Bookkeeping and accounting procedures in the Czech Republic are regulated by the Accounting Act.
The accounting legislation in the Czech Republic distinguishes between:
• Accounting which superseded the previously used so-called double-entry accounting
• Internal accounting
• Tax accounting which superseded the previously used so-called single-entry accounting
Conditions laid down by the law must be met in order to keep only tax accounting.
Accounting in the Czech Republic
Accounting services are typically provided to companies carrying out business in the Czech Republic by third-party accounting firms. Very seldom will a company employ their own accountant. The reason is the fact that double-entry accounting in a company involves too many obligations based on the ever-changing extensive legislation in the Czech Republic.
– Bookkeeping
– Payroll processing
– Representation when dealing with authorities and during audits
– Tax advisory
– Legal advisory
– Management accounting
– Creation of business and employment contracts
– Work and storage of documents
…this is a brief list of activities an accountant should manage, plus training and following changes.
Therefore companies starting a business in the Czech Republic hire a specialized accounting firm which will take care of everything, from “laying the foundation stone” of the company through the set-up of the accounting system, implementation of the accounting software up to the registration with the relevant authorities.
Hiring an accounting firm is more practical than employing an accountant also in terms of long-term costs.
Management accounting (Reporting)
For correct financial decisions and good overview of the finances accounting firms create reports which provide picture of the company’s financial situation.
These reports are compiled also for parent companies and subsidiaries. The information from these reports is used not only by the owners but also investors and different financial and stock-exchange institutions.
If you intend to start a business in the Czech Republic by establishing a subsidiary here you should expect to need these reports.
Accounting firms provide complete reporting and management accounting. When choosing an accounting firm you should focus on the firm’s previous experience. A situation where the accounting firm is also an audit firm and has experience in international taxation is of great advantage.
Management accounting involves:
– Balance sheet
– Profit and loss statement
– Cash flow
– Compilation of budgets
– Management reports
– Analysis of the economic management of the company
– Individual reports for parent companies and subsidiaries
International taxation
Management accounting also includes perfect knowledge of international taxation issues. Effective management of taxes in the Czech Republic and international taxes is the essence of successful business in the Czech Republic.
International taxation must be managed to provide the lowest possible income tax, increased margins and development of the business in accordance with the law. This brings up a lot of questions pertaining to legal, accounting, tax, HR and cultural issues which require a team of specialists.
Our team helps manage the risks associated with ensuring compliance with your as well as legislative requirements and potentially increase the revenues.
We cover:
– Income tax optimization
– Expansion of business activities in the Czech Republic
– Preparation of tax returns, communication with authorities
– Transactions from and to the Czech Republic
– International tax audit, proposals of an effective tax strategy
– Cross-border acquisitions and mergers, due diligence, set-up of the structure, optimization of the funding and trade, reports
– Optimization of the business model, minimization of the tax burden, planning of supplier chains and intellectual property
Legal forms of business in the Czech Republic
There are the following forms of business in the Czech Republic:
Self-employer – a person carrying out business activities on his/her own account (self-employed person, artist, etc.)
Association of businesses
– An association of several self-employed persons invoicing under one name, but otherwise largely independent
– A special interest association of legal entities (European economic special interest association on the EU level)
Companies
– V.o.s. – partnership – association of several self-employed persons acting under one name
– K. s. – limited partnership – two types of partners
– S.r.o. – limited-liability company – a legal entity liable with a certain subscribed amount
– A. s. – corporation – managed by an administration board, the supreme body is the general meeting of shareholders (European joint-stock company on the EU level)
Cooperative – an association of natural persons and legal entities liable with their membership shares and acting mainly as a legal entity, managed by the board of directors, the supreme body is the members meeting.
Foundation – nonprofit organizations, etc. – special types of businesses, typically defined by special laws, often having social and humanitarian function.
We are able to provide everything you need to start your business in Czech republic.
