The greatest benefit for foreign investors and Czech entrepreneurs is the reduction of fees associated with founding a new company, effective in the year 2016. The notary's reward, set by a regulation of the Ministry of Justice of the Czech Republic, dropped to ½ and the court fee was removed completely.
Mojmír Ježek, partner of Czech law firm rutland ježek in the economic magazine Doing business in the Czech Republic 2017 with the article Legal news for entrepreneurs in 2016.
The costs for founding a limited liability company (s.r.o.) with basic capital of CZK 1 (4 euro cents) have decreased, in the case of founding a company without further professional aid, to the very keen price of ca. EUR 150. The lawmaker's intent was to reduce the costs for founding an s.r.o. company to a EUR 100 limit, which is the European Commission's goal. The amendment also eliminates fees for entries associated with natural or legal persons whose bankruptcy or impending bankruptcy is being resolved in insolvency proceedings, during which a bankruptcy declaration was already issued, and for entries where a person is being removed from the public registry.
New rules for Real Estate Transfer Tax payment
Since November 1, 2016 the new amendment of the Statutory Measure of the Senate No. 340/2013 Coll. on Real Estate Transfer Tax (the "RE Transfer Tax Act") came into force. Since this date the 4 % RE Transfer Tax shall be paid by the purchaser only. Until this date, the RE Transfer Tax Act allowed the transferor and the transferee to stipulate in the transfer or exchange agreement who will pay the RE Transfer Tax and if the parties did not agree explicitly, the transferor was the tax payer and the transferee statutory guarantee. The change of taxpayer is not the only change introduced by the amendment of the RE Transfer Tax Act. For example, the new buildings and flat unit taxation concept was changed, the tax obligation on extension of building rights was broadened, changes and other transformations of legal entities were exempted from tax, and the taxation concept for the acquisition of utility networks was changed.
European Certificate of Succession Now Also in Czech Law
The European Certificate of Succession was introduced by EU regulation No. 650/2012 on jurisdiction, applicable law, recognition and enforcement of decisions and acceptance and enforcement of authentic instruments in matters of succession and on the creation of a European Certificate of Succession. The institute of European Certificate of Succession, which presents the evidence on the eligibility of the successor, testamentary successor or legatee and the powers of executor or administrator in another member state, is also mirrored by the Czech law since 7. 6. 2016. The regulation introduces the principle that decisions regarding the property of the same testator should always be made within the same inheritance proceedings to eliminate the now common duplicity of hearings. With this, the regulation unifies the governing law for the succession itself with the law for the place of inheritance proceedings. This institute is important particularly for managers, entrepreneurs and other persons operating within EU who may be affected by inheritance proceedings depending on where they currently reside.
Out-of-court Settlement of Consumer Disputes
On 1. 2. 2016, an amendment of the law on consumer protection came into force, introducing out-of-court settlements of consumer disputes into Czech law. Out-of-court settlements of disputes are held from the consumer's initiative, with the seller having no option to deliberately refuse this institute or terminate the proceedings. During an out-of-court settlement of disputes, the seller is obligated to provide an authorised entity with the necessary cooperation for the out-of-court settlement to proceed effectively. However, the seller is not obligated to accept the deal proposed within these proceedings and the authority for out-of-court settlement can only issue a non-binding and substantiated opinion, which the consumer can then use in any other potential steps taken to secure his claim in court. The proposal for initiating out-of-court proceedings can be filed 1 year at the latest from the moment the consumer first exercised his right with the seller, and only under the condition that no court proceedings have begun regarding the issue or a legally effective verdict was passed by a court. Out-of-court settlement of disputes must be concluded within 90 days of its initiation. If the case is especially complicated, this deadline may be extended by further 90 days. Out-of-court settlement ideally concludes with an agreement between the parties, or a unilateral declaration by the consumer of ending his or her participation in the proceedings, the death or termination of one of the parties, the expiration of the deadline within which the dispute was to be resolved, or by refusal of the proposal by an authorised entity. If the parties reach an amicable settlement to the dispute, this agreement must be concluded in written form. Though this agreement cannot be directly enforced, it can serve as good foundation for the parties's positions should the case go to court, where the parties will then be able to seek enforcement of this agreement.
Penal Law Amendment
Since 1. 7. 2016, the Czech law once again, after almost six years, makes it punishable to prepare the criminal act of tax evasion, or evasion of any obligatory fee or payment. The preparation of this criminal act may lie in preparatory steps before filing a tax return which would allow the perpetrator to (i) not pay the tax at all, (ii) pay the tax in a lower amount, or (iii) obtain benefits from the state for which the perpetrator is not eligible (such as excessive value added tax deduction). Otherwise, the preparation of this criminal act was punishable only if (i) the difference from the real tax liability was at least CZK 5 mil. or (ii) tax evasion was perpetrated within an organised group which operates across multiple states. As a result, this change will allow the Czech police primarily to intercept communication, follow persons and objects, secure and open packages, perform searches of premises used for business, or begin prosecution earlier, which also results in interrupting the period set for assessing a tax. It will thus be necessary for entrepreneurs to assess whether their so-called tax optimisation does not exceed the limits of the law and cannot be considered the preparation of a criminal act. The line between the legal and illegal interpretation and application of tax regulations may be thin, and in the case of making preparation illegal, this thin line may in the future cause entrepreneurs and their professional consultants significant problems.
rutland ježek, advokátní kancelář s.r.o. (law office)