Thursday, May 3, 2012

Working as a Freelancer in the Czech Republic: How to get your business license and tax ID

My creative Slovak colleagues working hard in our "war" room.

The lucky winds were blowing my way when a friend and former work colleague contacted me and asked if I was available for a short-term project located in the area. I would be a consultant to a local company; serving as the representative for a large international corporation; and would be paid by a small European multinational corporation. All the conditions pointed in one direction, I needed to get a Czech business license (živnostenský list or z-list) and tax ID in order to get paid.

In diplomatic status you have a head start, but it is still a long process with forms and notarized letters. My first step included:

1. Get approval from the Ambassador's Office: form available in HR

After I had internal approval, I started my research. The two sources that helped the most were Getting a Czech Trade License on the website, which was out-of-date but still a good start; and the WorldBank website has up-to-date information on how to start a business in many countries around the world, including the administrative processes. The one for the Czech Republic listed 9 procedures and 20 days. (A big thank you to my regional Global Employment Initiative Officer who sent me the link.)

Two other sources that can help through this process in the Czech Republic are the online discussions and CrowdSauce CZ group on Facebook. There are some small companies that will consult with you or take on all the procedures, but they are in high demand. Post on or CrowdSauce CZ, if you are interested in one of them.

The next step was:

2. Get approval from the Czech Ministry of Foreign Affairs, which results in an official letter: HR graciously helps with this step

and since it took about a week and a half to receive the letter, we headed down to the Trade License Office in Prague 1 with my Diplomatic passport (which has the long-term residency permit inside) and a very long, out-of-date "CRM One Stop" form. This form is not necessary anymore as the administrator just enters the information directly into an online application from their desk.

The best part of visiting the two administrative offices required was that they both had paternoster elevators:

which move faster than expected when you step on them for the first time. At the Trade License Office we were directed from the English special desk to the "S" desk for the beginning letter of our first name. Lessons learned:

Expect to revisit an administrative office several times, until your documents have met the satisfaction of the administrator.  All of your documents need to be in Czech and notarized.

3. Go to the Trade License Office with:
a. Your passport with long-term residency permit
b. Notarized letter from head of Consular stating that you declare that you have no outstanding criminal record in the U.S.
c. Notarized letter from Management Officer stating that you are allowed to use your residence for business purposes and the exact address
d. Letter from Ministry of Foreign Affairs stating your approval to work in the Czech Republic
e. 1000Kc

Since the Trade License Office is used to dealing with normal U.S. passports and standard long-term residency permits, our administrator questioned my permit since it did not state our exact address. He wanted us to get a new one that listed our exact address, but with the help of a translator from another desk and some intense looks he was able to finally accept it.

I registered as a freelancer in an unlicensed trade (the full list of unlicensed trade in the Czech Republic), which includes editorial services, translation, education, marketing and media. If you are planning to work in a licensed trade, I would plan on bringing notarized transcripts or degree certificates. I brought my transcripts but they were not needed for an unlicensed trade.

It took about three visits to get everything in order and accepted. Once entered into the system, it was available the next business day. Since the Trade License Offices for this process are only open Mondays and Wednesdays, the three visits and next business day return took about two weeks.

On to the next step, which was a lot harder than I expected:

4. Open a local bank account

In the U.S. you get the impression that banks are just about willing to do anything to get you to open an account, so I naively expected that I would be able to walk into a bank and open a checking account in Prague. Not so if you do not speak Czech. Although it only took about 30 minutes after all was said and done, of the three banks I walked into, each one requested I make an appointment and come back either the next day or the next week.

My favorite experience was with a bank employee in a completely empty bank, sitting behind the customer service desk with no visible paper work in sight. He was the go-to English speaker and when I asked if I could open account, he replied "how about coming in next week?"

I ended up opening a "current" account with KB, because when I walked into the bank a woman with the biggest smile I have seen in the Czech Republic walked up to me to ask me what I needed. Of course I had to come back the next day, but everyone I interacted with was very nice. I left in about 30 minutes with an account number and instructions on how to use my new internet banking account.

After receiving your business license you have 30 days to register with the Tax Office. There are specific offices for each section of Prague and you must register with the office representing the district in which you reside.

5. Go to the Tax Office for the Prague district in which you reside, with:
a. Your passport with long-term residency permit
b. Your new business license documentation
c. Bank account number, on statement or agreement from bank is best
d. Notarized letter from Management Officer stating that you are allowed to use your residence for business purposes and the exact address
e. All other documentation, just in case

It also helps if you bring a 9 month-old, babbling baby. I got lucky and my tax administrator was a very helpful woman who had a soft-spot for babies. She helped me fill out a required form which was in Czech by pointing to my documents and then pointing to the fields and then entered all the information into her online application. Since she didn't speak English and I don't speak Czech, I am not sure if this form is something you can do while there or needs to be done prior, but after completing it and her making copies of all my documents, she handed me a paper that contained my Tax ID.

These Tax Offices are also only open on Mondays and Wednesdays, so if you happen to need to come back or wait for the final number the next business day. I can take longer than one business day.

As the proud new owner of a Czech business license and Tax ID, it is time to start researching how and how much taxes and other fees (yes, even in diplomatic status we pay the full obligation of taxes on earned income) I must pay after I receive money in my new bank account. Another reason to choose KB, they have an English-speaking Help Desk for their internet banking!

Update: I successfully filed my Czech income taxes before the deadline! Details at Paying Czech Income Taxes.


Unknown said...

Absolutely amazing, lol omg, I finally found what I was looking for. 2 days of research, and this amazing site, and all of your work, gave me hope again. Thanks bunches.

Natalie Buda Smith said...

Greg - so happy you found this to be helpful. Best of luck!

kevin stanley said...

Dear Natalie

Thank you very much for taking time and sharing this great detail. I hope you are having a good time.
If it's OK, could you address or rather advice me ?
I'm an audio engineer from India looking to relocate to czech. The point 1&2 as you mentioned on your article is unclear to me if this has to be done in our local czech consulate embassy in India or do I have to come to Czech to do the documentation ?

Thank you for your time.

Natalie Buda Smith said...

Dear Kevin,

My situation may be different than yours, as I was in the Czech Republic on a diplomatic visa. Your visa will probably be different. I would go to the Czech embassy or consulate in India to get more information on the best visa for you. If you find an employer in the Czech Republic, their Human Resources department will most likely guide you through this process.

Best of Luck!