How to Expand to the Czech Republic as a Swiss Firm:

Are you a Swiss company considering expansion into the heart of Europe? This guide provides specific, practical answers to your most pressing legal questions about entering the Czech market. As a leading Czech law firm in Prague, EU, with deep experience advising foreign clients, ARROWS offers this comprehensive overview to help you navigate the opportunities and challenges. Our English-speaking lawyers are ready to help you make your investment a success.

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. Vojtěch Sucharda", an expert on the subject.

The Czech Republic: Your strategic gateway to the EU arket

For Swiss companies, the Czech Republic is more than a standalone market of 10.5 million people; it is a strategic and stable gateway to the entire European Union single market. The country boasts a highly educated and skilled workforce, competitive wage costs, and a strong industrial infrastructure, making it an attractive operational hub.

Beyond these economic fundamentals, the Czech-Swiss relationship is reinforced by a robust legal framework that provides security and predictability for your investment. The two nations have a long-standing Bilateral Investment Treaty (BIT) and a Double Taxation Treaty (DTT). These agreements are not mere formalities; they are legally binding guarantees that protect your assets from unfair expropriation, ensure fair and equitable treatment, and prevent your profits from being taxed twice.

This legal infrastructure transforms a potential business expansion into a legally de-risked strategic investment. Understanding and leveraging these treaties is key to maximizing the security and financial efficiency of your Czech operations.

Choosing your corporate structure: A comparison for Swiss investors

Selecting the right legal entity is the foundational decision for your Czech venture. While several options exist, the vast majority of foreign investors, including those from Switzerland, choose the limited liability company for its flexibility and protection.

The Limited Liability Company (s.r.o.) – The preferred choice

The Czech společnost s ručením omezeným (s.r.o.) is the most common and versatile corporate form, analogous to the Swiss GmbH. It offers a crucial liability shield, meaning the company’s debts and obligations are separate from the assets of its shareholders, protecting your parent company in Switzerland.

The governance structure is straightforward, requiring at least one executive director, known as a jednatel, who manages the company's day-to-day affairs. Crucially for Swiss businesses, there are no residency requirements for shareholders or directors, allowing you to appoint management from your Swiss headquarters.

The s.r.o. vs. the Swiss GmbH – Key practical differences

While the s.r.o. and GmbH serve similar purposes, Swiss business leaders must be aware of critical differences in Czech law that have significant practical implications.

The most striking difference is the minimum share capital. A Swiss GmbH requires a substantial contribution of at least CHF 20,000. In contrast, a Czech s.r.o. can be legally established with a share capital of just CZK 1 (approximately CHF 0.04). For capital contributions under CZK 20,000 (approx. CHF 800), a simple written declaration from the founder is sufficient, avoiding the need to open a special bank account.

This exceptionally low capital requirement is not merely a low barrier to entry; it signals a fundamental difference in legal philosophy. The Swiss system relies on a capital buffer for initial creditor protection. The Czech system, aligned with modern EU law, places the burden of protection on the ongoing conduct and personal responsibility of the company's director. This creates a hidden risk for Swiss directors who may be unprepared for the intense legal scrutiny of their management decisions.

The Joint-Stock company (a.s.) – For larger ventures

For larger-scale investments, significant capital-raising needs, or plans to eventually list on a stock exchange, the akciová společnost (a.s.) is the appropriate choice. This structure is more complex, requiring a minimum share capital of CZK 2 million (approx. CHF 80,000).

The corporate governance of an a.s. is also more formal, typically requiring a dualistic system with a Board of Directors (představenstvo) and a Supervisory Board (dozorčí rada), a framework familiar to those managing larger corporate structures. It also faces stricter financial reporting and disclosure requirements.

FAQ – Legal tips about Czech corporate forms

1. What is the real cost of starting an s.r.o.?

While the minimum share capital is just CZK 1, you must budget for notary fees, official translations, and legal fees. More importantly, a company with nominal capital may face credibility issues with banks and suppliers. We advise on a capital level that ensures operational viability. For a consultation, email us at office@arws.cz.

2. Can our Swiss holding company be the sole owner of a Czech s.r.o.?

Yes, a single shareholder, whether an individual or a foreign company like a Swiss AG or GmbH, can establish and own 100% of a Czech s.r.o. Our lawyers can structure this for you. Need legal help? Contact us at office@arws.cz.

3. Is a branch office a better option?

A branch office (odštěpný závod) is simpler to register but is not a separate legal entity. This means your Swiss parent company is fully and directly liable for all debts and obligations of the Czech branch. The s.r.o. is almost always the safer choice to protect your Swiss assets. Get tailored legal solutions by writing to office@arws.cz.

Corporate establishment risks and solutions

Risks and penalties	How ARROWS helps
Company name rejected: Using a non-unique name delays registration and requires new notarized documents, wasting time and money.	Company Name Check & Reservation: We verify name availability in the Commercial Register to ensure first-time approval. Need to secure your company name? Email us at office@arws.cz.
Registration blocked due to improper documents: Failure to provide apostilled and officially translated documents from Switzerland (e.g., criminal record, corporate extract) is a common cause of failure.	Documentation Management & Apostille Guidance: We manage the entire documentation process, including coordinating with official translators, to ensure full compliance. For immediate assistance, write to us at office@arws.cz.
Operational difficulties from under-capitalization: A CZK 1 company may struggle to open bank accounts or secure contracts due to perceived lack of credibility.	Strategic Legal Consultation: We advise on an appropriate capital level that balances legal minimums with business credibility. Get tailored legal solutions by writing to office@arws.cz.
Invalid director appointment: Submitting incorrect criminal record extracts or failing to meet eligibility criteria for the jednatel can void the appointment.	Director Vetting & Appointment: We ensure all director candidates meet Czech legal requirements and prepare the necessary declarations. Our lawyers are ready to assist you – email us at office@arws.cz.

A step-by-step guide to company formation in the Czech Republic

The company formation process in the Czech Republic is efficient if managed correctly. However, for a Swiss founder, it contains a critical dependency: the proper authentication of Swiss documents. Overlooking this step can derail the entire timeline.

Pre-Registration Decisions:

Before any legal drafting, you must finalize the company name, secure a registered office, and define your business activities. The name must be unique and can be checked in the online Commercial Register (Obchodní rejstřík). A physical address is required, for which you must have the property owner's notarized written consent.

Document Preparation (The Apostille Requirement):

This is the most common bottleneck for foreign founders. All public documents issued in Switzerland—such as the criminal record extract for each director and the commercial register extract for a corporate founder—must be authenticated with an Apostille under the 1961 Hague Convention. After apostillation, the documents must be translated into Czech by an official translator registered with a Czech court. Without these two steps, your documents are legally invalid in the Czech Republic.

Notarization of Founding Documents:

The company's constitutional document—either a Deed of Foundation (Zakladatelská listina) for a single founder or a Memorandum of Association (Společenská smlouva) for multiple founders—must be executed in the form of a notarial deed before a Czech notary.

Capital Deposit:

As noted, for share capital below CZK 20,000, the founder simply provides a written declaration to the notary confirming the deposit has been made. This simplifies the process significantly compared to systems requiring a dedicated bank account for all capital levels.

Obtaining a Trade License:

Before the company can operate, it must obtain a trade license (Živnostenský list) from the Trade Licensing Office. For most standard business activities (e.g., consulting, wholesale trade, IT services), a single "free trade" license covers dozens of fields and is straightforward to obtain.

Entry into the Commercial Register:

This is the final step that brings your company into legal existence. A major advantage of the Czech system is that the notary who prepares your founding deed can also perform a direct electronic registration into the Commercial Register (Obchodní rejstřík), often within a few business days.23 The company is then assigned its unique 8-digit identification number (IČO).

Post-Registration Obligations:

Once registered, the company must register with the Financial Office for corporate income tax within 15 days.22 If you plan to hire employees, you must also register with the Social Security Administration and a health insurance company.

Corporate governance: Understanding the role and risks of the Czech director (Jednatel)

For a Swiss executive appointed as a director (jednatel) of a Czech s.r.o., understanding the scope of your duties and personal liability is paramount. The Czech legal framework places a heavy burden of responsibility on the jednatel, which may exceed expectations based on Swiss corporate law.

The jednatel is the company’s statutory body, responsible for all aspects of business management, representing the company in all dealings, signing contracts, and ensuring full legal and tax compliance. This role is governed by a fundamental legal principle known as the duty of due managerial care (péče řádného hospodáře).

This duty requires a director to act with loyalty, integrity, and the knowledge and care that a reasonably prudent person would exercise in a similar position. Crucially, if the company suffers damages and a director's decision is challenged, the burden may fall on the director to prove they acted with due managerial care. This is a significant departure from systems where a claimant must prove negligence.

Failure to meet this standard can lead to severe personal consequences, including:

• Personal liability for damages caused to the company through a breach of duty.
• Liability for the company's debts if the director’s actions lead to the company's insolvency.
• A legal obligation to file for insolvency without undue delay if the company is unable to meet its financial obligations. Failure to do so can result in personal liability for debts incurred after this point.

FAQ – Legal tips about director liability

1. Can I be a director of a Czech s.r.o. while living in Switzerland?

Yes, you can manage the company remotely from Switzerland, as there is no residency requirement. However, your legal duties and potential liability under Czech law remain exactly the same. For a consultation on managing these duties from abroad, email us at office@arws.cz.

2. How can I protect myself from personal liability?

Meticulously document the rationale for all significant business decisions. Keep detailed minutes of meetings, seek expert opinions (legal, financial) where appropriate, and ensure you have a formal director's service agreement. Our firm provides professional training for directors on their duties. For immediate assistance, write to us at office@arws.cz.

Navigating the tax landscape: A Swiss-Czech comparison

The Czech tax system is relatively straightforward and competitive, offering clarity for Swiss investors. The key is to understand the main corporate taxes and leverage the bilateral treaty that prevents double taxation.

Corporate Income Tax (CIT): The Czech Republic has a flat CIT rate of 21% (for 2024/2025). This single rate applies to all profits of a Czech-resident company, including capital gains, and is often more predictable than the Swiss system of federal, cantonal, and communal taxes.

Value Added Tax (VAT): The standard VAT rate is 21%. A company becomes a mandatory VAT payer once its turnover exceeds CZK 2 million (approx. CHF 80,000) in any consecutive 12-month period. Cross-border transactions within the EU have specific VAT rules that require careful management.

The Double Taxation Treaty (DTT): This is the most important tool for financial efficiency. The DTT between the Czech Republic and Switzerland ensures that profits are not taxed twice—once as corporate profit in the Czech Republic and again as income when repatriated to the Swiss parent company. The treaty allows for significantly reduced withholding tax rates on dividends, interest, and royalties paid from the Czech subsidiary to its Swiss parent, overriding the higher domestic Czech rates.

As an international law firm operating from Prague, European Union, ARROWS has extensive experience in structuring foreign investments to maximize the benefits of the Czech Republic's extensive network of tax treaties.

Tax and Financial Compliance Risks

Risks and penalties	How ARROWS helps
Penalties for late tax registration: Failure to register for CIT within the 15-day deadline after incorporation can lead to fines.	Post-Incorporation Compliance: We manage all mandatory registrations with the Tax Office, ensuring deadlines are met from day one. Need legal help? Contact us at office@arws.cz.
Incorrect VAT filings: Misunderstanding the rules for cross-border EU transactions can lead to incorrect VAT declarations and penalties.	Tax Advisory & Legal Opinions: Our experts provide clear guidance on VAT obligations for international trade. Get tailored legal solutions by writing to office@arws.cz.
Excessive withholding tax on profit repatriation: Failure to correctly apply the Double Taxation Treaty can result in paying the higher domestic withholding tax rate, reducing profits returned to Switzerland.	International Tax Structuring: We structure your investment to fully leverage the benefits of the Czech-Swiss DTT. For immediate assistance, write to us at office@arws.cz.

Czech employment law: Critical differences from the Swiss system

For Swiss employers, the Czech labor market presents one of the most significant legal and cultural adjustments. While Swiss employment law is known for its liberal, contract-based approach, Czech law is highly regulated and protective of the employee, who is considered the weaker party in the relationship.

Hiring: All employment relationships must be based on a written contract that includes mandatory elements, such as the exact type of work, the place(s) of work, and the start date. Using a translated Swiss employment contract is a common and costly mistake, as it will likely be non-compliant and parts may be unenforceable.

Termination of Employment: This is the most critical difference. Under Swiss law, employers generally have the freedom to terminate an employment contract with proper notice. In the Czech Republic, an employer can only terminate an employee for a "just cause" reason that is explicitly listed in the Labour Code, such as redundancy, long-term health issues, or proven gross misconduct. Terminating an employee without one of these legally defined reasons will be ruled invalid by a court.

Working Hours and Benefits: The standard work week is legally capped at 40 hours, with strict rules governing overtime pay and limits. Employees are entitled to a minimum of four weeks of paid annual leave, in addition to public holidays, paid sick leave, and generous maternity and parental leave provisions that often exceed EU minimums.

Data protection: From Switzerland's FADP to the EU's GDPR

As a Swiss company, you are familiar with the revised Swiss Federal Act on Data Protection (FADP). However, once you establish a company in the Czech Republic, your operations there fall under the direct jurisdiction of the European Union's General Data Protection Regulation (GDPR). While the two laws are aligned in principle, there are crucial operational differences you must manage to avoid severe penalties.

Scope and Sanctions: The GDPR applies because your Czech entity will be processing the personal data of individuals within the EU. The penalty structure is a major distinction. The GDPR imposes fines on the company, which can reach up to €20 million or 4% of your company's total worldwide annual turnover, whichever is higher. This is a fundamentally different and higher-stakes risk compared to the revised FADP, which primarily fines the responsible individual up to CHF 250,000.

Data Breach Notification: The GDPR mandates a strict 72-hour deadline for reporting a data breach to the supervisory authority after becoming aware of it. The FADP is more flexible, requiring notification "as soon as possible." This means your Czech operations need a much more rapid and rehearsed incident response plan.

Data Protection Officer (DPO): Under the GDPR, your company may be legally required to appoint a DPO if you engage in large-scale data processing or systematic monitoring. In Switzerland, appointing a Data Protection Advisor is recommended but generally not mandatory.

Data Protection and GDPR Compliance Risks

Risks and penalties	How ARROWS helps
Massive fines for non-compliance: Breaching GDPR can result in fines of up to €20 million or 4% of global annual turnover, a significantly higher risk than under Swiss FADP.	GDPR Compliance Audits & Policy Drafting: We assess your data processing activities and draft the internal policies and documentation needed for GDPR compliance. Do not hesitate to contact our firm – office@arws.cz.
Failure to report a data breach in time: Missing the strict 72-hour GDPR notification deadline can lead to severe penalties, even if the breach itself was minor.	Breach Response Planning & Legal Consultation: We help you establish a compliant data breach response plan and provide urgent legal advice if a breach occurs. Need legal help? Contact us at office@arws.cz.
Unlawful data transfer: Transferring personal data from the Czech Republic to Switzerland (a non-EU country) without a proper legal basis, like Standard Contractual Clauses (SCCs), is a serious GDPR violation.	Cross-Border Data Transfer Solutions: We draft and review SCCs and other mechanisms to ensure your international data flows are legal. Our lawyers are ready to assist you – email us at office@arws.cz.

Safeguarding your Swiss investment in the Czech Republic

The legal relationship between Switzerland and the Czech Republic provides a multi-layered shield for your investment, covering everything from sovereign risk to commercial disputes.

Bilateral Investment Treaty (BIT): The Czech-Swiss BIT offers powerful protections directly to you as a Swiss investor. It guarantees fair and equitable treatment and protects your investment against expropriation by the state unless it is for a public purpose, non-discriminatory, and includes prompt, adequate, and effective compensation. Critically, the BIT gives you the right to bypass local courts and resolve disputes with the Czech state through international arbitration.

Real Estate Acquisition: The Czech real estate market is fully open to Swiss companies. You can directly purchase commercial property, industrial sites, or office buildings under the same conditions as a local Czech entity. Legal ownership is established upon registration of the written purchase contract in the public Land Register, a process that is transparent and secure.

Enforcement of Judgments (The Lugano Convention): Should you have a commercial dispute with a Czech partner and win a judgment in a Swiss court, the Lugano Convention provides a streamlined and effective mechanism for having that judgment recognized and enforced by Czech courts. This prevents a debtor from hiding behind borders and ensures that your legal victories in Switzerland have real-world effect in the Czech Republic.

Your legal partner for success in the Czech Republic

Expanding into the Czech Republic offers Swiss companies significant strategic advantages, but success requires navigating a legal environment that is fundamentally different from your own. From the heavy personal liability of a company director to the protective nature of labour law and the stringent demands of GDPR, local expertise is not a luxury—it is essential for managing risk and ensuring a smooth market entry.

ARROWS, an international law firm operating from Prague, European Union, is uniquely positioned to be your partner. We support over 250 limited liability companies and 150 joint-stock companies, combining deep knowledge of Czech law with a nuanced understanding of the challenges faced by foreign investors. Through our ARROWS International network, built over 10 years, we provide seamless legal support across 90 countries, ensuring your Czech operations are perfectly integrated with your global strategy.

We provide a full suite of services, including company formation, drafting of internal policies, contract review, representation before courts and authorities, and professional training for your management team. For a seamless entry into the Czech market, contact our expert team today. Get tailored legal solutions by writing to office@arws.cz.

FAQ – Most common legal questions about doing business in the Czech Republic

1. What is an Apostille and why is it essential for my Swiss documents?

An Apostille is an official certificate that authenticates a public document (like a criminal record or commercial register extract) for use in another country. As both Switzerland and the Czech Republic are signatories to the 1961 Hague Convention, this is a mandatory step. Without an Apostille, your Swiss documents will be rejected by Czech notaries and authorities, and your company registration will fail. Our lawyers ensure all your documentation is correctly prepared and authenticated. For assistance, email us at office@arws.cz.

2. As a director of our new Czech s.r.o., what is my single biggest liability risk?

Your biggest risk is breaching the "duty of due managerial care" (péče řádného hospodáře). This requires you to prove you acted with the necessary knowledge, loyalty, and diligence. Failure to do so, especially if it leads to the company's insolvency, can result in personal liability for the company's debts. Meticulously documenting your decision-making is your best defense. Our firm provides professional training on director duties. For immediate assistance, write to us at office@arws.cz.

3. Is it difficult for a Swiss company to acquire real estate in the Czech Republic?

No. A Swiss company has the same rights as a Czech company to purchase property. The process is straightforward, involving a written purchase agreement with certified signatures and registration in the public Land Register, which establishes legal ownership. ARROWS provides full legal support for real estate transactions. Need legal help with property acquisition? Contact us at office@arws.cz.

4. How are business disputes with Czech partners typically resolved?

Disputes can be resolved through litigation in Czech courts or via arbitration. Arbitration is often faster, confidential, and more flexible, making it a popular choice for international commercial disputes. This choice should be a strategic decision specified in your contracts. Our lawyers are experienced in both litigation and international arbitration. Get tailored legal solutions by writing to office@arws.cz.

5. Can our Swiss employment contracts be used for our Czech employees?

Absolutely not. This is a critical mistake. Czech labour law is highly protective and mandates specific contractual terms. Using a Swiss contract would likely be non-compliant, rendering key clauses (like termination provisions) unenforceable and exposing your company to wrongful termination claims. We draft fully compliant Czech employment contracts. Do not hesitate to contact our firm – office@arws.cz.

6. How does the Czech-Swiss tax treaty help my business?

The treaty's main benefit is preventing double taxation and enabling efficient profit repatriation. It significantly reduces the withholding tax that your Czech subsidiary must pay when sending dividends, interest, or royalties back to your parent company in Switzerland. This ensures a much higher portion of your profits makes it home. Our tax experts can structure your investment to maximize these benefits. For a tax consultation, email us at office@arws.cz.

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