Subsidiary vs. Branch in Czech Republic - Updated Guide 2021
Subsidiary vs. Branch in Czech RepublicUpdated on Thursday 29th April 2021
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Czech Republic offers several legal entities that can be chosen for incorporation by foreign investors. At the same time, foreign companies may also set up a subsidiary or a branch office, which can provide certain advantages, depending on the business strategy of the parent company. There are different requirements for the registration of a branch or a subsidiary and our team of lawyers in Czech Republic can offer assistance and legal advice on the incorporation aspects.
Subsidiary in Czech Republic
One of the ways to start a business in Czech Republic in 2021 is by opening a subsidiary that will be registered following the regulations applicable under the Czech Commercial Code and it will be treated as a resident company in the Czech Republic. The main characteristic of a subsidiary refers to the fact that it is considered a separate legal entity than the parent company, which means that the legal entity set up in this country will have the right to perform business operations independent from the business strategies set up by the parent company. The subsidiary will require a minimum share capital of CZK 200,000 and it will be registered following the legal procedures applicable in this jurisdiction. The company’s founders will have to notarize the company’s statutory documents in front of a public notary and register for taxation purposes in this country.
Although the company will be formed following the regulations applicable for commercial companies in Czech Republic, the investors will need to provide a resolution of the parent company, stating the decision to establish a subsidiary here. Our team of Czech lawyers can provide further details on other registration steps for a subsidiary in 2021. They can also help you register your company for VAT.
Branch office in Czech Republic in 2021
A branch office in Czech Republic is not considered a different legal entity and thus, its business activities will have to be approved by the parent company. Also, it is important to know that the branch is required to state its business activities at the Commercial Register. When opening a branch in Czech Republic in 2021, the investors will need to comply with the regulations provided by the following acts:
- Civil Code;
- Trade Licensing Act;
- The Act on Commercial Code of Legal Entities and Natural Entities;
- The Act on Private International Law.
Documents for subsidiaries in Czech Republic
With the help of our Czech lawyers, foreign entrepreneurs can benefit from complete support and assistance in terms of paperwork. Here are a few of the documents required for registering a subsidiary in Czech Republic:
- The Articles of Incorporation of the foreign company.
- A declaration signed by owners and administrators who agree with the subsidiary registration.
- A document with information about the business office of the subsidiary in Czech Republic.
- Information about the manager appointed for a subsidiary in Czech Republic. The criminal record will also be solicited.
The incorporation of a subsidiary in Czech Republic can be overseen by one of our Czech lawyers with experience in the business field and the creation of firms. This kind of support allows foreigners to start their operations in a fast and reliable manner.
Documents for branches in Czech Republic
The procedures for registering a branch in the Czech Republic are not complex and can be properly managed by one of our advisors. In terms of paperwork, it is required complete attention from the start, so here are a few of the documents solicited by the registration authorities:
- The decision of branch formation in Czech Republic, signed by owners and managers of the parent company.
- The Certificate of Incorporation of the foreign company.
- Information about the address of the new branch.
- A copy of the Trade License issued by the local authorities.
If you decide on branch registration in Czech Republic, you are invited to discuss with our specialists and see how they can help you from a legal point of view. Moreover, if you are interested in complete legal services for your new business in Czech Republic, we mention that our specialists can provide complete counseling and representation for litigation cases and more.
Timeframe for branches and subsidiaries registration
The incorporation of a business in Czech Republic is a straightforward process and can be done relatively fast if all the documents are submitted correctly to the relevant authorities. Because the limited liability company is the right type of structure, the incorporation formalities are rapid and simple. Plus, the support of our Czech attorneys will prove extremely helpful right from the start for foreigners interested in business operations in this country.
Bank accounts for subsidiaries and branches
Just like any kind of company, branches, and subsidiaries having financial operations need corporate bank accounts opened in the Czech Republic. Business owners must choose the right type of banking services for their future operations, then comply with the formalities presented for opening the corporate bank account. This is another important aspect that enters the attention of our specialists. Please send your inquiries to our Czech lawyers if you need support and complete guidance for opening a bank account.
Branches vs. subsidiaries – advantages and more
While the branch is dependent on the parent company, the subsidiary enjoys 100% independence. Such entities are established following the business needs of an investor who decides on starting the operations in a particular country, in this case, the Czech Republic. We present you a few interesting aspects you should verify and consider before choosing between a branch or a subsidiary:
- The foreign company oversees the activities of a branch anywhere in the world.
- The registration of a branch or a subsidiary is not complex. There are no restrictions, and the activities can start fast.
- In terms of costs, subsidiaries require a specific capital which is normally higher compared to the ones of a subsidiary.
- Taxation of branches is more relaxed compared to the ones of a subsidiary.
- Both entities are protected by the double taxation treaties signed by Czech Republic with countries worldwide.
- While branches are obliged to develop the same activities as the parent company, the subsidiary can have other operations too.
International entrepreneurs might also want to know a few facts and figures that highlight the business direction and the economy of Czech Republic before business formation:
- In matters of total FDIs, more than USD 170 billion have been registered in 2019.
- The 2020 Doing Business report issued by the World Bank ranked Czech Republic 41st out of 190 worldwide economies for simplified business formalities and more.
- Luxembourg, Austria, Germany, USA, and the Netherlands are the major investors in the Czech Republic.
- Most of the FDIs in Czech Republic are absorbed by the manufacturing sector, the most prolific one.
Our law firm in Czech Republic can offer more details on the regulations referring to branches and subsidiaries registered here in 2021. Please contact our attorneys for assistance.