Even though getting a visa based on owning a Czech company (s.r.o.) is possible, it might not really be suitable for most applicants. In this article we go deeper into the topic and even offer easier way of getting a Czech visa. Read on!
Two ways to start “business activities” in the Czech Republic
Before we dig deeper into the actual visa options, let’s first briefly look at what options to run a business in the Czech Republic are there.
The easiest way of starting a business in the Czech Republic is getting a trade license (“zivnostenske opravneni” in Czech, commonly referred to as “zivno” by foreigners). Among the main advantages of getting the trade license are fast and relatively straightforward process, lower establishing cost and generally lower taxation of your income.
The two potential disadvantages of getting a trade license are not being able to “share” the business (meaning having investors, shareholders etc.), and the fact that getting an active trade license requires having a valid long-term visa or long-term residence permit in the Czech Republic.
The second most common way of starting a business in the Czech Republic is setting up a limited liability company – in Czech called s.r.o. – “spolecnost s rucenim omezenym”. The main advantages are the ability to share the business (i.e. to have multiple owners/shareholders and multiple directors/representatives) and the fact that having an active s.r.o. does not require a valid visa from their directors and/or shareholders. That means the s.r.o. can be up and running even if none of the director/shareholders is legally residing in the Czech Republic.
Among the main disadvantages we count more complicated and costly set up and closing of the s.r.o. Setting up can be a few weeks for the s.r.o. as opposed to a few days of the trade license, the closing can even be couple months as opposed to “right away” of the trade license. Also the taxation is generally higher, in many case you basically get double taxed – once as a company (corporate tax) and once as an employee of the company (since you generally need some form of employment to get money out of the company).
Even though there are other potential ways of starting a business such as “akciova spolecnost” (a.s.) – a joint stock company, the above mentioned ones ar the most common and honestly the best for 95% of people and situations.
Czech Republic’s Business Visa
Now, how these two business options translate to the visa situation?
Czech Republic is (and kind of always has been) a popular destination for freelancers and entrepreneurs in various fields from teaching English, to IT to restaurant owners to massage parlors. So the Czech Republic also offers a visa that is suitable for entrepreneurs – a business visa.
Even though the idea behind the visa is the same for both visa based on a trade license and a visa based on an s.r.o. (meaning in both cases you apply for a business visa), there are technically two sub-types of the business visa that are not interchangeable. This means if you get a visa based on trade license, you can not just simply close your trade license, set up an s.r.o. and continue with the same visa, nor the other way around.
This is why it is important to be clear in which option (trade license or s.r.o.) is the best for you from the beginning.
Business Visa based on s.r.o. versus Business Visa based on trade license
The business visa is a pretty specific type of Czech visa which used to be misused in the past. Since then, it is the hardest Czech visa to get. Your starting position is generally the MOI thinking you are gonna misuse the visa (meaning you say you want to do business in CZE but you actually don’t) and your job is to convince them it is not the case.
There are two parts of “convincing the MOI” – the story you tell at the Embassy (because part of all business visa applications is a detailed interview about your business idea) and the documents you submit to support the story (just explaining what you want to do here without having it backed up by any physical documents is not gonna work in most cases).
The above means that when you go to a Czech Embassy to submit your business visa application, you must bring a solid business plan and as many supportive documents as possible.
Czech Business Visa based on trade license
Proving your business plan is generally easier if you are a freelancer, a self-employed person. The reason for that being that as a freelancer, you often do not really need to have an office or any elaborate business plan. If you for example want to teach English in the Czech Republic, reasonable “supportive documents” might be just two or three letters from two or three different language schools saying they will hire you as a freelancer teacher once you get your business visa approved.
Similar thing if you work as a consultant, developer or similar. You alway must have a reason to be in the Czech Republic which usually means having local clients. If you only work online and/or for foreign clients, there is no legal reason for you to request a Czech visa since you do not need to be in the Czech Republic to run the business.
Of course it gets a bit more complicated if your business plan is for example to open a restaurant or a massage parlor. In this case, it would not be enough to just have two or three potential clients write a letter for you (saying they will be regularly eating in your restaurant or using your massages) – that would be too weak of a story.
In these cases, you would already need to have the space for the restaurant/massage parlor rented, have some website, pricing, business plan on paper etc.
It would still be easier to start these kind of businesses as a freelancer rather that with establishing an s.r.o.
There is, in fact, more into the visa process than just the business plan. Part of the visa interview are for example questions about the taxation (i.e. what are your obligations as a freelancer in the Czech Republic).
Answering these questions is still pretty easy for freelancers since you basically just need to pay social security contributions on monthly basis, health care on monthly basis (for some nationalities) and income tax once a year.
Czech Business Visa based on an s.r.o.
Everything above gets more complicated if you want to apply for the business visa based on owning an s.r.o. The reason for that is that an s.r.o. is not a person. So even if your business plan was still teaching English, an s.r.o. can not go to a language school and teach people. It must always be a person employed by the s.r.o.
That brings a lot more questions for the interview such as “What is the taxation of a company in CZE”, “What is the taxation for an employee in CZE?”, “What type of contract will your employees have?” and way more.
So, not only you need to have way more knowledge about everything related to the business, you also need to have higher income expectations (due to the double taxation + generally pretty high taxation of employees in CZE) and hence also way more elaborate business plan.
To give you and example, say you are a freelance teacher and you want to keep 30 000 CZK every month, that means you will need to be making around 38 000 CZK a month since about 8 000 CZK a month are your social security and health care contributions + some reserve for the income tax.
If you want to get 30 000 CZK as an employee of an s.r.o., you will need to be making at least about 60 000 CZK a month. Net salary of 30 000 CZK translate to total cost of about 50 000 CZK for the s.r.o. (since the s.r.o. must add approx. 20 000 CZK to your salary as health carem social security and tax contributions), then you need to count with the corporate tax at the end of the year and you also need to count with paying an accountant to calculate your salary every month since that is not really something you can do yourself without having background in Czech accountancy.
On top of that, an s.r.o. should alway have an office. Even if it is a one person company, it is different than the trade license. The trade license is directly attached to you as a person so you can technically have an “office” in your apartment. It is not really possible with the s.r.o. Imagine you were hired by a company as an employee and they would tell you “Hey, you will be working from our CEO’s bedroom every day”.
The law does not care if the s.r.o. employee is you or someone else, the s.r.o. always must provide reasonable working conditions. Working from someone’s bedroom (even if it is your own) does not match that requirement.
Conclusion s.r.o. or a trade license?
To conclude this article, let us mention we have worked with around 19 000 clients so we have also done visas based on owning an s.r.o. That means getting a visa based on owning a Czech s.r.o. is possible. It is just mean more for entrepreneurs who plan on running a bigger business here, have an office, employees. And who are willing to invest significant amount of money and time into the process.
If you want to apply for a visa just on your own or with your spouse but you do not really plan on hiring big amounts of people, the trade license is most likely gonna be the easier (and for sure faster) way for you.
If you have any questions, please contact us using the general contact details or fill in any of the forms on the website. We’ll be happy to advise.
