How to Obtain a Payment Institution License in the Czech Republic

Are you planning to enter the European payments market? This guide provides a clear roadmap to obtain a Payment Institution license in the Czech Republic, a strategic gateway to the entire EU. We will detail the Czech National Bank (CNB) requirements, explain how to navigate the application process, and outline your ongoing compliance duties. As a leading Czech law firm in Prague, EU, with extensive experience helping foreign clients, ARROWS provides the expert guidance you need to succeed.

Need advice on this topic? Contact the ARROWS law firm by email office@arws.cz or phone +420 245 007 740. Your question will be answered by "Mgr. Marek Hučík", an expert on the subject.

Your Gateway to the EU: Why the Czech Republic is a Premier Hub for Payment Institutions

Choosing the right jurisdiction for your Payment Institution (PI) license is a critical business decision. It is not merely about meeting local regulations; it is about selecting a strategic launchpad for your European operations. The Czech Republic offers a powerful combination of full EU market access, a stable regulatory environment, and a strategic location.

The Power of Passporting

A PI license granted by the Czech National Bank (CNB) is a European license. This unlocks the single most important benefit for a foreign investor: the right to "passport" your services. This mechanism, foundational to the EU single market, allows a firm authorized in one European Economic Area (EEA) member state to operate in all 30 member states with minimal additional authorization.

This means your Czech license is your key to a market of over 450 million consumers and businesses across the continent, from Germany to France to the Nordic countries. You can provide services or establish branches in other EU nations without needing to undergo a new, full licensing process in each country, saving immense time and resources.

A Stable and Respected Regulator

Your operations will be supervised by the Czech National Bank (CNB), the sole and highly respected authority for the entire Czech financial market. The CNB ensures a predictable and robust legal framework, as Czech financial regulations fully comply with harmonized EU directives, including the pivotal second Payment Services Directive (PSD2). This alignment with EU standards guarantees that your license is respected and your operations are built on a stable legal foundation.

Strategic Location in Prague, European Union

Establishing your company in Prague places you in a safe, cost-effective, and dynamic business hub at the heart of Europe. As an international law firm operating from Prague, European Union, ARROWS serves as a crucial bridge for foreign companies, combining deep local knowledge with a comprehensive understanding of international business needs.

Are You Eligible? Key Requirements for Your PI License Application

The CNB has established clear and rigorous criteria for applicants. Before beginning the formal process, it is essential to assess whether your company and its management can meet these core requirements. A thorough preparation at this stage is the key to a successful application.

What is the required legal structure and location?

The first and most fundamental requirement is that your company must be a legal entity, typically a joint-stock company or limited liability company. Crucially, this entity must have both its registered office and its head office physically located within the Czech Republic. This establishes the necessary legal substance within the jurisdiction for regulatory supervision.

How much initial capital do you need?

The CNB requires you to demonstrate financial stability through a minimum level of initial capital. The amount depends directly on the scope of the payment services you intend to offer, as defined by the Czech Act on Payment Systems (No. 370/2017 Coll.):

• €20,000 if you plan to provide only money remittance services.
• €50,000 if your services will include indirect payment order services (PIS).
• €125,000 for a full license covering services like operating payment accounts, issuing payment instruments, or acquiring payment transactions.

This capital must be fully paid up and its legal origin proven to the regulator. It is not just a formality but a key indicator of your company's viability and commitment.

Does your management team pass the "Trustworthiness" test?

The CNB places immense importance on the integrity of the people who will manage the payment institution. All directors and key managers undergo a stringent "fit and proper" assessment to establish their trustworthiness, a critical legal standard in Czech financial regulation.

A person will be deemed untrustworthy if they have, for example, a past conviction for an intentional or economic crime, have received significant administrative penalties for regulatory breaches in the last 10 years, or have a history of bankruptcy. The CNB also assesses professional competence and requires sufficient, relevant managerial experience in the financial sector to ensure the sound and prudent management of the institution.

How to prepare a business plan that satisfies the CNB

Your business plan is arguably the single most critical document in your application package. The success or failure of your application often hinges on its quality and credibility. An unrealistic or poorly substantiated plan is a primary reason for rejection by the regulator.

The CNB requires a comprehensive business plan that includes a detailed budget forecast for the first three financial years. This plan must be supported by "realistic economic calculations" that demonstrate your business model is viable and prudent. Because the license grants EU-wide access, the plan must be primarily focused on serving the broader EU market, not just the Czech Republic.

FAQ – Legal tips about Eligibility

• Can our directors be non-EU residents?
  Yes, Czech law does not require directors to be EU residents. However, you should expect heightened scrutiny from the CNB on the backgrounds of non-EU managers and the viability of your business plan. Our lawyers can help prepare robust documentation to meet these standards. Need assistance? Email us at office@arws.cz.
• What is the "proof of origin of funds" for the share capital?
  You must provide clear documentation proving the legal source of the initial capital. This can include documents like an official income certificate, bank statements showing savings accumulation, or contracts from the sale of assets. ARROWS can advise on the specific documentation required for your situation. Get tailored legal solutions by writing to office@arws.cz.

A Step-by-Step Guide to the CNB Licensing Process

Navigating the licensing process requires meticulous preparation and a clear understanding of the timeline and regulatory expectations. The process can be broken down into four distinct stages, each with its own set of requirements.

Step 1: Document Preparation

This is the most time-intensive phase of the application. A complete and well-organized submission is essential to avoid delays. The required documentation falls into two categories:

• For the Company: You must prepare a comprehensive business plan, a three-year financial forecast, a detailed description of your organizational structure, and documentation of your internal control mechanisms. This includes your procedures for Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) and your measures for safeguarding user funds.
• For Each Director and Founder: Each key individual must provide a copy of their passport, proof of address, a certified copy of their birth certificate, and criminal record extracts from both the Czech Republic and their country of residence. They must also complete a detailed questionnaire covering their professional work experience and education.

Step 2: Application Submission

Once all documentation is prepared and translated into Czech where necessary, the application must be submitted electronically to the CNB's official data box or email portal. At the time of submission, the state duty of CZK 50,000 (approximately €1,850) must be paid.

Step 3: CNB Review and Communication

The CNB has a statutory period of three months to issue a decision, but this clock only starts once the application is deemed complete and all required information has been provided. In practice, the entire process from submission to decision typically takes 6 to 9 months. 

For applicants with non-EU founders, this period may be longer due to the CNB's enhanced due diligence. During this time, the CNB will likely have questions or requests for additional information. ARROWS manages all communication with the CNB on your behalf, ensuring timely and accurate responses.

Step 4: The Decision

Upon completing its review, the CNB will issue a formal decision. If successful, the decision will grant your company the license and specify the exact payment services you are authorized to provide.

Navigating Common Application Hurdles

Legal risk and potential issues	How ARROWS helps
Incomplete or Formally Incorrect Application: Missing documents or improperly filled forms leading to immediate rejection and months of delay.	Documentation Review & Preparation: We ensure your application is complete and meets all CNB formal requirements from the start. Need legal help? Contact us at office@arws.cz.
Unrealistic Business Plan: The CNB deems your financial projections unsubstantiated or your market strategy unviable, questioning your prudence.	Legal Opinion & Strategic Review: Our experts review your business plan for regulatory compliance and realism, providing strategic recommendations to strengthen it. Get tailored legal solutions by writing to office@arws.cz.
Weak AML/CFT Measures: Your proposed anti-money laundering policies are too generic and don't address the specific risks of your business model.	Drafting Internal Policies: We draft bespoke AML/CFT documentation that is tailored to your operations and satisfies the CNB's rigorous standards. For immediate assistance, write to us at office@arws.cz.
Failure to Prove "Trustworthiness": Insufficiently documented experience or a negative record for a key manager jeopardizes the entire application.	Due Diligence & Representation: We conduct preliminary checks on key personnel and prepare all documentation to robustly demonstrate their professional competence and integrity. Our lawyers are ready to assist you – email us at office@arws.cz.

The Real Work Begins: Your Ongoing Compliance Obligations

Securing your PI license is a major achievement, but it marks the beginning, not the end, of your regulatory responsibilities. The CNB requires continuous adherence to a strict set of compliance obligations to ensure the stability of the financial market and the protection of consumers.

Maintaining Capital Adequacy

The initial capital you provide is a baseline. As a licensed payment institution, you must maintain sufficient capital at all times to cover the operational and financial risks associated with your business activities. The CNB monitors capital adequacy to ensure your institution remains financially sound.

Robust Governance and Control Systems

You are legally required to establish and maintain an effective management and control system. This is a comprehensive framework of internal rules and procedures covering risk management, internal audits, accounting practices, and security measures for processing sensitive payment data. This system must be regularly reviewed, evaluated, and updated to address new risks and regulatory changes.

Strict AML/CFT Compliance

Perhaps the most critical ongoing duty is compliance with AML/CFT (Anti-Money Laundering/Countering the Financing of Terrorism) laws. This is an area of intense regulatory focus. Your obligations include performing thorough customer due diligence (also known as Know Your Customer or KYC), continuously monitoring transactions for unusual activity, and reporting any suspicious transactions to the Czech Financial Analytical Office without delay.

Reporting to the CNB

You have a duty to maintain transparency with the regulator. You must notify the CNB without undue delay of any significant changes to the information provided in your original license application. This includes changes in your management team, your qualifying shareholders, or your core business activities. You must also have procedures in place to report major operational or security incidents to the CNB.

Mitigating Post-Licensing Operational Risks

Legal risk and potential issues	How ARROWS helps
Inadequate AML Controls: Failure to identify and report a suspicious transaction, leading to a CNB inspection and severe penalties.	Professional Training & Policy Updates: We provide certified training for your employees and regularly update your internal AML policies to reflect new risks and regulations. Do not hesitate to contact our firm – office@arws.cz.
Failure to Report Changes: You change a director or key operational process but fail to notify the CNB in time, resulting in a compliance breach.	Ongoing Legal Consultation: As your retained legal counsel, we manage your regulatory reporting obligations, ensuring all necessary notifications are filed correctly and on time. Need legal help? Contact us at office@arws.cz.
System or Security Breach: A data breach occurs, and you are unsure of your reporting obligations to the CNB and under GDPR.	Representation before Public Authorities: We guide you through the incident reporting process with the CNB and provide legal representation to manage the fallout. For immediate assistance, write to us at office@arws.cz.

What’s at Stake? The High Cost of Non-Compliance

Operating in the EU financial services market offers immense opportunity, but it also comes with significant responsibility. The consequences of failing to meet your regulatory obligations are severe and can have devastating effects on your business.

Severe Financial Penalties

The CNB has the authority to impose substantial fines for non-compliance. For example, failure to meet reporting or registration obligations can lead to fines of up to CZK 500,000 for each breach. For more serious violations, particularly under the AML Act, the penalties are far greater. Financial institutions can face fines of up to a staggering CZK 130 million (over €5 million) for critical AML failings.

Criminal Liability

Beyond financial penalties, certain breaches can lead to criminal liability. Money laundering and terrorist financing are treated as serious crimes under the Czech Criminal Code, and individuals found responsible can face lengthy prison sentences.

License Revocation

For persistent or severe non-compliance, the CNB can take the ultimate step of revoking your license to operate. This would effectively shut down your business in the Czech Republic and, by extension, across the entire EU, representing a total loss of your investment.

Reputational Damage

The financial cost of a penalty can be dwarfed by the long-term reputational damage. A public sanction from a financial regulator erodes trust with customers, partners, and correspondent banks. Rebuilding that confidence is a difficult and expensive process that can hinder your company's growth for years.

FAQ – Legal tips on Avoiding Penalties

• Can penalties be waived?
  In very limited circumstances, such as for minor late tax filings, fines may be reduced by the authorities. However, this is highly discretionary and typically requires that the underlying tax obligation has already been fully paid. Proactive compliance is a far better and more reliable strategy. Our lawyers can help you build a compliant framework – email us at office@arws.cz.
• Who is personally responsible for a company's AML breach?
  The AML Act requires every obliged entity to designate a specific member of its statutory body (e.g., a director) to be personally responsible for ensuring AML compliance. Failure to make this designation can itself result in massive fines for the company. Get tailored legal solutions by writing to office@arws.cz.

The ARROWS International Advantage

For a foreign company entering the European market, choosing a legal partner with a purely local focus is not enough. You need a firm that understands the complexities of cross-border business and regulation. ARROWS offers a distinct international advantage that sets us apart.

Comparative Legal Insight

The EU payments landscape is harmonized but not uniform. Licensing requirements and regulatory focus can differ between member states. For instance, while the documentation required by Germany's regulator, BaFin, is broadly similar to the CNB's, the process can be perceived as more rigid.

Meanwhile, the Central Bank of Ireland places a strong emphasis on ensuring the "mind and management" of the applicant firm is substantively based in Ireland. Our lawyers understand these nuances, allowing us to provide strategic advice on why the Czech Republic is often the optimal choice.

ARROWS International Network

As a leading Czech law firm based in Prague, European Union, we have spent over a decade building our ARROWS International network. This network operates in 90 countries worldwide, providing our clients with seamless legal support for their global operations. Whether you are dealing with a cross-border transaction, an international dispute, or need to understand the implications of regulations in another jurisdiction, our network provides the expertise you need.

A Single Point of Contact

Our international capabilities mean we can serve as your single, trusted legal partner for your European expansion. We manage the entire Czech licensing process and can then coordinate with our network partners to handle passporting notifications and other legal needs across the EU. This integrated approach simplifies management and ensures a consistent, high-quality service.

What is Your Next Step?

The path to securing a Payment Institution license and successfully launching in the EU is complex and laden with regulatory risk. Attempting to navigate this journey alone is a significant gamble with your time and investment. With the right expert guidance, you can approach the process with confidence and clarity.

ARROWS law firm provides comprehensive support at every stage, including:

• An initial legal consultation to assess your business model and eligibility.
• Drafting and reviewing all legally required documentation, including your business plan, internal AML/CFT policies, and corporate governance frameworks.
• Full representation in all proceedings and communications before the Czech National Bank.
• Ongoing compliance support, regulatory updates, and professional training for your staff after your license is granted.

Our firm supports over 150 joint-stock companies and 250 limited liability companies, and our reputation is built on speed, quality, and a deep commitment to our clients' success.

To start your journey into the EU payments market with confidence, contact our expert team for an initial consultation. Write to us today at office@arws.cz.

FAQ – Most common legal questions about the Czech PI License

 

• How long does the entire PI licensing process really take in the Czech Republic?
  While the CNB has a 3-month statutory review period for a complete application, the total timeline from starting document preparation to receiving a license is typically 6 to 9 months. For founders from outside the EU, this can be longer due to enhanced scrutiny. We help streamline this process to avoid unnecessary delays. To discuss your specific timeline, email us at office@arws.cz.

• What is the difference between a Payment Institution (PI) and an Electronic Money Institution (EMI) license?
  A PI license allows for payment processing and money remittance. An EMI license includes all PI capabilities but also permits the institution to issue electronic money (e.g., funds held in digital wallets), which is legally considered a digital equivalent of cash. The initial capital requirement for an EMI is significantly higher, typically €350,000. Our lawyers can help you determine the right license for your business model. For immediate assistance, write to us at office@arws.cz.

• Can we start our business activities while the license application is pending?
  No. Providing regulated payment services without a valid license is a serious breach of financial law. Doing so can lead to significant fines and will jeopardize not only your current application but also any future attempts to get licensed in the EU. It is essential to wait for the CNB's final approval. Need legal help to ensure you are compliant? Contact us at office@arws.cz.

• What are the most common reasons the CNB rejects an application?
  The most frequent reasons for rejection are an unrealistic or poorly documented business plan, the failure of key managers to meet the strict "trustworthiness" criteria, and inadequate descriptions of internal control and AML/CFT systems. Our firm specializes in preparing robust applications that proactively address these common pitfalls. Get tailored legal solutions by writing to office@arws.cz.

• Do we need to have a physical office and staff in the Czech Republic?
  Yes, the law requires a payment institution to have its head office and registered office in the Czech Republic. The CNB also expects you to operate at least part of your business from the country, which implies a substantive local presence with appropriate staff to manage operations and ensure compliance. We can advise on satisfying these substance requirements effectively. Do not hesitate to contact our firm – office@arws.cz.
• Once we have the Czech license, how do we start operating in another EU country like Germany or France?
  This is achieved through the "passporting" notification process. You must formally notify the CNB of your intention to provide services in another "host" Member State. The CNB then communicates with the regulator in that country on your behalf. This process is far simpler than applying for a new license from scratch. Our international team can manage the passporting process for you. Our lawyers are ready to assist you – email us at office@arws.cz.