Sole Trader vs Ltd (s.r.o.) for E‑Shops: Taxes, VAT and 2026 Costs

Mgr. Dita Zbožínková, LL.M.
Mgr. Dita Zbožínková, LL.M.
18.5.2026 | ARROWS law firm

If you are considering selling accessories through an e-shop, choosing the right legal form of business is crucial. The tax implications differ significantly and affect tax rates, social security and health insurance contributions, bookkeeping requirements, and VAT. The difference between a sole trader (OSVČ) and a limited liability company (s.r.o.) can amount to hundreds of thousands of Czech crowns per year. We will show you specific figures on when each form pays off and what legal pitfalls to watch out for.

In the image, we see a lawyer addressing the issue of choosing the appropriate legal form of business.

Quick summary:
  • Tax rate: OSVČ pay 15% income tax (up to 36 times the average wage) or 23% (above the threshold); an s.r.o. pays 21% corporate income tax, plus 15% withholding tax on profit distributions
  • Social security and health insurance: In 2026, OSVČ pay at least CZK 5,720 in social security and CZK 3,306 in health insurance per month; paid insurance contributions are a tax-deductible expense; an s.r.o. depends on the number of employees and their wages
  • VAT registration: Both entities become VAT payers upon exceeding CZK 2 million in turnover over 12 immediately preceding consecutive calendar months; the deadline for filing the registration is max. 10 working days
  • Resulting profit: With lower turnover (up to approx. CZK 2 million), OSVČ is usually more advantageous thanks to the basic taxpayer tax credit; above CZK 2–3 million, an s.r.o. tends to be more beneficial due to the option to retain profit in the company taxed at 21% and the protection of personal assets

Legal form of business: a key choice with tax implications

When deciding whether to sell supplements as an individual (OSVČ) or to set up an s.r.o., it is not just about administration. It is about what tax you will pay, what risk you will bear, and how much you will be able to optimise your profit. In practice, it is worth consulting tax law when setting up taxation, expenses and related obligations. Both forms have their place and purpose—you just need to clearly understand their scope.

OSVČ (a self-employed individual) is an individual from both a tax and legal perspective, even though they carry out independent activity. This means that if your e-shop causes a liability or damage, you are liable for it with all your personal assets—i.e., including your house, car, and bank deposits. This obligation follows from Act No. 89/2012 Coll., the Civil Code (Czech Republic). On the other hand, setting it up is very simple and inexpensive.

An s.r.o. (a limited liability company) is a legal entity that exists independently of you. It is liable only up to the amount of the unpaid contribution of the shareholder recorded in the Commercial Register. The Business Corporations Act allows a minimum contribution of CZK 1; in practice, however, for credibility and initial capital it is recommended to contribute a higher amount. The founder therefore has protection of personal assets, but in return must deal with accounting, the Collection of Deeds and more complex administration. This distinction is directly reflected in the taxes you pay and the obligations you have. If, during a subsequent review, you discover an error in records or accounting, it may be appropriate to proceed according to the article Additional tax return: How to proceed when an error is discovered in accounting and reduce the risk of high penalties.

Income tax: rates and calculation in 2026

The choice between OSVČ and an s.r.o. is not only a matter of administration or liability, but also of the method of taxation. While OSVČ tax income directly as an individual at a progressive rate, an s.r.o. is taxed first at the company level and then again when profit is paid out to the shareholder.

1. OSVČ: two-tier progressive rate

As a self-employed individual, in 2026 you have the following tax regime under Act No. 586/1992 Coll., on Income Taxes:

The 15% tax applies to the tax base up to 36 times the average wage. The average wage for the purposes of the Income Taxes Act in 2026 is CZK 48,967, so 36 times is CZK 1,762,812. Up to this threshold falls your tax base after deducting expenses and paid social security and health insurance contributions.

The 23% tax applies to the part of the tax base that exceeds this threshold. It is a progressive rate that applies only to the excess.

In addition, you are entitled to the basic taxpayer tax credit of CZK 30,840 per year (or CZK 2,570 per month), as provided by the Income Taxes Act. This credit is deducted from the calculated tax. To correctly set up income and expense records (including handling insurance contributions and tax deductions), accounting services are also often addressed.

Example: If, as an OSVČ, you have a tax base of CZK 1,000,000 for the year (after deducting expenses and insurance contributions), your tax is calculated as follows:

  • The tax base (CZK 1,000,000) is below the threshold (CZK 1,762,812).
  • Tax = CZK 1,000,000 × 15% = CZK 150,000
  • Taxpayer tax credit = CZK 30,840
  • Final tax = 150,000 – 30,840 = CZK 119,160

If you had a tax base of CZK 2,000,000:

  • Part up to the threshold (CZK 1,762,812) × 15% = CZK 264,421.8
  • Part above the threshold = (2,000,000 – 1,762,812) CZK = CZK 237,188 × 23% = CZK 54,553.24
  • Total tax before the credit = 264,421.8 + 54,553.24 = CZK 318,975.04
  • After deducting the taxpayer tax credit = 318,975 – 30,840 = CZK 288,135 (rounded)
2. S.r.o.: two-tier taxation

As an s.r.o., you pay 21% corporate income tax on your taxable income (profit after deducting all costs). This rate does not apply with any thresholds—the amount of profit does not matter; it is a flat 21%.

When you then withdraw profit as a profit distribution, the company must withhold 15% withholding tax (if you are an individual and the sole shareholder), under the Income Taxes Act. This is the second tier of taxation.

Example: If an s.r.o. has a profit of CZK 1,000,000:

  • Corporate income tax = 1,000,000 × 21% = CZK 210,000
  • Profit after tax = 1,000,000 – 210,000 = CZK 790,000
  • You pay out CZK 790,000 as a profit distribution
  • Withholding tax = 790,000 × 15% = CZK 118,500
  • Your net income = 790,000 – 118,500 = CZK 671,500

At first glance, it may look worse, but this is exactly where there is room for optimisation. However, ongoing cash withdrawals from a company (e.g., in the form of advances) are subject to specific rules, which are summarised in the article Advances on profit distribution: Tax and accounting implications of ongoing withdrawals of company cash. If you reinvest part of the profit back into the business, you reduce its taxable profit and therefore the tax. A self-employed individual (OSVČ) does not have this option – regardless of whether you take the money out or leave it in the business, it is taxed the same way.

Comparison using specific figures

1. Self-employed individual (OSVČ) with 60% flat-rate expenses:

  • Income = CZK 500,000
  • Flat-rate expenses (60%) = CZK 300,000
  • Profit for the calculation of insurance contributions / before corporate income tax (DPPO) = CZK 200,000
  • Social security contributions paid = CZK 68,640 (min. 12 × CZK 5,720)
  • Health insurance contributions paid = CZK 39,672 (min. 12 × CZK 3,306)
  • Tax base (after deducting expenses and insurance contributions) = CZK 91,688
  • Income tax (15% of CZK 91,688) = CZK 13,753
  • Taxpayer allowance = -CZK 30,840
  • Final tax after the allowance = CZK 0
  • Total tax and insurance burden = CZK 0 (tax) + CZK 68,640 (social security) + CZK 39,672 (health insurance) = CZK 108,312
  • How much of the income remains for the entrepreneur = CZK 500,000 - CZK 108,312 = CZK 391,688

2. Limited liability company (s.r.o.) with the same actual expenses of 60% (CZK 300,000):

  • Income = CZK 500,000
  • Actual expenses (e.g., managing director’s remuneration, accountant, rent, etc.) = CZK 300,000
  • Profit for the calculation of insurance contributions / before corporate income tax (DPPO) = CZK 200,000
  • Corporate income tax (21%) = CZK 42,000
  • Profit after tax = CZK 158,000
  • If you withdraw the profit as a profit share (dividend), withholding tax = 158,000 × 15% = CZK 23,700
  • Accountant costs (average) = CZK 18,000 per year
  • Total tax and other burden (corporate income tax + withholding tax + accountant) = 42,000 + 23,700 + 18,000 = CZK 83,700
  • How much of the income remains for the entrepreneur (in the form of dividends) = 158,000 - 23,700 = CZK 134,300

Conclusion: With income of CZK 500,000, being self-employed (OSVČ) is significantly more advantageous in terms of the money that remains available to the entrepreneur. For an OSVČ, CZK 391,688 is available, whereas for an s.r.o. it is CZK 134,300. Here, an OSVČ with minimum insurance contributions and the taxpayer allowance clearly wins.

At turnover of around CZK 2 million, the situation starts to level out. At turnover above CZK 2.5–3 million, an s.r.o. gradually becomes more advantageous.

Why? Because for an OSVČ, social security and health insurance contributions increase in proportion to higher profit, and tax progression (23%) starts to apply to profit above CZK 1,762,812. With an s.r.o., you can leave part of the profit in the business and keep it taxed at the lower 21% rate, which allows future reinvestment without additional taxation.

Social security and health insurance for self-employed individuals (OSVČ)

Social security and health insurance contributions paid are tax-deductible expenses for an OSVČ under the Czech Income Taxes Act. They therefore reduce the tax base from which income tax is calculated. Although you pay them to the accounts of the relevant insurance institutions, in the end they reduce your tax liability. However, their amount depends on the profit achieved and on the statutory minimum assessment bases.

In 2026, the minimum assessment base for calculating these contributions increased to 40% of the average wage, under the Czech Pension Insurance Act and the Czech Public Health Insurance Act. With an average wage of CZK 48,967, this means a minimum monthly assessment base of approximately CZK 19,587.

Minimum monthly advance payments for OSVČ in 2026 (main activity), according to the Czech Social Security Administration and the Ministry of Health:

  • Social security: at least CZK 5,720 per month (29.2% of CZK 19,587)
  • Health insurance: at least CZK 3,306 per month (13.5% of 50% of the average wage, i.e., of CZK 24,483.5)

Newly starting OSVČ pay the standard minimum advance payments from the outset, the same as other OSVČ whose activity is their main activity.

For secondary activity, the minimum advance payment for social security is calculated as one quarter of the minimum advance payment for main activity, i.e., CZK 1,430 per month (CZK 5,720 / 4). For health insurance, no advance payments are made for secondary activity; any additional payment is made only after filing the annual statement. The decisive threshold amount for social security for secondary activity in 2026 is CZK 146,901 per year.

This means that even if you earn almost nothing, you will have to pay at least approximately CZK 9,026 (5,720 + 3,306) every month for social security and health insurance. You can then deduct these paid amounts from your income tax base.

The actual advance payments are calculated from your income, and if your profit for the year increases, the advance payments will also increase. No later than three months after the end of the year, you must file a statement of income and expenses with your health insurance company and the CSSA. If you have paid more than your annual contribution should have been, you will receive a refund. If you have paid less, you will have to pay the difference.

Most common questions about social security and health insurance for OSVČ

1. Do I have to pay social security if I have no income?
Yes. Even if your e-shop has not earned a single crown yet, you are legally required to pay the minimum monthly advance payments for social security and health insurance if this is your main activity. This is one of the main financial obligations for OSVČ and often comes as a surprise to new entrepreneurs.

2. Can my social security rate be reduced if I set up secondary activity?
Yes, but only in certain situations. If your activity is secondary (for example, you are employed, you are a student/pensioner, and you sell dietary supplements in your spare time), you may pay a lower advance payment or, in certain cases, you may not have to pay advance payments at all if the profit from the secondary activity does not exceed the decisive threshold amount (for 2026, the decisive threshold amount for social security is CZK 146,901 per year).

3. What happens if I am unable to pay social security?
You will incur arrears in insurance contributions and so-called debt movement may occur. In such cases, the CSSA often sends reminders and may ultimately enforce its claim through the courts, which can result in enforcement proceedings. In addition, penalties and default interest accrue, which may affect your future pension.

VAT registration and thresholds in 2026

In 2026, the following rules apply under Act No. 235/2004 Coll., on Value Added Tax. You are required to register for VAT if:

Your turnover for the 12 immediately preceding consecutive calendar months exceeded CZK 2,000,000. In that case, you become a VAT payer from the first day of the second calendar month following the month in which the threshold was exceeded.

If you sell goods at a distance (e-shop) to consumers in other EU Member States and your total turnover from these sales exceeds EUR 10,000 in a calendar year (approximately CZK 253,650 at an exchange rate of CZK 25.365/EUR).

This threshold applies to the total value of goods shipped from the Czech Republic to all other EU Member States, under Council Directive 2006/112/EC. In such a case, you must register for VAT under the One Stop Shop (OSS) scheme in the Czech Republic (or in another EU Member State) and remit VAT at the rates applicable in the destination countries.

The deadline for filing the VAT registration application is 10 business days from the date you become a VAT payer (i.e., from the first day of the second calendar month after exceeding the turnover threshold).

Practical implications of VAT registration

Increased administration: Once you become a VAT payer, you will have to:

  • Issue tax documents (invoices) showing VAT
  • Maintain VAT records
  • File monthly or quarterly VAT returns (including the VAT Control Statement)
  • Archive tax documents for 10 years

Change in product pricing: If you have so far sold without VAT (as a non-VAT payer), your new price for the end consumer will be 21% higher unless you adjust your margin. This may discourage customers—especially when they see that other e-shops (for example, abroad, which sell into the Czech Republic without VAT) do not charge VAT.

At the same time, you gain an advantage: As a VAT payer in the Czech Republic, you can deduct the VAT you paid on purchases of goods and services for your business. So if you buy dietary supplements from a manufacturer as a VAT payer who invoices you including VAT, you can deduct it. This is usually why it pays off to become a VAT payer.

If you take a typical scenario: you purchase goods for CZK 100,000 excluding VAT from a supplier. If the supplier is a VAT payer, they will invoice you CZK 121,000 (100,000 + 21% VAT).

As a VAT payer in the Czech Republic, you will deduct the CZK 21,000 input VAT. If you sell the goods for CZK 150,000, you will collect VAT of 21% on CZK 150,000, i.e., CZK 31,500. Payment to the state budget = CZK 31,500 (output VAT) – CZK 21,000 (input VAT) = CZK 10,500. This means that while you have remitted VAT to the state, the input VAT deduction has effectively reduced your cost of purchasing the goods.

Most common VAT questions for e-shops

1. Will I become a VAT payer compulsorily even if I do not want to?
Yes. Once you exceed the threshold of CZK 2 million over 12 consecutive months, there is no way to avoid registration under the VAT Act. You must file it within 10 business days after the end of the month in which you exceeded the threshold. If you are not sure when you will exceed the threshold, you can register voluntarily at the beginning—then you do not have to worry about paying VAT retroactively.

2. What penalties apply if I do not register for VAT on time?
The tax administrator may impose a fine for late filing of the VAT registration application. The fine is generally calculated as 0.05% of the VAT that should have been paid for each day of delay, up to a maximum of 5% of the tax, under the Tax Code. In practice, this can amount to hundreds of thousands of Czech crowns. In addition, the tax administrator retains the right to assess VAT for the period during which you should have been a VAT payer but were not registered. This means you will have to pay VAT retroactively plus late-payment interest.

3. What if my e-shop is small and I do not want to become a VAT payer?
You can try to keep your turnover below the CZK 2 million threshold. But it is a risky strategy. First, you must monitor it precisely (the tax administrator monitors it as well), and second, it limits your growth. Many e-shops prefer to register voluntarily early on to have clarity and to be able to deduct VAT on purchases.

4. When can I deregister from VAT?
You can deregister from VAT if your turnover for the 12 immediately preceding consecutive calendar months did not exceed CZK 2,000,000 and at the same time 12 calendar months have elapsed from the date you became a VAT payer. Alternatively, if you became a VAT payer voluntarily, you can deregister after 12 months if your turnover allows it.

VAT for an s.r.o.

For an s.r.o., VAT registration is handled in the same way as for a self-employed individual (OSVČ)—based on turnover. An s.r.o. also becomes a VAT payer upon exceeding CZK 2 million over 12 consecutive calendar months, under the VAT Act.

The difference is that an s.r.o. is required to keep accounting records and must archive all tax documents as part of standard accounting practice, under Act No. 563/1991 Coll., on Accounting. This means that VAT records are in fact part of ordinary accounting administration, which an s.r.o. typically arranges through an accountant. So the administrative burden is effectively similar, but for an s.r.o. it is already part of the overall accounting obligation.

Accounting, tax records, and the flat-rate tax

Now comes the question of how to record your income and expenses at all. This has a direct impact on which expenses you can deduct, and therefore on your tax. A self-employed individual (OSVČ) has three options:

1. Flat-rate tax (since 2021)
You pay a single monthly amount that includes income tax, social security contributions, and health insurance. You do not have to file a tax return. Your income must not exceed CZK 2 million per year, under the Income Taxes Act.

In 2026, the flat-rate tax for the first band (lowest income) is estimated at CZK 9,984 per month, according to the Ministry of Finance.

Advantage: No administration of income and expenses, clear fixed costs.

Disadvantage: You cannot claim tax credits or deductible items (e.g., mortgage interest, donations). The flat-rate tax is not suitable if you have high actual costs that you cannot deduct, or if your calculated tax after credits would be lower.

2. Tax records (simplified form of record-keeping)
You keep records of income and expenses and deduct actual expenses. You pay advances for social security and health insurance (based on profits from the previous year), which are tax-deductible. Income tax is calculated from the tax base.

Advantage: You clearly see your actual costs and can deduct real expenses. If you have high costs (rent, marketing campaigns, etc.), it is beneficial. You can claim all tax credits and deductions.

Disadvantage: You must record every invoice and document purchases and payments—administration is higher than with the flat-rate tax, but lower than with accounting.

3. Accounting (mandatory above a certain turnover)
Keeping double-entry accounting, which means each transaction is recorded in two places (debit and credit). This is quite complex and is usually handled by an accountant.

For a self-employed individual (OSVČ), the obligation to keep accounting records arises if their turnover for the immediately preceding calendar year exceeded CZK 25 million, or if they are registered in the Commercial Register, under the Accounting Act. VAT payer status alone does not create an obligation for individuals to keep accounting records—they may continue to keep tax records.

Advantage: You have a complete overview of assets, liabilities, income, and expenses. Accounting creates a “snapshot” of the company’s financial situation, which you can use in negotiations with banks, investors, etc.

Disadvantage: Costs for an accountant (at least CZK 1,500–3,000 per month) and the administration itself is high.

Flat-rate expenses: how they work

As a self-employed individual (OSVČ), instead of actual expenses you can deduct flat-rate expenses as a percentage of income, under the Income Taxes Act:

  • 80% of income from agriculture, forestry, water management, or craft trades (max. CZK 1,600,000)
  • 60% of income from other trades (e.g., services, sales—this is your case, max. CZK 1,200,000)
  • 30% of income from renting property (max. CZK 600,000)

If you sell supplements via an e-shop, you fall under the category of 60% flat-rate expenses.

Example: You have income of CZK 1,000,000 from an e-shop. Flat-rate expenses are 1,000,000 × 60% = CZK 600,000. Profit for the purposes of calculating insurance contributions = CZK 400,000. Social/health insurance contributions are calculated from 50% of this profit. At the same time, paid social/health insurance contributions reduce the tax base. This is an advantageous approach if your actual expenses are lower than this flat rate and you want to minimize administration.

But—beware—there are situations where flat-rate expenses are not worthwhile. If you have high actual costs, it is better to switch to tax records and deduct actual expenses.

If, for example, you purchase supplements for CZK 700,000, but flat-rate expenses are only CZK 600,000 (with turnover of 1 million), then using the flat rate is not as advantageous as tax records with actual expenses.

Limited liability company (s.r.o.): mandatory accounting

An s.r.o. must keep double-entry accounting because this is required by the Accounting Act. The financial statements must then be filed in the Collection of Deeds of the Commercial Register.

This means higher costs—a standard accountant will charge at least CZK 1,500–3,000 per month, i.e., CZK 18–36 thousand per year. It may be more if the s.r.o. has more transactions, employees, etc.

At the same time, an s.r.o. cannot use flat-rate expenses—all expenses are recorded as actual expenses. However, this has an advantage: all your real costs are taken into account, so you have a lower taxable profit.

Risks and penalties: mistakes that can cost you dearly

Both selling supplements via an e-shop and choosing a legal form of business involve a number of risks. In the event of an error or breach of an obligation, the tax authority or an inspectorate may impose fines in the tens or hundreds of thousands of Czech crowns.

Typical risks:

  • Failure to register for VAT on time
    If you exceed the threshold of CZK 2 million over 12 immediately preceding consecutive calendar months and do not file a VAT registration application, the tax authority will impose a penalty. It is calculated as 0.05% of the VAT for each day of delay, up to a maximum of 5% of the total tax you should have paid, under the Tax Code. Within a few months, this can climb into the hundreds of thousands of Czech crowns. If, for example, in June 2026 you find out that you already exceeded the threshold in May and you report it only in August, you are 2–3 months late. If your VAT for those months is CZK 50,000, the penalty may be in the tens of thousands of Czech crowns. In addition, VAT may be additionally assessed together with late-payment interest.
  • Errors in information on the e-shop and failure to publish required details
    When selling dietary supplements, your website must include: detailed information on the product composition (in Czech); accurate identification details (Company ID No., VAT ID No., registered office); terms and conditions explaining the right of withdrawal (14 days) and a complaints procedure; safety information and warnings (if required); and a privacy policy—these are precisely the items checked during inspections. If they are missing, you risk a fine of up to CZK 100,000.
  • Failure to comply with obligations under the GPSR (Product Safety Regulation)
    As of 13 December 2024, the EU General Product Safety Regulation (GPSR—Regulation (EU) 2023/988 of the European Parliament and of the Council) applies. You are obliged to ensure that you have placed only safe products on the market. You must: provide on the e-shop the name and contact details of the manufacturer/importer or the responsible person in the EU; demonstrate that the product is safe (e.g., certificates, technical documentation); ensure product traceability; respond to complaints and, if necessary, withdraw the product. If you breach this regulation, you may receive a fine of up to CZK 5 million for the breach (under the Czech Consumer Protection Act and the GPSR).
  • Non-payment of social and health insurance
    If, as a self-employed individual (OSVČ), you do not pay social and health insurance, the Czech Social Security Administration (ČSSZ) and health insurance companies will collect it gradually through reminders and, if necessary, enforcement. In addition, penalties and late-payment interest accrue, which may negatively affect your future pension.
  • An error in the tax return or concealment of income
    If the tax authority finds that you did not file a tax return or filed it with incorrect data, this may result in a late-filing penalty (0.05% of the tax per day, max. 5%) or a penalty for failure to report income (5–10% of the additionally assessed tax). Late-payment interest also applies, under the Tax Code.

Potential issues

How ARROWS helps (office@arws.cz)

Failure to register for VAT on time – penalty of 0.05% of VAT per day of delay, max. 5% + additional VAT assessment

We monitor the turnover threshold and ensure timely registration. If it is already too late, we will help you defend the case or minimize the penalty.

Errors in website information, breach of GDPR or the Consumer Protection Act – Czech Trade Inspection (ČOI) fine up to CZK 100,000

We will set up your terms and conditions, e-shop content, data processing policies, and carry out methodological checks to ensure the website meets all requirements.

Failure to comply with the GPSR (product safety) – fine up to CZK 5 million

We will arrange verification of product safety, preparation of safety documentation, and communication with manufacturers. We represent you in complaints or inspections.

Concealment of income or errors in the tax return – penalty for failure to report 5–10% of the additionally assessed tax + interest

We will help with correct determination of income, management of tax records, preparation of returns, and representation during a tax audit.

Debt in social or health insurance, penalties, risk of enforcement

We will arrange negotiations with the Czech Social Security Administration (ČSSZ) and health insurance companies on repayment, filing an application to defer or reduce advance payments, and defence in enforcement proceedings.

Specifics of selling dietary supplements: additional obligations

When you sell dietary supplements/food supplements specifically, you have certain special obligations that other e-shops may not have.

Notification obligation

Before placing a dietary supplement on the market for the first time, you must send the State Agricultural and Food Inspection Authority (SZPI) a notification (so-called “notification”) of the parameters of your product (composition, allergens, contents), under Act No. 110/1997 Coll., on Foodstuffs and Tobacco Products and Decree No. 225/2008 Coll., on dietary supplements and the composition of foods. You should fulfil this obligation before launching sales; otherwise, you risk fines from SZPI.

GPSR – product safety

As of 13 December 2024, the new EU General Product Safety Regulation (GPSR—Regulation (EU) 2023/988 of the European Parliament and of the Council) applies throughout the EU. You are obliged to:

  • Provide on the e-shop the name and address of the product manufacturer and contact details (or details of the importer/responsible person in the EU)
  • Ensure that the product meets EU safety standards
  • Have available documentation on product safety (so-called technical documentation)
  • Ensure product traceability
  • Respond to customer complaints and, if necessary, take steps to withdraw the product from the market

If the Czech Trade Inspection Authority (ČOI) or the State Agricultural and Food Inspection Authority (SZPI) finds that your product does not comply with the GPSR, they may impose a fine on you.

Product information obligations

Under EU Regulation No. 1169/2011 on the provision of food information to consumers and the Food and Tobacco Products Act, each product must clearly display:

  • Product ingredients (in Czech)
  • Allergen information
  • Minimum durability / best-before date
  • Recommended dosage and a warning not to exceed it
  • Risk warnings (e.g., not suitable for children, pregnant women, interactions with medicines)

All of this must be published on the website before the customer purchases the product. If the information is hidden or not available, you are breaching Czech law.

Most common questions about selling food supplements

1. Do I have to have all supplements tested in a laboratory?
No, but you should have certificates or safety and quality attestations from the manufacturer/supplier confirming compliance with EU legislation. For the products you offer, you should verify that they meet EU standards. If you are not sure, it is safer to have an analysis carried out or consult an attorney.

2. What sanctions do I face if I fail to meet the notification obligation?
SZPI may impose a fine of up to CZK 500,000 for placing a product on the market without proper notification, under the Food Act. You may also be ordered to withdraw the product from sale.

3. Can I buy supplements from China and sell them without a certificate?
If you purchase supplements from China or any third country outside the EU, you become an “importer” and must ensure they have EU certification or otherwise meet EU standards. Your e-shop must state the “responsible economic operator” (i.e., the importer or an authorised representative in the EU) under Regulation (EU) 2023/988 of the European Parliament and of the Council. If you do not do so and you sell a substandard or unsafe product, you are liable as the seller – even if you are buying from a Chinese manufacturer.

How to choose between a sole trader (OSVČ) and an s.r.o. for selling supplements via an e-shop

How to choose?

Choosing OSVČ makes sense when:

  • Your turnover will be up to approx. CZK 2 million per year and your profit is not very high.
  • You want minimal administration and low start-up costs.
  • You have low to medium personal operating costs (rent, transport, etc.).
  • You do not need protection of personal assets (or you have few assets to protect).
  • You want to use tax credits and deductions (e.g., for a spouse, a child, a mortgage).

Choosing an s.r.o. makes sense when:

  • You plan turnover above CZK 2–3 million.
  • You want to limit personal liability (at most up to the amount of the unpaid contribution).
  • You plan to hire employees or need a more professional image.
  • You have the financial resources to pay for an accountant and administration.
  • You want to retain profit in the company for future reinvestment at a lower tax rate (21%).
  • You want to sell the company later or transfer it to someone else (with an s.r.o. this is much easier than with OSVČ).

Practical tip:

If you are not sure, start as OSVČ, ideally using the flat-rate tax regime (paušální daň) if you meet the conditions. Administration is minimal, and within 1–2 years you will clearly see what your actual profit is.

If you exceed CZK 2 million and you can see that you want to continue and expand, you can then set up an s.r.o. The transition from OSVČ to an s.r.o. is not complicated, although it does involve certain administrative steps.

Most common mistakes when setting up an e-shop selling supplements

1. Underestimating VAT
Many new e-shop operators think VAT is just administration. If you become a VAT payer and do not keep records properly, you may run into problems during a tax audit. If you have more input VAT than output VAT, you have an excess deduction, meaning the state refunds VAT to you. If, on the other hand, output VAT is higher than input VAT, you have a tax liability and must pay VAT to the state. If you do not have the money for it, you will face a cash-flow problem. That is why it is important to choose a business form that suits you and to keep VAT records properly before it happens.

2. Failing to inform yourself about the GPSR and product safety
Many e-shops sell supplements that are not properly labelled or do not have safety documentation. ČOI will identify this during an inspection and the fine will be on you. Verify with your supplier that they have all safety certificates, and check that your e-shop includes them.

3. Not keeping proper records
Whether you choose OSVČ or an s.r.o., you must keep records of your income and expenses. If you do not, the tax authority cannot verify anything and may impose a fine. The simplest option is to keep a standard Excel sheet or purchase accounting software.

4. Overlooking minimum advances for social security and health insurance
As OSVČ, entrepreneurs often think that if they do not earn anything, they do not have to pay anything. Wrong – minimum advances for social security and health insurance must always be paid, unless it is a secondary activity with profit below the limit. If you forget, the Czech Social Security Administration (ČSSZ) and health insurance companies will enforce it with penalties and interest.

Final summary

Selling supplements via an e-shop is a promising business, but without proper legal and tax preparation it can become financially burdensome. The choice between OSVČ and an s.r.o. is not just administration – it is a decision that affects how much tax you will pay, what risks you face, and how well you will be able to scale the business.

At lower turnover (up to approx. CZK 2 million), OSVČ is usually more advantageous – lower tax, lower administrative costs, an easier start, and the ability to use tax credits.

At higher turnover, an s.r.o. keeps pace, and from a certain point (CZK 2.5–3 million in turnover, depending on profit) it may become more tax-efficient, especially thanks to the possibility of optimising profit within the company and protecting personal assets.

Do not forget the specific obligations for supplements: SZPI notification, GPSR, safety documentation, and proper information obligations. These are not optional – breaching them can result in high fines.

If you do not want to risk mistakes, missing documents, figuring out the rules yourself, or if you want to save time and money by setting things up correctly, contact the attorneys at ARROWS advokátní kanceláře, a Prague-based law firm.

We will help you choose the right legal form, set up your website documentation, ensure record-keeping, communicate with administrative authorities, and represent you if any issues arise. Contact us at office@arws.cz.

FAQ - Most common questions about taxation of selling supplements via an e-shop

1. Can I start selling supplements without registering for VAT even if I know I will exceed CZK 2 million?
Technically yes, but you risk a fine. The tax authority knows when you exceed the limit and expects you to file the registration application within 10 working days after the end of the month in which you exceeded the limit. It is safer to submit your registration on time. If you are not sure when you will exceed the limit, you can register voluntarily from the start – then you do not have to worry about back payments.

2. Are social security and health insurance contributions as a self-employed individual tax-deductible expenses?
Yes, paid social security and health insurance contributions are tax-deductible expenses for self-employed individuals and reduce the tax base for the calculation of personal income tax (pursuant to Section 24(2)(d) of Act No. 586/1992 Coll., on Income Taxes). However, it is important to note that, for the calculation of the contributions themselves, the assessment base is half of the tax base after deducting expenses (whether actual or flat-rate).

3. If I have an s.r.o. and leave all the money in the company, do I not have to pay withholding tax on it?
Yes, that is an advantage of an s.r.o. As a self-employed individual, you must tax all income for the year – whether you take it out or not. As an s.r.o., you can leave part of the profit in the company and tax it only at 21% (instead of 15–23% + social security and health insurance when the full amount is paid out). This money will remain in the company and you can reinvest it later without any additional tax burden. The 15% withholding tax is paid only at the moment a profit share is distributed.

4. What happens if I sell without an invoice?
If you become a VAT payer, you must issue tax documents (invoices) for each sale of goods or services, pursuant to the VAT Act. Without a tax document, there is no accounting document, and the tax administrator will notice this during an audit. In addition, you cannot deduct VAT on purchases without a tax document from the supplier. If you sell without a tax document, this is a breach of tax obligations and you may face a fine.

5. Can I have my e-shop operated by my husband/wife without their registration?
If this is in fact your joint activity and your husband/wife has a share in it, they should be registered as a self-employed individual or be part of the s.r.o. (e.g., as an executive director with salary remuneration, or as a shareholder). If they were only de facto employed on an indistinguishable basis without registration, you would be breaching Act No. 435/2004 Coll., on Employment, and you may face fines. It is better to address this in time with a lawyer – for example, by having your husband/wife start their own secondary self-employment activity, or by employing them under an employment contract.

6. What documents do I have to keep?
All tax documents (invoices, receipts), purchase confirmations, bank statements, tax documents for rent and other expenses. You must archive them for at least 10 years if you are a VAT payer, pursuant to the VAT Act. If you are not a VAT payer, you must keep them for at least 3 years for the purposes of tax records and 10 years for the purposes of tax proceedings, pursuant to the Tax Code and the Accounting Act. Keep electronic invoices in their original format or as scans – and do not forget to back them up.

Notice: The information contained in this article is of a general informational nature only and is intended for basic guidance on the topic under the legal framework as of 2026. Although we take the utmost care to ensure the accuracy of the content, legal regulations and their interpretation evolve over time. We are ARROWS advokátní kancelář, an entity registered with the Czech Bar Association (our supervisory authority), and for maximum client protection we are insured for professional liability with a limit of CZK 400,000,000. To verify the current wording of regulations and their application to your specific situation, it is necessary to contact ARROWS advokátní kancelář directly (office@arws.cz). We accept no liability for any damages arising from the independent use of the information in this article without prior individual legal consultation.

Read also: