How to Start a Company or Branch in the Czech Republic as a Indian or China Business: A Clear Guide

Establishing a business in the Czech Republic offers significant advantages for Indian and Chinese enterprises seeking to expand into Europe, but the process involves regulatory requirements, documentation procedures, and structural decisions that differ considerably from your home market. This guide walks you through the practical steps, from choosing the right legal structure to managing compliance obligations, and explains how ARROWS Law Firm can help you navigate these requirements efficiently.

Understanding your business structure options in the Czech Republic

When you decide to establish operations in the Czech Republic, your first critical decision involves choosing between registering a Czech company or opening a branch office of your existing foreign business. This choice has profound implications for tax treatment, liability, regulatory compliance, and day-to-day operations.

A limited liability company (s.r.o.) represents the most popular choice for foreign investors, including businesses from India and China. This structure creates a separate Czech legal entity with independent liability, meaning the company itself bears responsibility for debts and obligations.

The minimum registered capital is exceptionally low—just CZK 1 (approximately five euro cents)—making it accessible for enterprises of all sizes. For Indian and Chinese companies with multiple shareholders or complex ownership structures, the s.r.o. provides clear liability separation and professional credibility.

A joint-stock company (a.s.) works better if you're planning larger operations, intend to take on investors, or require shares that can be freely traded. However, the minimum capital requirement is significantly higher (CZK 2 million) and the administrative requirements are more demanding, including mandatory corporate governance structures.

The branch office approach means registering a representative office of your existing Indian or Chinese company without creating a separate Czech entity. While this avoids some administrative steps, it also means your parent company bears full liability for all branch activities and debts.

Because the branch is not a separate legal entity, it cannot hold title to assets independently; the parent company remains the direct owner of any acquired property. This structure suits companies with short-term market exploration or small-scale operations, but offers less flexibility than establishing a separate Czech company.

ARROWS Law Firm specializes in advising foreign investors on selecting the optimal structure for their specific business plans and helping them understand how each choice affects taxation and compliance.

microFAQ – Legal tips on choosing your business structure

1. Which structure requires the least capital?
The s.r.o. (limited liability company) requires only CZK 1 in initial capital, making it the most accessible option for startups and smaller operations regardless of investment size.

2. If I'm not sure whether I'll stay in Czech Republic long-term, should I choose a branch?
Not necessarily. A branch offers simplicity but gives your parent company full liability and less operational independence. Even short-term operations often benefit from a separate Czech company, which provides liability protection and local credibility.

3. Can I change my business structure later if I choose wrong initially?
Yes, restructuring (e.g., cross-border merger or conversion) is possible, but it involves additional costs, administrative time, and potential tax implications. Choosing correctly at the start is significantly more efficient and cost-effective.

The legal requirements for establishing your Czech company

Regardless of whether you're an Indian entrepreneur, a Chinese corporation, or a multinational enterprise, Czech law requires specific documents and procedures before your company becomes legally operational. The process may appear straightforward, but each step contains procedural details laypeople often underestimate.

Obtaining a trade license (živnostenský list) marks your first essential step. This authorization from the Trade Licensing Office formally permits you to conduct your specified business activities in the Czech Republic. You cannot skip this requirement or complete it after company registration.

For foreign nationals and foreign company representatives, critical authentication requirements apply. Your criminal background check from India or China must be no older than 90 days. As both India and China are members of the Hague Apostille Convention, these documents require an apostille to be legally valid in the Czech Republic.

Superlegalization is generally no longer required for these countries, simplifying the process, though official Czech translation is mandatory. Many entrepreneurs underestimate this administrative burden; what seems like a simple document requirement can add weeks to your timeline if not handled correctly.

Once you obtain your trade license, you proceed to registering with the Commercial Register (Obchodní rejstřík), the centralized database where all Czech business entities are recorded. This registration actually creates your legal entity—until this moment, despite having a trade license, your company doesn't officially exist.

Your company registration application requires numerous supporting documents, including notarized copies of your founding documents and proof of registered office ownership. Each document from a foreign jurisdiction requires official Czech translation.

The court fee for registration is CZK 6,000 for a limited liability company. However, direct registration via a notary is often faster and cheaper (approx. CZK 2,700 for a standard s.r.o. with basic articles of association).

ARROWS Law Firm works with Indian and Chinese businesses daily to navigate these documentation requirements and manage authentication procedures.

Managing your banking and capital requirements

Opening a Czech bank account is a practical necessity. While the law allows basic capital (up to CZK 20,000) to be paid to a designated custodian rather than a special bank account, in practice, having a corporate bank account is essential for operations and tax compliance.

For foreign business owners, opening a bank account in the Czech Republic requires navigating different banking standards (AML/KYC) than you may experience in India or China. Most Czech banks require either physical presence at the bank or authorization through a power of attorney granted to a local representative.

This is where many international entrepreneurs encounter unexpected delays—banks have their own due diligence requirements beyond what the Commercial Register demands. They typically request business plans, proof of beneficial ownership, and details of the company's intended activities.

ARROWS Law Firm handles this coordination for clients, working with banks to establish accounts using powers of attorney and ensuring the sequence of steps proceeds smoothly.

microFAQ – Legal tips on banking and capital requirements

1. Can I deposit capital in foreign currency instead of Czech koruna (CZK)?
Banks accept foreign currency deposits, but the registered capital is typically declared and recorded in CZK according to Czech law. The conversion happens at the exchange rate on the date of deposit, and exchange rate fluctuations can affect your declared capital amount.

2. What if I plan to invest equipment or intellectual property instead of cash?
Non-monetary contributions are permitted and can count toward registered capital, but they require expert valuation by a court-appointed appraiser and detailed documentation. This process adds time but is often more efficient than converting assets to cash.

3. Is my personal bank account sufficient, or must I establish a separate business account?
A separate business account is essential for legal compliance and tax purposes. Commingling personal and business funds creates serious complications for tax authorities and auditors, and may lead to personal liability for business obligations.

Visa and residency requirements for foreign business owners and managers

If you plan to reside in the Czech Republic to manage your business, you must obtain appropriate visa authorization. You cannot legally stay on a tourist or short-term visa (Schengen C visa) while conducting regular work or long-term management activities.

A long-term visa for business purposes applies if you intend to establish or manage a business, be a company director, or own significant shareholding in a Czech company. This visa is issued for a maximum of one year by Czech diplomatic missions abroad and requires substantial supporting documentation.

The police clearance certificate requirement deserves special emphasis. This document must be issued by authorities of your home country, cannot be older than 90 days at submission, must carry an apostille (for India and China), and must be officially translated into Czech.

Additionally, the visa application process includes a detailed interview at the embassy, where officials assess whether your business plan is genuine and whether you possess adequate financial resources. The Ministry of Interior in Prague makes the final decision, typically within 90 to 120 days.

Once your long-term business visa is approved and you arrive in the Czech Republic, you must register your residence with the Foreign Police. Subsequently, you may apply for a long-term residence permit for business purposes, which can be extended up to two years.

ARROWS Law Firm regularly assists Indian and Chinese business owners with visa applications and residency permit procedures, helping them understand which documents are required.

Understanding foreign investment screening obligations

The Czech Republic implements a foreign investment screening mechanism (FDI Screening) designed to assess foreign acquisitions in sensitive sectors. If your company plans to acquire shares in certain Czech entities, you may face mandatory screening procedures.

The Act on the Examination of Foreign Investments focuses on non-EU investors acquiring effective control of a Czech company operating in sensitive sectors. The regulated sectors include military equipment production, critical infrastructure operators, and dual-use goods manufacturers.

It is important to note that the scope of "critical infrastructure" and "essential services" is expanding due to the implementation of the EU NIS2 Directive via the new Czech Act on Cybersecurity. This legislation expands the definition of regulated services to include data centers and cloud computing providers.

While the legislative process is ongoing, Indian and Chinese investors in the technology and infrastructure sectors must be vigilant. If your target company falls under the current or upcoming essential service definitions, you may face mandatory screening requirements.

The screening process is not automatically prohibitive—the absolute majority of foreign investments proceed without complications. However, the process generally adds 30 to 90 days to transaction timelines and requires submission of detailed information.

ARROWS Law Firm advises Indian and Chinese investors on whether their planned investments trigger screening obligations and helps them prepare submissions to the Ministry.

Risks and sanctions	How ARROWS helps (office@arws.cz)
Undisclosed investment in critical infrastructure: Proceeding with investment without obtaining required government approval, resulting in Ministry invalidation of transaction and forced divestment, plus potential penalties.	Investment screening consultation and submission preparation: ARROWS reviews your planned investment structure, determines screening obligations, and manages the approval process.
Failure to meet documentation deadlines: Missing regulatory reporting deadlines for critical infrastructure or essential services, resulting in potential designation without your input.	Deadline management and notification coordination: ARROWS monitors all reporting deadlines applicable to your company and ensures timely notifications.
Unexpected screening expansion: New sectors brought into screening framework by cybersecurity amendments (NIS2), catching companies unprepared.	Regulatory monitoring and strategic planning: ARROWS tracks regulatory changes affecting your sector and advises on implications for your business.

Registration of beneficial owners

Czech law requires every registered company to identify and register its beneficial owners (persons who ultimately control or benefit from the company). This requirement applies to all companies entered in the Commercial Register.

The beneficial owner register is maintained separately from the Commercial Register. If your company has complex ownership structures—common for Indian and Chinese corporations—determining who qualifies as a beneficial owner requires careful analysis of your organizational structure.

Beneficial owners must be registered without undue delay after company registration. Failure to register results in penalties of up to CZK 500,000. More significantly, unregistered beneficial owners are prevented from exercising voting rights and barred from receiving dividend distributions.

The registration process requires submitting detailed documentation about beneficial owners to the registry court, including identification documents and statements confirming their status. For foreign beneficial owners from India or China, this involves submitting authenticated foreign documents with apostilles.

ARROWS Law Firm regularly handles beneficial owner registrations for foreign-controlled companies, ensuring complete compliance and preventing dividend blockages.

microFAQ – Legal tips on beneficial owner registration

1. If I own 100% of the company through my Indian holding company, is just the holding company the beneficial owner, or do I personally need to register?
The beneficial owner must always be a natural person (human). Therefore, you personally (as the ultimate owner of the holding company) must be registered, not just the Indian entity.

2. Can I change beneficial owners after registration?
Yes. Changes must be registered without undue delay—failing to update beneficial owner information exposes you to the same penalties as failing to register initially.

3. What happens if I miss the registration?
You face penalties up to CZK 500,000, but more consequentially, the company cannot legally pay out any share of profits to you, and you cannot vote at the General Meeting.

Tax obligations and compliance requirements

Your newly established Czech company immediately becomes subject to corporate income tax at the standard rate of 21% (effective from 2024), calculated on your company's net profit. You must file tax returns regardless of financial results.

The Czech Republic taxes resident companies on worldwide income, while non-resident companies pay tax only on Czech-source income. Your newly registered Czech company is automatically a tax resident.

Corporate income tax returns must be filed within three months following the end of the tax year (typically March 31). However, if you engage a licensed tax advisor to file your return, the deadline extends to June 30.

Value-added tax (VAT) registration becomes mandatory once your company's annual turnover exceeds CZK 2 million in 12 consecutive calendar months. You can also voluntarily register for VAT earlier if you engage in B2B trade or want to reclaim VAT on business expenses.

VAT is charged at 21% on most supplies, with a reduced rate of 12% on certain goods and services. VAT returns must be filed and tax paid monthly (or quarterly for smaller payers). Beyond income and VAT taxes, your company must register with the Czech Social Security Administration and select a health insurance company within eight days of company registration or hiring staff.

ARROWS Law Firm provides comprehensive tax advisory services to Indian and Chinese-owned companies, ensuring compliance with Czech tax obligations.

Accounting obligations and financial reporting

Czech law requires every business entity to maintain accounting records and prepare annual financial statements, regardless of company size.

Your company must maintain detailed accounting records, prepare a balance sheet and profit and loss statement annually, and file these statements with the Commercial Register. Failure to file financial statements triggers automatic penalty proceedings by the registry court.

Mandatory audit requirements apply to companies exceeding specific thresholds. As of 2024, audit is generally mandatory for medium and large entities, or small entities exceeding specific asset, turnover, or employee criteria.

ARROWS Law Firm helps Indian and Chinese-owned companies establish accounting systems compliant with Czech requirements and manages annual filing obligations.

Employment law considerations for foreign-owned Czech companies

If you plan to employ Czech staff, employment contracts must be concluded in writing and include mandatory information. This includes the type of work, place of work, start date, and wage conditions.

The standard working week in the Czech Republic is 40 hours. Overtime compensation is required at a minimum premium of 25% above base wages, or compensatory time off. Employees are entitled to annual leave of at least four weeks.

EU/EEA citizens enjoy freedom of movement and do not require work permits. However, if you hire employees from India, China, or other non-EU countries, they must obtain appropriate Employee Cards or Blue Cards. The process involves a vacancy test by the Labour Office.

ARROWS Law Firm advises foreign-owned Czech companies on employment law compliance, contract preparation, and hiring non-EU employees.

Data protection and GDPR compliance

As a Czech company processing personal data of employees, customers, or business partners, you must comply with the General Data Protection Regulation (GDPR). The GDPR applies immediately upon company registration if any personal data processing occurs.

Compliance requires documenting your data processing activities, obtaining proper legal basis, providing privacy notices, and implementing security measures. Non-compliance results in substantial fines.

ARROWS Law Firm provides GDPR compliance advice, including data processing documentation and privacy policies.

Risks and sanctions	How ARROWS helps (office@arws.cz)
Non-compliance with beneficial owner registration: Failure to register results in penalties up to CZK 500,000, dividend blockages, and voting restrictions.	Beneficial owner identification and registration: ARROWS analyzes your ownership structure and submits complete registration documentation.
Tax filing failures: Missing deadlines or miscalculating obligations results in penalties and interest charges.	Tax return preparation: ARROWS manages filing deadlines and coordinates tax strategy to ensure complete compliance.
Accounting violations: Failure to file financial statements results in registry court penalties up to CZK 100,000 and potential liquidation.	Accounting system setup and annual filing: ARROWS ensures accurate financial statements are filed on schedule to prevent compliance failures.
GDPR violations: Processing personal data without compliance results in fines up to EUR 20 million or 4% of turnover.	GDPR compliance: ARROWS implements GDPR-compliant policies and procedures to prevent violations.
Employment law violations: Hiring without proper contracts or authorization results in Labour Office fines.	Employment law advice: ARROWS drafts compliant contracts and advises on work authorization procedures.

Branch office registration as a simpler alternative

If establishing an independent Czech company seems too complex, opening a branch office of your existing Indian or Chinese company may appear more straightforward. A branch does not create a separate Czech legal entity.

Branch registration requires submitting authenticated copies of your parent company's incorporation documents to the Commercial Register. A legal representative (head of the branch) must be appointed.

However, branches face limitations. They cannot independently acquire real estate (the title must be held by the foreign parent), and business partners may view them as less permanent than independent Czech companies.

For most foreign investors seeking serious market entry, establishing a separate Czech company (s.r.o.) provides superior flexibility and credibility. ARROWS Law Firm can advise whether a branch office suits your specific situation.

microFAQ – Legal tips on branch offices

1. Can I start with a branch office and later convert it to a separate Czech company?
Conversion is legally complex. It is usually easier to start with the correct structure or establish a new company later and transfer assets, which has tax implications.

2. What activities can my branch perform?
Only those activities listed in your Commercial Register entry.

Executive summary for management

• Regulatory complexity: Establishing a Czech company involves multiple independent registrations (trade license, Commercial Register, tax, social security).
• Beneficial owner registration: Mandatory registration affects profit distribution and voting rights. Early compliance is essential to avoid operational paralysis.
• Foreign investment screening: Investors in critical infrastructure, IT, and dual-use sectors must navigate FDI screening. New cybersecurity laws (NIS2) are expanding the scope of regulated sectors.
• Tax and Accounting: Corporate tax is 21%. VAT registration is mandatory over CZK 2M turnover. Accounting filings are public and mandatory.
• Compliance: Employment and GDPR obligations apply from day one.

Conclusion

Establishing a company or branch in the Czech Republic as an Indian or Chinese business involves navigating a complex regulatory framework. Your decision between a separate Czech company and a branch office, and the timing of regulatory compliance, all interact to shape your business success.

ARROWS Law Firm has regularly assisted Indian and Chinese enterprises with Czech market entry. Our lawyers combine deep knowledge of Czech legal requirements with experience serving international clients.

We understand the specific challenges foreign entrepreneurs face—document authentication (apostilles), visa procedures, and the interaction between Czech tax obligations and your home country reporting requirements. If you are contemplating establishing operations in the Czech Republic, contact us at office@arws.cz to discuss your situation.

FAQ – Frequently asked legal questions about starting a company in the Czech Republic

1. How long does it take to establish a Czech company from start to finish?
The complete process typically takes 3-6 weeks if all documentation is properly prepared. However, obtaining police clearances and apostilles from abroad can extend this. ARROWS Law Firm can accelerate this process by managing registrations simultaneously.

2. Do I need to have a local Czech person involved in my company?
No, you can own and manage a Czech company entirely from India or China. However, you need a registered office address in CZ. If the managing director is a non-EU national who will perform their duties physically in CZ, visa/residency issues must be addressed.

3. What is the minimum capital I need to start a Czech company?
The minimum registered capital for an s.r.o. is CZK 1.

4. What happens if I fail to register my beneficial owners?
You face penalties up to CZK 500,000, and you cannot receive dividends or vote at shareholder meetings.

5. Can I operate my Czech company from abroad?
Yes, but you must maintain a physical registered office address in the Czech Republic (a virtual office is permitted if it provides actual contact services).

6. How do I hire employees in the Czech Republic?
Hiring non-EU citizens requires a vacancy test and work authorization (Employee Card) from the Labour Office. Contact ARROWS Law Firm at office@arws.cz for guidance.

Disclaimer: The information contained in this article is for general informational purposes only and serves as a basic guide to the issue. Although we strive for maximum accuracy in the content, legal regulations and their interpretation evolve over time. To verify the current wording of the regulations and their application to your specific situation, it is therefore necessary to contact ARROWS Law Firm directly (office@arws.cz). We accept no responsibility for any damage or complications arising from the independent use of the information in this article without our prior individual legal consultation and expert assessment. Each case requires a tailor-made solution, so please do not hesitate to contact us.