Czech Republic - League of Lawyers

Capital: Prague
Largest city: Prague
Official Language: Czech
Government: Unitary parliamentary constitutional republic
Area: 78,866 km2
Population: 10.7 million
Currency: Czech Koruna (CZK)
GDP total: CZK9.056 trillion (USD432 billion)
GDP per capita: CZK850,825.97 (USD40,585)
Time zone: UTC+1/+2
Calling code: +420
Internet TLD: .cz
[Source: Wikipedia]

Total Foreign Investment in Czech Republic

2018: USD164.2 billion (CZK3689.5 billion)
2019: USD171.3 billion (CZK3875.7 billion) with the top 3 foreign investors being the Netherlands, Luxembourg and Germany

[Source: Czech National Bank]

3 largest trading partners :
Germany, Slovakia and Poland

Top 3 exports :
Iron & Steel, Oil and Wood

[Source: worldstopexports.com]

Q&A on Foreign Investment

Are there any foreign investment laws in the Czech Republic?
Yes, these include the Act on Screening of Foreign Investments (FIR Act), the Act on Certain Measures against Money Laundering and Financing of Terrorism (AML and CFT Act), the Act on Investment Incentives etc.
Is there a governing or regulatory body responsible for overseeing foreign investment in the Czech Republic?
The Ministry of Industry and Trade of the Czech Republic (MIT) has this responsibility.
What restrictions exist in the Czech Republic on foreign investment?
Generally, there are no or only minor restrictions on foreign investment. Investments that will allow access to information (relating to security and the internal order of the Czech Republic) will be mandatorily notifiable to the MIT and will be prohibited from closing until the MIT issues its approval.
Can foreign investors acquire real estate/property/land in the Czech Republic?
Yes, there are no laws or practices that discriminate against foreign investors acquiring real estate/property/land in the Czech Republic (except for certain sensitive sectors listed below).
Which industries do these restrictions apply to (if any)?
Arms and military equipment, critical infrastructure (including infrastructure related to energy, water management, food and agriculture, healthcare, transportation, communication and IT systems, financial markets, emergency services or public administration), dual-use items.
Are there any sanctions or restrictions on foreign investors from certain countries?
Yes, against high-risk third countries according to the Financial Action Task Force (FATF) List.
Are any governmental approvals required for foreign investment in the Czech Republic?
Generally, there are none. For exceptions, see the answer to question 3.
What are the common types of foreign investment in the Czech Republic?
Sectors: Manufacturing, real estate, wholesale and retail trade, science and technologies.
Ways: Virtually all possible ways – shares, loans, asset deals etc.
What are the common business entities open to foreign investors?
Generally, there is no need to obtain authorisation before setting up a company, except in some sectors such as national defence, national security, nuclear energy, etc. In these particular types of cases, companies have to contact the respective ministries.
Are there any tax advantages for foreign investment in the Czech Republic?
Yes, tax relief is a primary form of investment incentive. The government provides investment incentives in the form of corporate income tax relief for 10 years. Investors can also benefit from a wide range of Double-Tax Treaties.
Are there any incentives for foreign investors in the Czech Republic?
Yes, investment incentives are intended for investors in the areas of technology centres, business support services centres, the manufacturing industry and manufacturers of special medical products.
Are there any free trade zones in the Czech Republic which are attractive to Foreign Investors?
Yes, free zones are established in a number of cities across the Czech Republic. Any goods exported into the free zone are exempt from duty and VAT. The exemption also remains if the goods are used in the manufacture of a final product that is exported out of the country again. Duty is only payable when the goods are removed from the zone and into the Czech economy.
Can foreign investors obtain work visas in the Czech Republic?
Yes. However, some sectors such as banking, financial services, insurance, or defence equipment have certain limitations or registration requirements, and foreign entities need to register their permanent branches in the Czech Commercial Register. Some professionals, such as architects, physicians, lawyers, auditors, and tax advisors, must also register for membership in the appropriate professional chamber.
Are there any foreign currency or exchange controls regulations in the Czech Republic relating to foreign investment?
The Czech crown (CZK) is fully convertible and there are no foreign exchange controls affecting trade in goods. Companies operating in the Czech Republic have free access to foreign currency and there has been no failure by the banking system to provide hard currency on demand.
Can foreign investors invest in government projects? If so, are there any restrictions or penalties imposed on the withdrawal of such investments?
Yes, they can though this can carry possible penalties too, as there are sanctions for the breach of FIR Act – which is punishable by a fine of up to 1% of the investor’s total turnover in the previous financial year.
Are there any safeguards or investor protection frameworks in place in the Czech Republic for foreign investors?
There is no official investor protection framework. Strength of investor protection index (0 to 10) in Czech Republic was reported at 6 in 2016, according to the World Bank collection of development indicators, compiled from officially recognized sources.
Is the Czech Republic a signatory to any investment protection treaties with any countries?
There are various bilateral and/or multilateral agreements to make international investment easier (Double Tax Treaties, Resolution of Investment Disputes, Multilateral Investment Guarantee Agency Convention etc.).
Have there been any recent changes in law or developments for reform that may affect foreign investment in the Czech Republic?
The FIR Act enters into force on 1 May 2021 and will apply to completed foreign investments from this date only (i.e. the FIR Act will therefore not have retroactive effect).
What tips are there for foreign investors to be aware of when dealing with foreign investment in the Czech Republic?
Despite not having adopted the Euro currency yet, the EU membership still facilitates trade with other member states and even with third countries that are parties to the international treaties concluded by the EU. On the other hand, the economy of the Czech Republic is highly dependent on the level of exports and the inflow of foreign investment, which makes it particularly vulnerable in times of crisis.

ABOUT THE AUTHORS

Veronika Civínová
Lawyer, KLB Legal

Veronika graduated from the Faculty of Law, Charles University and also took the opportunity to study for a year at Sutherland School of Law, University College Dublin. She started her law practice in an international investment bank in 2012 and joined KLB Legal in 2015. Veronika focuses on financial markets and both their Czech and European regulation. On a long-term basis, she cooperates with leading Czech financial institutions. Furthermore, she is active in the area of issuing securities, including working on IPOs or prospectus and matters related to investment funds. Last but not least, she acts as a mentor in the area of compliance and money laundering prevention and is focused on FinTech and innovations in financial services.

Ondřej Kučera
Junior Lawyer, KLB Legal

Ondřej graduated from the Faculty of Law, Charles University in 2020. During his university studies, Ondřej spent one year in Grenoble, France, where he got a Diploma in French Law. He also completed several internships, in particular at the Ministry of Finance of the Czech Republic and in an international law firm affiliated with a consulting company. He joined KLB Legal in September 2020. Ondřej focuses mainly on capital markets law, corporate law and European law. On a long-term basis, he is active in the field of issuing securities, including composing prospectus, setting up alternative investment funds, anti-money laundering policy or mergers and acquisitions.

ABOUT THE FIRM

Name: KLB Legal
Address: Letenská 121/8, Malá Strana, 110 00, Praha 1, Czech Republic
Telephone: +420 739 013 183
Email: info@klblegal.cz
Website address: www.klblegal.cz
Key contact: Veronika Civínová, Lawyer, civinova@klblegal.cz
Established: 2013
Number of lawyers: 11
Languages: Czech, English, German

Brief description:

KLB Legal was founded in 2013 by attorneys-at-law David Kuboň, Vojtěch Láska and Petr Budzinski. David and Vojtěch have gained many years of experience working for international law firms and leading Czech investment banks; Petr was a top litigation attorney with experience in restructuring troubled companies. Since then, KLB Legal has grown into a medium-sized law firm providing comprehensive legal advice in all areas of law. In terms of the law of capital markets, compliance, securities, structured financing, investment funds, damages and class dispute settlement, we undoubtedly rank among the few top lawyers with such specialization and unique know-how in the Czech Republic.

Key practice areas:

Financial law, Capital Markets law, Corporate law, Damages, Injury Compensation, Litigations, General Civil law, Class Dispute Settlement, Insolvency law.