First steps as a business owner: what are your obligations?
You have drawn up the articles of association and registered the company in the Commercial Register (OR) - unfortunately, the paperwork associated with the new Ltd. does not end there. You will soon be facing other administrative and tax obligations. We will help you navigate them.
One of the first administrative necessities you must deal with as the owner of a newly formed company is tax registration. You can do this online via the My Taxes portal.
The following taxes in particular will concern you:
- Corporation tax (DPPO) - compulsory for every company,
- Personal income tax (DPFO) - if you have employees,
- Value Added Tax (VAT) - once you have reached the turnover for compulsory registration, or you can volunteer.
Corporate income tax
A new company must register for VAT within 15 days of its formation. Income tax is compulsory for every company - the rate is 19% of the tax base. This is based on the profit or loss determined on the basis of the accounts.
The due date of the DPPO corresponds to the date of submission of the tax return. This must be filed annually, always within 3 months after the end of the tax year (which is usually the end of the year). The deadline is extended to 4 months if you file the return electronically, or 6 months if a tax adviser or lawyer files it for you on a power of attorney basis.
In the first year of business, you pay the tax at once when you file your return, and from the second year onwards you usually start making regular payments in advance, based on the amount of tax declared. We discuss the topic in more detail in our article on corporate tax registration.
Personal income tax
Are you planning to take on employees? As a company, you will also pay tax on their income, either in the form of employment tax or withholding tax, which you will also apply when paying out shares in the company's profits. You will thus become liable for VAT. Here, too, you cannot do without filling in a registration form (which is common to both DPPO and DPFO payers).
Value added tax
As a new company, you start your business as a non-VAT payer. Only taxable persons whose turnover in 12 consecutive months exceeds CZK 2,000,000 are obliged to register for VAT. However, there are also situations when it is worthwhile to register for VAT voluntarily (however, your application must be approved by the tax office). In both cases, you will not avoid registration, monthly paperwork(especially filing the tax return and control report) and the actual payment of the tax if the tax liability comes out according to the return.
Are you hesitating whether to register for VAT? Read on to find out when it is convenient to be a VAT payer.
Tip! You can register for VAT and pay VAT by filling in the uniform form "Registration for legal entities" in the Registration section of the Tax Administration's website. VAT registration must be done separately using the form in the same section.
In addition to taxes, as the owner of a new company you must also deal with the issue of bookkeeping and the obligations that go with it, such as the preparation of financial statements and financial reports, or an audit.
The law requires you to keep full double-entry books of account. It is up to you whether you employ your own accountant or hire one externally.
Are you looking for bookkeeping experts? We will be happy to help you with your accounting agenda. Just write us a message.
Publication of financial statements
Business corporations, including LLCs, are also required by law to publish their financial statements in the commercial register.
How does this work in practice? You close the books and produce the following documents:
- Balance sheet,
- profit and loss account (or profit and loss account),
- a cash flow statement,
- statement of changes in equity.
The required scope of the financial statements varies according to the size of the company. Micro and small accounting units have an easier job - they do not have to prepare documents 4 and 5.
You then send these documents electronically (usually via a data box) to the relevant registration court. You have 12 months from the closing of the books to comply with this obligation. This means that the documents must be sent to the court no later than the end of the following year.
Payment of profit share
If your business is doing well, the company will start generating its first profits. You can then, of course, distribute these to the individual shareholders. However, everything must be done in the prescribed manner and the tax must be paid properly if there is a tax liability.
Are you hesitant about how to do this? Our guide on how to pay out money from your company will help you.
Sooner or later, your new company will hire its first employees. When this happens, the administrative merry-go-round will start again. You'll be drawing up contracts of employment, or signing Taxable Income Statements with your employees. You will not avoid the aforementioned registration for employment tax (and possibly withholding tax). The withholding tax is also accounted for annually.
In addition to the tax office, as a new employer you must also register with the Czech Social Security Administration and your employees' health insurance companies. You have 8 days to do this from the start of the contractual relationship with the employee. After that, you have other obligations in the areas of occupational safety and fire protection.
Finally, we will mention a few administrative necessities that are sometimes forgotten.
Identification of the registered office and business premises
You are obliged to mark the registered office and the place of business with your company ID number and name. You must also receive correspondence at the official business location and have valid written consent from the property owner to locate your business headquarters. Read what the owner's consent to locate the registered office must include.
When you register your company in the Commercial Register, the state (i.e. the Czech Post) will automatically create a data box on the mojedatovaschranka.cz website, which you must use to communicate with the authorities. It is also used to process submissions to the tax authorities and other state administration bodies. This is also where you will receive various summonses and notifications. You can read more about them in the article about data boxes.
Attention! Most of the messages that you receive from the government in your mailbox are subject to the so-called fiction of delivery. This means that they are automatically considered delivered after 10 days - even if you haven't opened your mailbox in that time. To make sure you don't miss important messages, we recommend that you set your mailbox to send you notifications about incoming mail.
Register of beneficial owners
You have additional obligations under the Beneficial Owners Registration Act. Under the Act, companies must enter details of beneficial owners and ownership structure into the Register of Beneficial Owners.
If your company has partners (natural persons) with a shareholding of more than 25%, the registration court will automatically enter them in the register. However, companies with a more complicated ownership structure or a majority foreign owner must apply for registration themselves via the eJustice website.
Convening a general meeting
The general meeting is the supreme body of any limited liability company. Therefore, it must meet at least once a year to approve the company's financial statements and, if necessary, to discuss other organisational matters. All shareholders must be invited to the general meeting - and in writing.
Note: In addition to the general obligations, you will also be affected by the rules that arise from the legislation for your particular line of business. So if you are in the food business, for example, make sure you read the hygiene regulations and ordinances carefully.
You don't have to take the first steps alone
Starting a business can be a tangled jungle - so don't be afraid to turn to professionals who know their way around it. At Jake&James, we can help you with tax registration and bookkeeping. Just get in touch using the form below.