Extension of the maximum length of the trial period

In several cases, the Flexinovela encroaches on areas that have long been unchanged and are so entrenched that change is met with some degree of reluctance.

One such change is the extension of the maximum length of the trial period. Whereas traditionally for decades the maximum was 3 months for regular employees and more recently 6 months for managerial employees, these limits have now been increased to:

Possibility of additional contractual extension of the trial period

An important novelty is also the possibility of an additional extension of the already agreed trial period, which was not possible before.

Under the new regulation, the employer and the employee can agree in writing to extend the trial period until the maximum limits (4 or 8 months) are reached. Thus, for example, if a trial period of two months was initially agreed, it can be extended by an amendment to the employment contract for a further two months before the trial period ends. Alternatively, if the employee has been promoted to a managerial position during the agreed four-month trial period, the trial period may be extended to eight months.

Statutory extension of the trial period

The Flexinovela also brings clearer rules for the extension of the trial period, which occurs by law.

The trial period is extended by law by the employee’s working days on which they have not worked a full shift during the trial period due to:

However, if the employee works part of the shift, the trial period is not extended. In the case of a statutory extension, the trial period shall be extended by the employee’s working days, not by calendar days.

Transitional provisions, i.e. which legislation to follow

According to the transitional provisions, the decisive moment is when the trial period was agreed, i.e. when the employment contract was concluded. According to the transitional provisions of the Flexinovela, the trial period agreed before 1 June 2025 (i.e. before the Flexinovela comes into force) is governed by the existing (i.e. ‘old’) wording of the Labour Code. The transitional provisions thus link the new regulation not to the start of the employment relationship or the start of the trial period, but to the moment of its negotiation (which does not seem very practical).

The extended trial period and the possibility of its additional extension can therefore only be used for employment contracts concluded no earlier than 1 June 2025.

What are the practical implications of the changes to the trial period?

• In new employment contracts, you can agree a trial period of 4 months (or 8 months for managerial employees).
• This option applies only to contracts that are concluded no earlier than 1 June 2025.
• If you agree a shorter trial period, e.g. 2 months, you can subsequently extend it to up to 4 months (or 8 months for managers) before the trial period ends).
• For trial periods agreed before 1 June 2025, the original regulation applies, i.e. a maximum of 3 months (or 6 months for managerial employees), as well as the impossibility to extend them further.
• When calculating the end of the trial period, remember that it is extended by law not only by a full day’s holiday and a full day’s absence (or a combination of these if the employee misses a whole shift as a result), but also by unexcused missed shifts.

Working during parental leave

The Flexinovela brings a major change for parents on parental leave. It will now be possible for an employee to perform the same type of work for their employer during parental leave as agreed in their employment contract, through agreements on work outside the employment relationship (“DPP” or “DPČ”). Please note that this option is not available during maternity leave, which, according to the explanatory memorandum, has a clear aim and purpose, namely the recovery of the mother and the healthy development of the baby in the first days and weeks.

The regulation remaining in place states that if there is no longer such a matching position with the employer, the employer must place the employee in the position according to their employment contract (i.e. the agreed type of work and the agreed place of work).

Fixed-term employment relationship and parental leave

Significant changes also affect fixed-term employment relationships in the context of parental leave:

Return to work after parental leave

Another important change is the extension of the period for which the employer must place the employee in the same position (‘same chair’) when returning from parental leave. While previously the employer had to allow the employee to return to the original position only during the maternity leave, this obligation now applies until the child is 2 years old.

Special compensation for work and parental leave abroad

The new legislation introduces special compensation for employees in the public sector who work abroad when taking maternity or parental leave abroad. These employees will be entitled to reimbursement of accommodation expenses for 14 weeks at the same rate as before taking maternity or parental leave.

The condition is that the employee gives notice of the intention to take maternity or parental leave abroad at least 10 weeks before the expected date of the birth.

Transitional provisions, i.e. which legislation to follow

The transitional provisions are completely silent on the changes concerning parents, which means that all these changes must be applied automatically as from the entry into force of the Flexinovela, i.e. from 1 June 2025.

Among other things, this means and is confirmed by the interpretation of the Ministry of Labour and Social Affairs, that the extended entitlement to the ‘same chair’ also applies to parental leave commenced before the Flexinovela takes effect, if the return falls between the effective date of the Flexinovela and the child’s 2nd year of age. To qualify for this entitlement, the employee must return to work from parental leave no later than the day before the child’s second birthday.

What do the changes to the employment of parents mean in practice?

• You can negotiate a parallel employment relationship with an employee on parental leave on the basis of agreements on work outside the employment relationship (“DPP” and “DPČ”), for the same type of work that the employee does for you in the employment relationship.
• You can enter into an unlimited number of fixed-term contracts with a person replacing employees on maternity or parental leave, but the total length must not exceed 3 years in a single contract and 9 years in total.
• You must place on the same position not only an employee who returns from maternity leave, but also an employee who returns from parental leave before their child turns 2.

New start of the notice period

A very important change brought by the Flexinovela is the adjustment of the start of the notice period. The notice period will now start on the date of delivery of the notice and not, as was previously the case, on the first day of the calendar month following the delivery of the notice.

The notice period will then terminate at the end of the day that coincides numerically with the date of delivery of the notice in the following month(s). For example, if notice is given on 15 June, the notice period will end on 15 August (with two months’ notice). If there is no such calendar day in the month (e.g. if the notice is delivered on 31 December), then the notice period will end on the last day of the relevant month (i.e. 28 February).

Length of the notice period

The Flexinovela introduces different minimum notice periods depending on the reason for termination:

• At least 1 month in the case of termination for sanction reasons (Section 52(f), (g) and (h) of the Labour Code), i.e. for breach of duties, failure to meet qualifications or requirements or unsatisfactory performance.
• At least 2 months if you give notice for other reasons.

However, it is also possible to agree on a different length of notice period or a different way of running it, both for ‘normal’ and for sanctions grounds. If you are not interested in having the notice period start on delivery, which may cause different termination dates for individual employees, e.g. in the case of major organisational changes, then it is possible to keep the current arrangement. For new contracts, you will need to include a special provision in the contracts to set out the start of the notice period. The correct procedure for existing contracts will then depend on how you have contracts of employment currently set up.

Transitional provisions, i.e. which legislation to follow

The decisive moment is the moment of delivery of the notice. This means that if the notice was delivered at the latest on 31 May 2025, the shortened notice period for penalty grounds cannot be applied, nor can the notice period be calculated from the moment of delivery of the notice. The new rules will then apply to notice served from 1 June 2025 (i.e. after the Flexinovela comes into force), provided that you do not explicitly state in your employment contract with the employee how long the notice period is and how it runs (see the following section on this).

Practical effects on employment contracts

The crucial factor is how you have set the notice period:

• If it is expressly agreed in the employment contract that the notice period is 2 months and starts on the first day of the month following the delivery of the notice, it will be necessary to modify the employment contract by an amendment to apply the new regulation.
• If you have only a general reference to the Labour Code or a legal regulation in your employment contract (e.g. “The length of the notice period and its duration are governed by the Labour Code”), then you can automatically follow the rules from 1 June 2025. However, please note that the specific indication of the length and duration of the notice period should be included in the written information that the employer provides to the employee pursuant to Section 37, so it is advisable to amend this written information as well; although the employer is not legally obliged to inform the employee of the change in legislation, we recommend doing so so that employees are aware of the change and unnecessary complications and misunderstandings do not arise in practice.

In the case of new employees, it is advisable to include the length of the notice period and how it will run in the written information pursuant to Section 37 of the Labour Code, and therefore not to negotiate it in the employment contract.

Termination on medical grounds and one-time compensation

Merging of termination grounds for health reasons

The Flexinovela merges the existing termination grounds relating to the employee’s loss of medical ability. While until now the Labour Code distinguished between:

• Loss of capability due to occupational disease or injury (§ 52(d)) and
• Loss of capability for other reasons (§ 52(e))

There will now be a single ground: long-term loss of capacity to perform the existing work for health reasons. This change responds to previous case law according to which a notice of termination was invalid if the employer used an incorrect reason for termination, even if in fact the reason for termination existed, but at the time the notice was given it was not certain whether the loss of medical capacity was caused by an occupational disease or accident at work (§ 52 písm. d)) or was not directly related to the performance of the employment (§ 52 písm. e)).

The existing termination ground relating to the maximum permissible level of exposure (§ 52(e)) will be recast as a separate termination ground.

One-off compensation instead of severance pay

A major new feature is the replacement of severance pay with a one-off compensation upon termination of employment due to long-term loss of medical capability as a result of:

The one-off compensation will be equivalent to 12 times the employee’s average monthly earnings and represents satisfaction – a one-off compensation provided to an employee whose employment has ended for work-related health reasons.

Key characteristics of a one-off compensation:

• This is compensation for non-pecuniary damage (satisfaction)
• It is not subject to social security and health insurance contributions
• It is paid even if the medical assessment is issued after the end of the employment relationship (of course, after the medical assessment has been issued)
• It is covered by the employer’s statutory insurance (unlike the existing severance pay)
• It may be reduced if the employee is jointly at fault (in the case of a work-related injury)
• Replaces the existing entitlement to severance pay
• Employer may provide a higher benefit, but the insurance company is only required to pay 12 times average earnings

In the event of termination of employment due to reaching the maximum permissible level of exposure, the employee will remain entitled to severance pay in accordance with Section 67(3) of the Labour Code (also equal to 12 times the average earnings).

Transitional provisions, i.e. which legislation to follow

The decisive date is the date of termination of employment. Only employees whose employment ends on or after 1 June 2025 will be entitled to a one-off compensation. Employees whose employment ends due to loss of medical capacity due to an occupational injury or disease at the latest on 31 May 2025 are entitled to a severance payment under the current legislation.

Extension of time limits for termination of employment relationship

Extension of subjective and objective time limits

The Flexinovela extends the time limits within which an employer may give notice or immediately terminate an employee’s employment for breach of employment obligations:

• The subjective time limit is extended from two to three months (the time limit within which the employer becomes aware of/discovers the violation)
• The objective time limit is extended from one year to fifteen months (the time limit from the moment the breach occurred)

This change reflects the requirements of practice, as in many cases it is difficult for employers to obtain all the necessary information and fully assess the case within the current short timeframe.

Transitional provisions, i.e. which legislation to follow

The decisive point is the moment when the employee’s breach of their duties occurred. Therefore, the extended time limits apply only to breaches of employment obligations occurring from the date of effect of the Flexinovela. If the employee has breached their employment obligations before 1 June 2025, the subjective and objective time limits are governed by the original regulation.

Invalid termination of employment relationship

Compensation for invalid termination of employment

The Flexinovela explicitly provides that in the event of an invalid termination of employment, the employee is entitled to compensation for untaken leave in addition to wages or salary.

This change responds to the development of case law in the European and subsequently also in the Czech environment and reflects the fact that court proceedings to determine the invalidity of an employment relationship are often quite lengthy.

Moderation of wage compensation

The current wording of the Labour Code already allows the court to reduce (i.e. moderate) the wage compensation that will be paid to the employee in the event of success in the litigation. The Flexinovela extends the demonstrative list of facts that the court takes into account when reducing the wage compensation. A reduction of up to 6 times average earnings is possible not only if the employee had other employment during the litigation (and thus generated the income meant to be replaced by the wage compensation), but now also explicitly if the employee was engaged in other gainful activity (e.g. as a self-employed person). This is a logical change that is consistent with the intent of the provision and removes the apparent inequality between the forms of gainful activity of the employee.

Newly, an employee who considers the termination of the employment relationship invalid does not have to notify the employer that they insist on continued employment without undue delay. It is sufficient for them to do so at any later time, e.g. even in the course of (timely initiated) litigation, which is in line with previous case law.

What do the changes to termination of employment mean in practice?

• If you have not agreed on the length and duration of the notice period in your employment contracts, you will be governed by the new regulation as of 1 June, i.e. the notice starts on the date of delivery and the shorter notice period for penalty grounds will apply.
• If you have agreed on the length and/or duration of the notice period in your employment contracts, you follow the agreed terms; to apply the changes brought about by the Flexinovela, you need to conclude an amendment to your employment contracts.
• If, according to a medical report, an employee loses the ability to perform his/her current job on a long-term basis, you do not need to address whether this is due to an occupational injury, occupational disease or a non-occupational medical reason for termination, it is the same reason for termination; you only address the circumstances for the purposes of providing severance pay or, after the Flexinovela, a one-off compensation.
• If an employee is breaching their duties, you have a longer period of time to investigate and assess the misconduct and any termination or immediate termination must take place within 3 months of becoming aware of the reasons.

Extension of payroll delivery options

The Flexinovela introduces a very specific method of electronic delivery of wage statement. The wage statement is included among the documents that must be delivered to the employee by hand (similar to a notice of termination or other forms of unilateral termination of employment). Thus, its electronic delivery was also subject to strict conditions, which, however, are contrary to the needs of practice.

It will now be possible to deliver the wage statement to an electronic address other than the employee’s private address, which the employee has designated for the delivery of unilateral documents, provided that the following conditions are met:

• The wage statement will be signed with a recognised electronic signature of the employer
• The employee will be able to save and print the wage statement
• The employee shall acknowledge receipt of the wage statement within 15 days; failure to do so shall render the delivery ineffective

If the above conditions are met, it will therefore be possible to deliver the wage statement to the employee’s company email, or by storing it in the employer’s internal system (which will allow confirmation of reading by the employee).

Timing aspects of the delivery of wage statement

Another change is that the employer is obliged to provide the employee with a wage statement before the commencement of work. Therefore, it will not be sufficient, as it was before, to hand over the wage statement on the day of commencement of work). The wage statement is delivered at the moment (i.e. not on the date) of acknowledgement of receipt. This is a consequence of the principle that the employee should be made aware of the pay conditions before commencing work.

The other options for delivery of the wage statement (including electronic delivery to the employee’s designated address) and their terms and conditions remain unchanged.

Payment of wages and salary

Cashless payout as a primary method

It is almost unbelievable that until now the basic method of payment of wages has been cash at the workplace. The Flexinovela finally responds to practice and establishes non-cash payment of wages as the primary method. Only in the following cases will wages be paid in cash during working hours and at the workplace:

Wages or salary are normally paid in Czech crowns to a bank account in the Czech Republic. The employee must have the money in the account on the pay date.

Payment of wages in a foreign currency

An important novelty is the extension of the possibility to pay wages in foreign currency. It will now be possible to pay wages in foreign currency in the presence of a so-called foreign element in the employment relationship, particularly in the following cases:

• The place of work is abroad
• The employee is a foreigner
• Employee is a citizen of an EU Member State who does not have permanent residence in the Czech Republic
• The employee lives abroad permanently or pays for him/her or his/her family living expenses abroad

The employee’s consent is required for payment of wages in a foreign currency (it must be an agreement). Only the currency for which the Czech National Bank announces the exchange rate can be used. For the conversion, the Czech National Bank’s rate for the first working day of the month following the month for which the wage entitlement arose is used.

Long-term care provision

If the employee is providing long-term care, the employer will now have to excuse the employee’s absence despite the existence of serious operational reasons on the employer’s side with which the employee’s absence conflicts.

Transfer of leave

The possibility of transferring leave is now introduced also in the event of a change in the basic employment relationship, i.e. in the event of a change in the employment relationship to an agreement on the performance of work or an agreement to complete a job, and vice versa, in the event of the replacement of one form of agreement by another.

Trade union activities

The Flexinovela regulates the conditions for proving the existence of a trade union in the employer. The trade union will now have to prove at the employer’s request that at least 3 employees of the employer are organised with it. This proof does not have to be part of the initial notification of the presence of a trade union with the employer.

Proof of membership is in the form of a notarial record, which is the result of the cooperation between the trade union and the employer. The costs of the notarial deed shall be borne by the employer.

Prohibition of the pay confidentiality clause

The amendment explicitly prohibits so-called confidentiality clauses on wages/remuneration and their components. Violation of this prohibition may be punishable as an offence with a fine of up to CZK 400,000.

However, the Ministry of Labour and Social Affairs admits that where it would not be feasible to conclude amendments or would be excessively administratively demanding, employers may cancel the concluded clauses by unilateral declaration addressed to the employees, by which the clauses will be declared null and void.

Clarification the definition of a single person

The Flexinovela clarifies the definition of a single person, who is:

• Person not living in a marriage, partnership or registered partnership.
• The category of ‘single person for another serious reason’ (assessed in socio-economic terms, e.g. employees whose spouse or partner is serving a sentence) remains.

Additional rules for calculating average earnings

The rules for calculating average earnings are also clarified for cases where average earnings are determined after termination of employment (for example, for severance pay purposes) and for cases where there is a change in hours of work:

• For the purposes of severance pay (or leave compensation), the average earnings are determined for the calendar quarter preceding the last day of employment (e.g. if the last day of employment is 31 December, the average earnings determined during the fourth calendar quarter will be used, with the 3rd calendar quarter being the relevant period for determining the average earnings);
• In the event of a change of hours during the reference period, the adjustment to the calculation of average earnings is more precise.

After many weeks of discussions, adjustments and negotiations, the long-awaited amendment to the Czech Labour Code was finally approved.

On 13 September 2023, the House of Representatives overruled the Senate’s proposals to the amendment to Act No. 262/2006 Coll., the Labour Code (the “Labour Code”) and therefore approved the amendment as submitted to the Senate by the House of Representatives.

The Act was signed by the Czech President on 17 September 2023 and published in the Collection of Laws on 19 September 2023 as Act no. 281/2023 Coll.

Consumer protection in the Czech Republic stems partially from the EU harmonization, therefore provisions similar to the Czech regulations can be expected also in other EU countries. On the other hand, EU countries are allowed to apply some additional consumer protection arrangements, so rules applicable in each EU country (including the Czech Republic) should be crosschecked. For an e-shop, especially provisions relating to consumer contracts (and particularly to distance contracts) are relevant. A distance contract is a contract:

Among these rules, it is possible to highlight provisions imposing information obligation on the trader towards the consumer, provisions regulating the process of concluding the contract and provisions regulating the content of the contract (prohibited provisions, termination of the contract, quality guarantee and the consumer’s claims from defective performance, etc.). The operator of the e-shop should ensure that the web page where the e-shop is located contains all the information required by law and that the contract concluded through the e-shop respects all the consumer’s rights.

Information duty

Before the conclusion of a contract, i.e. generally before an order through the e-shop is finished, the consumer should be informed about the identity of the trader, his address, contact details, specification of the goods or services offered, final price of the goods and services (including all taxes and fees), use of price personification, means of payment and delivery, delivery costs, claims arising from defective performance or warranty and conditions for their application, length of duration of the contract and ways to terminate it (steps, period for withdrawal and procedure of withdrawal included), costs of distance communication, amount of eventual advance payments, body competent for settlement of consumer disputes, etc.

Process of conclusion of the contract

Consumers should be informed about particular steps of concluding the contract and before final placing of the order should have a chance to verify and eventually correct the data inserted into the order. The trader should also inform the consumer where the concluded contract is available for the consumer, about languages in which the contract can be concluded or any rules of behaviour bounding on the trader.

In the context of ordering (specifically the Order button) goods and services, the consumer must be informed of the obligation to pay, i.e. the consumer must be clear from the order that by sending (confirming) it, he undertakes to pay for the order.

The trader should also inform the consumer where the concluded contract is available for the consumer, about languages in which the contract can be concluded or any rules of behaviour bounding on the trader.

After the order is placed by the consumer, the trader is obligated to immediately confirm receipt of the order also by one of the means of distance communication (for example by an e-mail).

Content of the contract

The contract concluded through the e-shop is regulated by the applicable law. For a private contract, the principle of contractual freedom usually applies, nevertheless in the case of consumer contracts, the freedom is to a significant extent limited in favour of the consumer.

First, certain provisions are explicitly prohibited by law and cannot be applied by the trader. Arrangements establishing disproportional unbalance between rights and obligations of the trader and of the consumer are prohibited in general.

In addition, the contract cannot contain arrangements restricting or excluding consumers’ rights from defective performance, allowing the trader to withdraw from the contract without any reason, allowing the trader to change unilaterally rights and obligations of the parties to the contract, disallowing the consumer to file an action at court and forcing him to sue the trader at an arbitration court not being bound by the consumer protection provisions, etc.

Czech law also contains some provisions protecting consumers that are applicable for all sales contracts, not only distance contracts.

It is worth mentioning that under these provisions the consumer is entitled to raise claims from defective performance within 24 months from takeover of the goods (or within the warranty period stated on the cover of the goods). These provisions also determine the respective claims consumers have in case of defective performance.

In case of distance contracts consumers also have the right to withdraw from the contract without any reason within 14 days from takeover of the goods (it is sufficient that the consumer dispatched the withdrawal announcement within this term). If the consumers have not been informed about this right by the trader, the period for withdrawal prolongs to 1 year and 14 days.

To avoid any potential disputes, we recommend to offer to the customers a template withdrawal form. When this form is used by the customer, the trader is obligated to confirm its receipt within undue delay. The consumer must return the goods obtained on the basis of the contract within 14 days from the withdrawal. Within the same period, the trader is obligated to return the price paid by the consumer together with delivery costs in the manner the price was paid or in a manner agreed on with the consumer.  

When placing the order, the traders often require customers to provide (and customers provide) certain personal data, such as name, address, phone number, e-mail address, date of birth or gender. Such personal data serve mainly for invoicing and delivery of the goods and services, however, some traders use the personal data also for other purposes, such as marketing, advertising, references, statistics, etc. Processing of personal data is regulated, and when a trader processes personal data, statutory obligations must be fulfilled.

In order for the lawful processing of personal data to take place, it is necessary that the trader has at least one of the legal titles for processing personal data set out in the GDPR. In the case of e-shops, this will generally be the processing of personal data in connection with the performance of a contract or the legitimate interest of the trader (it will always depend on the specific purposes of the processing). Personal data may only be processed for the purpose for which it was obtained, only for as long as there is a legitimate reason for processing it, and only in relation to such data as is necessary to fulfil the required purpose (although there are exceptions).

Before processing may commence, the customer has to be informed about the purpose of processing the data (the purpose must be laid down by the controller before processing of the data is commenced), who will be processing the data, what kind of data will be processed, for how long the data will be processed and about rights of the data subject regarding access to, correction of, or destruction of the data and other information required by law.

The controller is also obliged to adopt technical and organizational measures preventing leakage and abuse of the personal data of the customers and such measures must be documented. Employees of the controller are bound by the statutory confidentiality duty with regard to the data and the measures adopted for their protection.

Commercial messages

Sending commercial messages is a common practice for e-shops, whether it is sending information about new products or birthday cards. Commercial messages are generally considered to be all forms of communication, including advertising and solicitations to visit websites, intended to directly or indirectly to promote the goods or services or the image of the business that the trader sends to its customers.

If the e-shop operator receives electronic contact (e.g. e-mail) from its customer in connection with the sale of products or services. The e-shop operator may send commercial messages to the e-mail received in this way, provided that the customer has the possibility to refuse such commercial messages easily and free of charge and that the commercial messages concern similar products or services purchased by the customer on the e-shop.

Cookies

Almost every e-shop operator uses cookies on its website. Cookies are small text files that are stored on the hard drive of the computer or other device from which the visitor browses the website. Cookies have various uses, such as ensuring the technical operation of a website, enabling website operators to understand visitor preferences, create targeted advertisements or obtain other information about customer behaviour.

This rule applies to all types of cookies except those necessary for the operation of the website. Unlike the previous opt-out regulation, this requires activity on the part of the website user. As a consequence of this amendment, the wording of the cookie bar needs to be adjusted so that users can give consent separately for each type of cookie.

Often, website operators use a so-called cookie wall (i.e. a window that blocks the user from further access to the website until they agree to the use of cookies). Please note that such consent, which is essentially forced, cannot be considered free and as such does not comply with the requirements of the GDPR.

Conducting a business on the territory of the Czech Republic is usually connected with various tax registrations. The corporate income tax registration and value added tax registration are the most common for an e-shop.

Corporate income tax registration

Provided that the e-shop carries out its activities through a company established for this purpose in the Czech Republic, it is liable to register for corporate income tax purposes within 15 days from the establishment of the company, i.e. from its registration in the Commercial Register.

If on the other hand the e-shop would have no physical presence on the territory of the Czech Republic, the liability to corporate income tax registration and related duties would not arise.

It is impossible to provide a full list of activities that would or would not lead to permanent establishment creation. To come up with a relevant conclusion on this issue both the Czech tax legislation and the Double Tax Treaty concluded between the Czech Republic and the country of which the entity operating the e-shop is a tax resident should be analysed.

To provide an indication of situations both leading and not leading to Czech permanent establishment creation, a few examples are described below.

Corporate income tax filing obligations

Once registered for corporate income tax purposes, the e-shop is liable to file its Czech corporate income tax return on annual basis. The time-limit for filing the return is generally three months following the end of the taxable (accounting) period. If the corporate income tax return is filed by a tax advisor or if the entity operating the e-shop becomes liable to a statutory audit, the time-limit for the submission of the corporate income tax return is prolonged to six months following the end of the taxable (accounting) period.

The corporate income tax liability (self-assessed by the e-shop) is payable within the filing deadline.

As a consequence of the corporate income tax liability, the obligation to corporate income tax advance payments arises. Advance payments must be paid semi-annually if the last known tax liability ranges between CZK 30,000 – CZK 150,000 (approx. EUR 1,200 – EUR 6,000). In this case the advance payment is set at 40% of the last known tax liability.

If the last known tax liability is higher than CZK 150,000 (approx. EUR 6,000), the advance payment is ¼ of the previous tax liability and is paid quarterly.

VAT registration

Provided that the e-shop has registered seat, place of business or fixed establishment in the Czech Republic, the threshold for mandatory VAT registration is the turnover of CZK 2,000,000 (approx. EUR 80,000) for a calendar year.

A foreign taxable person that realizes long-distance sales (i.e. sale of goods via e-shop) in the Czech Republic to Czech final customers has to register for VAT in the Czech Republic if the total value of the transactions carried out to the European Union customers reaches EUR 10,000 in the relevant calendar year and the year immediately preceding and is not registered to One Stop Shop scheme in his home country.

The entity operating the e-shop (both Czech and foreign) may however apply for voluntary VAT registration. The process of voluntary VAT registration is more demanding from the administrative perspective lately.

If the online store is already registered in the country of its establishment under the One-Stop Shop regime (OSS), it is not obliged to register for Czech VAT purposes.

VAT filing obligations

Once VAT registered, a liability to file VAT returns in which the VAT liability or entitlement to VAT recovery are calculated and reported arises. The compulsory VAT reporting period for newly registered VAT payers is a calendar month.

Starting from 2016, VAT registered persons are also obliged to file special tax return called VAT Control Statement through which further details on transactions are reported (e.g., invoice number, identification of supplier or customer, tax base, VAT amount). The VAT Control Statement is filed within the same deadlines as are relevant for VAT returns filing. The VAT Control Statement is only a reporting tool that allows financial authorities to have more control over correct and complete reporting of VAT liabilities.

VAT identified person

Even if not VAT registered in the Czech Republic, the e-shop should be aware of the risk of becoming VAT identified person. The e-shop would become liable to register as VAT identified person in the following situations:

In the situations described under the first two bullet points, the VAT identified person becomes liable to file VAT return through which the Czech VAT liability is reported. At the same time no entitlement to input VAT deduction arises to the VAT identified person. In the third case a liability to file VAT return and EC sales list arises. No liability to pay output VAT and apply input VAT deduction is connected with filing the VAT return. The VAT return serves for reporting purposes only.

Other tax registrations

The liability to other tax registrations should be assessed with regard to the nature of the e-shop and its operations. As relevant examples could serve registration to personal income tax from employment activities provided that the entity operating the e-shop has employees, registration to road tax if the entity operating the e-shop operates vehicles for business purposes in the Czech Republic, real estate tax registration if the entity operating the e-shop owns real estate in the Czech Republic, etc.

Below we comment on the liability of the e-shop to declare the sale of goods through a tax document as defined by the Czech VAT legislation.

The liability to issue a tax document declaring the sale depends on whether the e-shop is VAT registered in the Czech Republic or not. Our comments to individual scenarios follow below.

Goods delivered within the Czech Republic

Goods sold to Czech end customer (non – taxable person)

In the case of a warranty claim from the customer, the e-shop is liable to issue a confirmation of the warranty claim and a report on the settlement of the warranty claim (declaring how the customer’s claim was dealt with). None of these documents are tax documents.

In this case it will be sufficient for an e-shop to issue any convenient document that will indicate the following information: identification of the e-shop (business name, seat, registration number, VAT number), identification of the customer (name, address), date of order, delivery date, description of the goods sold, total amount including VAT, advance payment, amount to be paid.

Goods sold to person liable to VAT

If the e-shop sells goods to a person liable to VAT, the liability to issue a tax document depends on whether the e-shop is VAT registered in the Czech Republic or not.

As required by the Czech VAT legislation, the tax document must provide the following information: identification of the e-shop (business name, seat, registration number, VAT number), identification of the customer (name, address), description of the goods sold, date of taxable supply (delivery date or date of advance payment receipt), date of issuance of the tax document, unit price of the goods sold excluding VAT and discount (if the discount is not included in the unit price), VAT base, VAT rate, amount of VAT in CZK, total amount to be paid.

In case of exchange or return of the goods, a liability to issue corrective VAT document will arise. Based on  the Czech VAT legislation the corrective VAT document must state the following information: Identification of the e-shop (business name, seat, registration number, VAT number), identification of the customer (name, address), evidence number of the original tax document, evidence number of the corrective VAT document, reason for issuance of the corrective tax document, difference between the original and corrected tax base, difference between the original and corrected amount of VAT, difference between the original and corrected amount to be paid by the customer.

Goods transported from EU

Goods sold to Czech end customer (non-taxable person) – distant sale

If the goods sold to Czech end customer (non-taxable person) are at the time of their sale located on the territory of the EU, the liability to declare the sale of the goods by a tax document will depend on whether the EU e-shop is VAT registered in the Czech Republic or not.

If the e-shop is not VAT registered in the Czech Republic, the VAT legislation of the country where the EU e-shop is VAT registered will be followed when it comes to issuance of VAT documents.

As required by the Czech VAT legislation, the tax document must provide the following information: identification of the e-shop (business name, seat, registration number, VAT number), identification of the customer (name, address), description of the goods sold, date of taxable supply (delivery date or date of advance payment receipt), date of issuance of the tax document, unit price of the goods sold excluding VAT and discount (if the discount is not included in the unit price), VAT base, VAT rate, amount of VAT in CZK, total amount to be paid.

In the case of exchange or return of the goods, a liability to issue corrective VAT document will arise. Based on  the Czech VAT legislation the corrective VAT document must state the following information: Identification of the e-shop (business name, seat, registration number, VAT number), identification of the customer (name, address), evidence number of the original tax document, evidence number of the corrective VAT document, reason for issuance of the corrective tax document, difference between the original and corrected tax base, difference between the original and corrected amount of VAT, difference between the original and corrected amount to be paid by the customer.

Goods sold to person liable to VAT

In the case of sale of goods to a person liable to VAT, the rules for issuance of a VAT document as valid in the given EU country will apply. The rules of the given EU country will also apply to a situation when receiving VAT advances from the customers, or in case of exchange or return of the goods.

Goods transported from 3rd country

Goods sold to Czech end customer (non-taxable person)

If the goods are transported to Czech end customer from a 3rd country, then regulations of the 3rd country are decisive when it comes to rules governing the issuance of VAT/sales documents.

All goods imported from the third countries to the EU are subject to VAT, regardless of their value.

If the sale of goods is facilitated by online sellers or through an electronic interface (e-shop) to buyers in the EU, the seller/electronic interface is considered to have made the sale and is in principle liable for the payment of VAT.

To simplify the declaration and payment of VAT for goods sold from a distance by sellers from either the EU or from a non-EU country or territory the seller may apply for Import One-Stop Shop (IOSS). If a business is not based in the EU, it will normally need to appoint an EU-established intermediary to fulfil its VAT obligations under IOSS. The IOSS simplification is applicable only to purchases made by a buyer within the EU and for goods valued at less than EUR 150. For goods valued more than EUR 150 shall apply the rules for standard import of goods from a non-EU country.

Goods sold to a person liable to VAT

If the goods are transported to Czech end customer from a 3rd country, then regulations of the 3rd country are decisive when it comes to rules governing the issuance of VAT/sales documents.

It is essential for the e-shop (with no regard to the destination from where the goods are shipped) to be able to prove both the date of receiving the advance payment (in case of receiving advances from the customers) as well as the date of taxable supply (i.e. the date on which the customer overtakes the goods). Receipt of the payment can be proved by a bank account statement in case of card/bank transfer or by a confirmation from courier company in case of cash on delivery. The handover of the goods to the customer can be proved by a confirmation issued by the courier company proving that the goods were handed over to the customer or by a delivery note. Even though there is no legal obligation to issue delivery notes, it is a common practice in case of e-shop sale.

The incorporation procedure of a limited liability company in the Czech Republic consists of the following steps:

The incorporation time of a limited liability company in the Czech Republic is approximately 1 week after receiving the incorporation documentation.

What documents are required from you?

• A written consent on the provision of the registered office address (we can arrange this for you)
• Documents relating to the appointment of the statutory body
  • Criminal background extracts of the appointed managing directors (for non-Czech citizens)
  • Personal data of the appointed managing directors
• Extracts from the Commercial Register of shareholders and/or managing directors, if they are legal persons

*This list is not exhaustive

Joint-Stock Company (Akciová společnost | a.s.)

Features of a Joint-Stock company:

• High share capital requirements – CZK 2,000,000 or EUR 80,000
• More complex and costly administration
• Shareholders are not liable for the company’s debts or obligations
• Suitable form of business for a large number of shareholders

Branch

Features of a Branch:

• Short establishment period and easy liquidation requirements
• No share capital
• Easy administration
• It does not have legal personality (e.g., all agreements must be concluded through the parent company).

The most important document required when establishing a company in the Czech Republic is the Articles of Association / Foundation Deed adopted in the form of a notarial deed.

Other documents required depend on the specific legal form of the company. Usually, the following documents are also required:

Incorporation time varies based on company type. For example: the establishment and registration of a capital company could be completed within 7 working days.

Company formation in the Czech Republic and related taxes

Czech and foreign legal entities, as well as natural persons engaged in business activities in the Czech Republic, can apply for investment incentives. The supported areas include:

When meeting the conditions, investment incentives can be provided in the form of:

• corporate income tax relief for a period of 10 years
• financial support for acquisition of tangible fixed assets up to 10% of the eligible costs
• cash grant for job creation
• cash grant for training of employees

The term „related persons” (“related parties”) concerning transfer pricing in the Czech Republic refers to:

Working time

40 hours/week is the length of standard weekly working hours, except for some employees. Working hours are usually distributed over a five-day working week. Part-time work may be agreed between the employer and employee.

12 hours is the maximum length of a shift. The employer shall distribute working hours and determine the start and end of shifts.

25% of the average earnings is the minimum premium that the employee is entitled to for overtime work in addition to the attained wage, or a compensatory time off.

Besides an evenly distributed work time schedule, employers may also introduce uneven or flexible schedules, as well as a work time account. In addition, from 1 January 2025, the employer may also agree with the employee on the employee´s self-scheduling of working hours, both when working at the employer´s workplace and when performing remote work. Specific requirements are indicated in the Czech Labour Code.

Time off

Regarding the vacation and other circumstances under which the Czech employee can take time off, the main cases are:

Agency employment

An employment agency temporarily assigns its employee to perform work for a client on the basis of a temporary assignment agreement entered into by and between the agency and the client.

The employment agency and the client are obliged to secure that the working and wage conditions for the temporarily assigned employee are not or would not be worse than those under which a comparable employee works or would work.

Posting of employees and the necessity to carry an A1 certificate

In case an employee of an employer based in one of the EU member states is sent to work within the framework of the posting of employees in the territory of the Czech Republic, such an employment must comply with the European legislation, as well as that of the Czech Republic.

An A1 certificate is a form that states the country in which an employee is covered by social insurance. In principle, all employees are covered by social security in the country where they work and hence to prove this, employees must carry an A1 certificate.

Inspections in several EU countries are strict and may cause unpleasant situations to the employees and their employers if they do not have A1 certificates.

If the posting is short-term (i.e. up to 12 months), the employment must comply with the following Czech basic work conditions:

• maximum work periods and minimum rest periods
• remuneration, including overtime rates; this does not apply to supplementary occupational retirement pension schemes
• occupational safety and health
• minimum paid annual leave
• working conditions for pregnant employees, breastfeeding employees and employees up to the end of the ninth month after giving birth and minors
• equal treatment of male and female employees, ban on discrimination
• working conditions for agency employment
• conditions of employee accommodation
• allowances or reimbursement of expenditure to cover travel, board and lodging expenses for employees away from home for professional reasons.

In case of long-term postings (i.e. exceeding 12 months), it is necessary to ensure that also any other local work conditions are applicable to the posted employee, with the exception of conditions governing the establishment, changes or termination of an employment relationship.

Local legislation is not applicable if the legislation of the posting country is more favourable to the employee, which is to be considered individually.

Local statutory representation for VAT

In the Czech Republic, local representation by a tax advisor is not obligatory.

As of 1 January 2025, foreign entities which do not have a data box are obliged to have an authorized representative for the delivery of documents. Authorized representative should be appointed by the foreign entity no later than

1. the last day of the deadline for mandatory registration, or
2. on the date of application submission in the case of voluntary registration.

Statutory language

Communication with authorities

A taxable person can communicate with the tax authorities in written form, verbally to the protocol or electronically via the data box.

Tax period and deadline for VAT return filing

EC sales list and other documents

The EC Sales List shall be filed until the 25th day following the respective tax period which is in general a calendar month; eventually a calendar quarter.

Besides the VAT return, a control statement listing information from issued and received invoices must be filed as well.

Real estate in the Czech Republic (again with certain exceptions such as engineering networks) as well as certain rights to it are registered in the Cadastre of Real Estate.

The Cadastre of Real Estate contains descriptive information on real estate, such as:

This information is listed for each cadastral area on separate title deed. Such title deed lists all the information on all the real estate owned by the same person in relevant cadastral area.

Furthermore, the Cadastre of Real Estate includes the Collection of Deeds which contains documents relevant for the registrations in the register (such as past acquisition titles to real estate or geometric plans).

The descriptive information as well as excerpts from the individual title deed can be obtained for a fee electronically via the website of the State Administration of Land Surveying and Cadastre (http://katastr.cuzk.cz).

Selected information can also be obtained on a non-reliance basis for free.