur since they started to perform self-employment. Electronic forms are published for the purpose of registration. The tax office will assign a tax identification number (DIČ) when registering for any tax.
Persons (both, self-employed and companies) with a 12-month turnover of over CZK 1,000,000 are obliged to register as value-added tax (VAT) (DPH) payers (with the exception of persons who perform exclusively tax-exempt transactions without the right to deduct tax). If this amount is not reached, they can also register voluntarily. The basic VAT rate starts at 21%, the first reduced rate is 15% and the second reduced rate is 10%.
Occupational Safety and Health (OSH) (BOZP)
When concluding an employment relationship, the employer is obliged to acquaint its employees with regulations to ensure safety and health at work, then repeat this obligation at least every two years and fulfil a number of other related health and safety obligations. As the administrative complexity and fines for non-compliance with health and safety regulations can be high (up to EUR 100,000), we recommend using the services of companies offering OSH services (e.g. Instructor provides service for a price of around 8 EUR / 1 user / for 1 year).
The Czech Republic
The employer is obliged to acquaint its employees with regulations to ensure safety and health at work when concluding an employment relationship, when changing the job classification and type of work, introducing new technology or work procedure and in cases with a significant impact on safety and health at work. It is also obliged to repeat the training at least every two years. This usually takes the form of online or offline training. Fines for non-compliance with health and safety regulations range from CZK 300,000 to CZK 2,000,000. There are various companies offering health and safety services in the Czech Republic (e.g. E-profesor).
Consider optional, but beneficial, business liability insurance. The price of the premium depends on the individual parameters of the company, such as the company’s assets and turnover or the number of employees. If you are interested in calculating the premium amount, we recommend that you contact your insurance company directly.
Relevant only to Slovakia.
During the existence of the company, it is important to avoid the so-called company crisis. If the company enters a crisis, the statutory body (for s.r.o. a managing director) has an active role in taking measures to overcome it. A loan provided to a company during a crisis by a shareholder who has at least 5%, a member of the company’s governing body, a silent shareholder or a person close to them, cannot be repaid in the time of a crisis. If it is repaid, the statutory body is responsible for its repayment to the company with their own property. You will also not receive a bank loan during a crisis.
8. Consumer Protection
If you plan to operate an e-shop or sell goods or provide services to individuals who will not be in the position of entrepreneur at the time of purchase, you must not forget that consumer comes into play and the associated legislation that protects the consumer in all possible ways. In relation to the consumer to whom you sell goods or services at a distance, you must comply with a number of information obligations, as well as ensure compliance with their rights (related to warranty claims, the possibility of withdrawal from a contract, etc.).
There should be general terms and conditions that will inform about a broad range of things, as a part of an e-shop, website or mobile application, and also don’t forget the Privacy and Cookies Policy, about which you can read more in our article on Personal Data Processing.