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Czechia, or the Czech Republic, is a landlocked nation in Central Europe. It is bounded to the south by Austria, to the west by Germany, to the northeast by Poland, and to the southeast by Slovakia. The Czech Republic has a hilly environment with a largely moderate continental and oceanic climate, covering an area of 78,871 square kilometers (30,452 square miles). Prague is the capital and biggest city; other significant cities and urban regions include Brno, Ostrava, Plze, and Liberec.
Under Great Moravia, the Duchy of Bohemia was established in the late ninth century. In 1002, it was legally acknowledged as an Imperial State of the Holy Roman Empire, and in 1198, it became a monarchy. The whole Crown of Bohemia was progressively absorbed into the Habsburg Empire after the Battle of Mohács in 1526. The Thirty Years' War was precipitated by the Protestant Bohemian Revolt. The Habsburgs cemented their authority after the Battle of White Mountain. When the Holy Empire was dissolved in 1806, the Crown lands became part of the Austrian Empire.
The Czech lands grew increasingly industrialized in the nineteenth century, and with the fall of Austria-Hungary during World War I, the majority of them became part of the First Czechoslovak Republic in 1918. Throughout the interwar era, Czechoslovakia was the only nation in Central and Eastern Europe to maintain a parliamentary democracy. Following the Munich Agreement in 1938, Nazi Germany gradually assumed control of the Czech territories. Czechoslovakia was regained in 1945 and, after a coup in 1948, became an Eastern Bloc communist state. Attempts at government and economic liberalization were thwarted by a Soviet-led invasion of the nation during the Prague Spring in 1968. The Velvet Revolution ended communist control in the nation in November 1989, and Czechoslovakia was dissolved on January 1, 1993, with its component republics becoming the separate states of the Czech Republic and Slovakia.
The Czech Republic is a developed nation with a unitary parliamentary republic and a high-income social market economy. It is a welfare state that follows the European social model and provides universal health care and tuition-free higher education. It is ranked 12th in the UN Human Development Index in terms of inequality, and 24th in the World Bank Human Capital Index. It is ranked ninth in terms of safety and peace, and 31st in terms of democratic administration. The Czech Republic belongs to NATO, the European Union, the OECD, the OSCE, and the Council of Europe.
Employees are entitled to four weeks of paid vacation (20 days). To obtain this allotment, the employee must work for the same company for at least 60 days without interruption.
Czech Republic recognizes 13 public holidays.
During the first 14 days of sickness, the employee is entitled to 60% of their daily pay, as long as the employee meets the eligibility requirements.
A mother is entitled to 28 weeks of maternity leave in the Czech Republic, or 37 weeks if she has several children. The leave must begin at least 8 weeks before the expected due date and end no less than 6 weeks before the expected due date. Maternity leave is paid at 70% of the daily wage, but the balance is determined by the amount of social security contributions made by the employee. In addition, you must take at least 14 weeks of maternity leave.
In the first seven weeks, new fathers will take leave in place of the mother.
The mother is entitled to parental leave until her maternity leave ends, and the father is entitled to leave from the birth of the infant before the child hits the age of three. This leave is only available while the infant is cared for at home.
Parents are entitled to a cumulative payment of 220,000 CZK before their child is four years old, or 330,000 CZK if they have several children.
Employers and employees can mutually agree to end employment. Both sides must agree on a termination date, and the employer must offer a written justification. Employers may terminate employment by providing written notice that includes a cause for the termination. Without a documented justification, the termination is void. Employees may immediately end their job if they present documented justifications. Employers have the option of terminating employment when temporary work or a project is done.
A minimum of two months' notice is necessary.
The probation period is three months.
When an employee is terminated for "organizational reasons," the following levels of severance pay are applicable: If the employer-employee relationship lasted shorter than a year, one month's earnings; 2 months' income if the employer-employee connection lasted at least one year but not more than two years; 3 months' salary if the employer-employee relationship lasted at least two years.
A 40-hour work week, or eight hours per day, is considered full-time. A shift cannot exceed 12 hours in duration.
Overtime work is permitted only in exceptional circumstances and cannot exceed 150 hours in a calendar year. Overtime is paid at 125 percent of the standard rate and is limited to eight hours per week or 150 hours per year.
If the employee and employer agree on work beyond regular hours, overtime cannot exceed 8 hours per week for a period of more than 26 consecutive weeks. If a collective bargaining agreement exists, overtime may be increased.
The maximum amount of overtime that can be negotiated for managerial positions is 150 hours per year.
Overtime is paid at a rate of 125 percent of the regular rate. Additionally, additional time off can be substituted for overtime pay. Employees are entitled to their wages plus time off for work performed during holidays. Overtime pay is 110 percent of regular wages for weekend work. Nightshift shifts cannot exceed 8 hours in a 24-hour period, and pay is 110 percent of regular wages.
In January 2021, the Czech Republic's compensation laws were amended to increase the minimum wage to CZK 15,200 per month. These laws, however, may vary according to the terms of the collective bargaining agreement.
Employers are required to contribute 9% of each employee's income to the state's health insurance funds. There is no upper limit on the pay basis for health insurance purposes.
Employers occasionally offer private health insurance, although the Czech healthcare system is often regarded as providing high-quality treatment. Employers in the Czech Republic also frequently provide meal coupons.
Legal entities based in the Czech Republic must pay corporate income tax on their global earnings. Foreign corporations are solely taxed on revenue earned in the Czech Republic. The typical corporation tax rate is 19%. Investment funds are taxed at a special rate of 5%, whereas pension funds are taxed at 0%. Dividend income received by Czech tax resident entities from non-resident companies is taxed at a rate of 15%.
Every business taxpayer has the option of taking straight-lined or accelerated depreciation on tangible assets. Depending on the depreciation category, the depreciation time ranges from three to fifty years.
Individuals considered to be tax residents in the Czech Republic pay a flat personal income tax rate of 15% on gross income, and there is a solidarity surcharge of 7% on yearly incomes exceeding 48 times the average monthly salary within the calendar year. Non-tax residents are solely taxed on income earned in the Czech Republic. Employment income, entrepreneurial income, capital (interest, dividends, etc.), rent, and other kinds of income are all taxable.
VAT is levied on the sale of products, the supply of services, and imports, exactly as it is in the rest of the EU. In the Czech Republic, there are three VAT rates, with the normal rate being 21%. This rate is applied to all products and services that are not on a specific list of reduced-tax items.
The first lowered rate is 15%. Groceries and non-alcoholic drinks, plants and animals, music notes, books, and certain medicines are examples of items subject to a 15% tax.
The second discounted rate is 10%. This tax applies to items such as infant food and radiopharmaceuticals. In most cases, the standard rate is applied to imported products. The exception is when the worth of the products is less than 22 EUR, in which case it is free from tax.
Business travellers to the Czech Republic often utilize a local variant of the Schengen C Visa, which foreign citizens must acquire before to arrival in the Czech Republic unless their nationality qualifies them for visa exemption. The Schengen Area restricts stays to 90 days in any 180-day period, calculated cumulatively throughout the Schengen Area.
The Employee Card, a combined work and residency permit for highly trained local workers, is the most common kind of work authorisation. It must be paired with a separate work permit for intracompany transfers, assignments, and secondments. The Employee Card is valid for two years and is renewed.
In the Czech Republic, it is legally obligatory to have a solid, documented employment contract in place. A job description, start date, location, mandatory notice periods, pay and compensation information, collective bargaining information, and information concerning probationary periods, if applicable, should all be included in the contract. A trial period must be written in writing and agreed upon prior to the employee's start date for it to be legitimate. In the Czech Republic, an offer letter and job contract should always mention the salary and any compensation amounts in Czech koruna rather than a foreign currency.
Employment contracts must be in writing and include an employment agreement. Employers have the option of hiring staff on a full-time basis. Contracts for part-time labor must define the hours to be performed. Fixed-term contracts are limited to three years and may only be renewed twice. Seasonal and casual job contracts are for a limited time period.
In the Czech Republic, employment contracts are often completed for an infinite period of time. Fixed-term contracts are permitted, although they cannot last more than three years.
Czech Koruna (CZK)
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Setting up a Czech Republic subsidiary is not an easy operation, but you can make it easier by taking crucial elements into account before you begin. Different localities, such as individual cities or regions, may have their own subsidiary laws in the Czech Republic. Choosing the correct location will make incorporation simpler and may result in lower prices and availability. Before deciding on a physical office space, you should always do research or talk with a professional who can offer a suitable site to integrate.
You may establish your Czech Republic subsidiary as a limited liability company (LLC), a joint-stock company, a free zone business, a branch office, or a representative office. The most typical form is an LLC, which gives you greater flexibility to operate in the Czech Republic as well as advantageous tax rules.
The following are the stages to forming an LLC:
(1) Keeping consistent records for all directors
(2) Before registering with the Trade Licensing Office, notarize statutory declarations and partnership articles.
(3) Obtaining a Commercial Register in order to validate registration
(4) Creating an account with the Social Security Administration and the Revenue Authority
(5) Opening bank accounts in the nation
(6) Paid-up share capital is deposited.
Czech Republic subsidiary rules differ depending on area and company. A single owner may form an LLC with a share capital of 1 EUR. You may nominate just one director, who can be either a human or a business. The director is not required to reside in the Czech Republic in order to comply with the country's subsidiary legislation.
Each year, as an LLC, you must submit financial statements with the tax authorities. You'll need an external audit every year if you fulfill two of the following criteria:
(1) Annual balance sheet in excess of 1.5 million EUR
(2) More than 3 million EUR in annual revenue
(3) There are more than 50 workers.