Kweez
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Wed Oct 26th 15:59 2005 / #1 |
Hi SlowPoke. I see what they're doing - this situation would greatly simplify things for them and could potentially cause you a lot of headaches.
First: All Czech limited liability companies (s.r.o.) are obligated to file annual corporate income tax returns. Moreover, if the income of the company exceeds 1 million CZK in a year, the company is obligated to register for VAT, which carries the obligation of filing VAT returns with the financial authorities at least every three months. You would need to hire an account to deal with the bookkeeping and filing.
Second: Payroll. The company would most likely need to officially employ you, and the company is responsible for making employee contribitions to the Social Security and Health Insurance authorities, as well as paying income tax advances to the financial authorities. If you are sole shareholder of the company, which I am assuming you would be, you could potentially just pay yourself from post-tax profits and not bother with employment, to which a 15% withholding tax would apply, after the company has already been taxed 26% on operating profits (this is actually a better solution for an expat company shareholder, though you would need to cover your own health insurance). In short, getting you money out of the company would also require the services of experts.
This situation would be far more complicated for you as an independent contractor than it's worth. The legal and finacial obligations would take up a lot of your time and money. There's also some more complicated issues which would take a lot of writing to explain. But I can see why they want to do it this way, so that all they have to do is pay a monthly invoice without handling all the admin required for actually employing someone.
Try to avoid it at all costs. There are other, more effective ways of structuring your relationship with this employer, and I suggest you consult the services of one or more of the companies listed on this website for details.
Hope this helps. Good luck. |
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SlowPoker
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[anon]
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Wed Oct 26th 17:12 2005 / #2 |
Hi Kweez,
Thanks a million! That a lot of information.
Could i have a chat with on mesengers!!
rayiyer@yahoo/hotmail.com??
Regards
Sudhir |
jeff
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Thu Oct 27th 08:55 2005 / #3 |
Strange - thought i already responded to this - Ok, again - although Kweez covered many of the issues..
The only thing i would add is ... that if you were an employee and lost your position you would effectively have to leave the country immediately as the reason for your extended visa would have been dependent on your employment with THAT company. And the time allotted to find other employment is ridiculously short. Not sure - but think only a matter of days. So, my point being that if interested in staying in the CR for a while, the SRO actually enables some kind of long term visa security..
here's link to request more info on companies:
http://prague.tv/business/company-formation.php |
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kr??ska
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Thu Oct 27th 10:55 2005 / #4 |
I don't know what country you are from. If you are an EU citizen, I suppose this might not apply, I've never asked if it would, since I am American. But even if you are EU, I suggest you make certain this does not apply to you before you assume it does not.
The issue: If you are the owner of an sro and are actively working - as opposed to simply being an owner and sitting back while other people work for you - you will need a work permit from the sro you own.
This is not a joke. It went into effect last October. And yes, if you are the owner, you will sign all the legal papers giving yourself permission to work, as silly as that may sound.
Olsanska was forcing people to prove they had the work permit when applying for visa renewals for about a month earlier this year, but they were told to stop, because not all owners work.. and blah blah blah.
Bottom line, you need this if you are American/Canadian/Australian, etc. And, based on the fact that the idea of giving oneself permission to work for oneself is bizarre - I wouldn't be suprised if everyone has do.
Check into it. If you need one, you will need a health exam too. |
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Kweez
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Thu Oct 27th 11:20 2005 / #5 |
Kraska, I think SlowPoke will need a work permit whether he is officially employed by his own company or someone elses. I'm not sure if it's any different for EU citizens.
The bottom line, SlowPoke, is that becoming the owner and / or executive director of your own limited liability company here means you take on a lot of responsibility to fulfil numerous obligations, which you wouldn't otherwise take on if you were merely employed. These responsibilities will be with you for as long as you are the owner / director of the company. It's not something you can just pop into and pop out of at the end of your contract.
On the other hand, HEY, you've got your own company and you can get down to some serious business. If you've got ambition, this could be a good start for you.
I can Messenger you later in the afternoon if its convenient. Cheers. |
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kr??ska
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Thu Oct 27th 12:40 2005 / #6 |
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Kweez - Most sro owners who formed a company prior to last October do not know they are in violation of the law by not having a work permit. The FP are not responsible to tell you about it. Before last October, sro owners did not need a work permit to work here. Now they do. It was an FYI, nothing more. |
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Kweez
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Thu Oct 27th 16:46 2005 / #7 |
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Kraska - thanks for the heads-up. I wasn't aware. I'm assuming you're only referring to those company owners who are officially employed. |
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kr??ska
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Thu Oct 27th 17:12 2005 / #8 |
I'm not sure I follow you. What do you mean by officially employed?
I'm referring to anyone who is a shareholder of an sro. Any non-EU person, at least. And possibly some EU persons.
Last year you only needed the business visa in order to work legally. Now, if you work as opposed to dictate, you need a special work permit.
This is not the same thing as some language school requesting a work permit for some TEFL teacher. This is sro shareholder specific.
Maybe I don't understand where you were going with that.. |
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Kweez
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Mon Oct 31st 09:44 2005 / #9 |
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Kraska - One can be a shareholder of an s.r.o. without being employed by the company. By 'officially employed', I mean signing a work contract and getting on to the company payroll, which means registering with the Social Security, Health Insurance and Tax authorities. Shareholders have a choice as to whether or not they want to go through with this. If they choose not to, I'm assuming they don't need a work permit. Is this what you mean by 'work as opposed to dictate'? If so, then we understand eachother. :-) |
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kr??ska
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Mon Oct 31st 09:57 2005 / #10 |
Kweez, I fully understand what sro shareholders can and can't do. I am one. The difference in what you are saying, and what I am saying, is this:
Prior to last October, a shareholder COULD work legally WITHOUT a work permit. NOW THEY CAN'T.
A shareholder MUST have a work permit. It IS the law.
You make it sound like they can choose. This is wrong. The ONLY reason a shareholder should be without a work permit if they DON'T WORK. Meaning, they simply own everything, and let other people work for them.
Whether or not people choose to follow the law and get one is their own business, I'm simply stating the facts. I'm sure many people will avoid getting one, the same way 18 year old TEFL teachers avoid getting legal employment.
But you seem to think it's a choice. It's not. If you work, you need a work permit now. Period.
And in case you didn't read my other post - this is a SPECIAL work permit for sro shareholders. It is NOT the same work permit a non-shareholder would have.
Maybe we understand each other now... but I ain't holding my breath! |
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Kweez
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Mon Oct 31st 10:03 2005 / #11 |
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Ok, I understand - the operative phrase is 'if they choose to work'. So we're saying the same thing, but I didn't know about that special work permit for shareholders. I will look into it further. Thanks for the info. |
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kr??ska
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Mon Oct 31st 12:08 2005 / #12 |
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Yes, if you choose to work. As in, you choose to teach, or choose to be a secretary, or choose to be a translator, etc. If you work, you need a permit. But anyway, most people don't know about the new law, because it's not required to submit the permit for visa renewals, since there is the possibility that the shareholder does not physically work. That's why I mentioned it. |
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Ray
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[anon]
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Sat Nov 5th 14:31 2005 / #13 |
Hi Guys,
Thanks for all the dope here.
Here i go again giving you the exact trip in am looking to take.
I have a 90K Euros One year Contractual Offer from an Czech company. The Contract could be renewed or terminated at the end of the first year.
Realizing the need for my services my client has proposed to help me on all the investments required to open an SRO - bear all the expenses to setup the SRO.( 100%). Looks like they will buy a company on my name and help me invoice my services on a monthly basis.
That sounds alright. I have been in touch with the services company who tell me that this is the way we would be going aobut accomplishing this.
QUOTED:
You are 100% owner of the czech Ltd. You will not get employeed.
Company generates e.g. CZK 1 000 000 turnover. Let us assume there is no additional costs (rent, electricity, computer, ...). Company taxes the
profit at the end of the period with 26% (next year 24%) corporate income tax. This leaves the cumulated profit of company amounting to CZK 740 000. You, as the sole owner can decide to pay the the profit to yourselves. Out of this the 15% (max) of withrdaw.
Tax is to be deducted. Your NETTO income than amounts to CZK 629 000. The total taxation then amounts to 37% of total (how did you get to 70%).
Therefore I would propose not to get employed.
VAT does not have anything in common with the profit/salary taxation,
as you/Alfa Technology get it back from the state (this is a plane cash
flow operation).
Owner without a status of employee does not pay social/health security.
You would work for your company as the sole owner - the invoice would
be issued by your company to Alfa - No problem.
ENDS
Can i have your comments on these.
They are also help me in getting all the docs required for the Visas. I would be the owner of the SRO not employed.
your Comments Please.
RAY |
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kr??ska
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Sat Nov 5th 16:21 2005 / #14 |
Sure, here's a comment. And since you spell like an American or Canadian, that's what I'm going to assume you are:
You WILL be paying social and health, because, as I said earlier, YOU WILL NEED A WORK PERMIT and YOU WILL BE WORKING FOR YOUR OWN COMPANY.
This is law. Since last October. Its law, no matter what other people might tell you. It's not common knowledge yet, and it's understandable that this company doesn't know. But they are still incorrect. Whether or not you get the work permit, you ARE required to have it.
Before last year, you could do what they are saying - you could have an sro and work as soon as your visa was ready, and you didn't need a work permit. In the capacity you are describing, you will need one.
I would advise you to contact a company that specializes in creating sros. They can explain all of this to you. Try www.assistance2expats.com .
Aside from this, I don't have any comment on your situation - other than it gives me a bad feeling. Can't really tell you why, just doesn't gel for me. It would be far cheaper for them to issue you a work permit. Why do they want to pay more than 200,000 kc to form a company for you? (And that's just what you need to put in the bank - that's not including having everything else done, which costs AT LEAST another 30,000 and possibly as much as 50,000, depending on what you are doing.)
Keep in mind - you will NOT be director of your company until you have your visa. Or unless you already have long term residence here. Do you?
If not, someone else has to be assigned as director until you have your visa in hand. Do you trust them? Of course, if it's their money, I guess you have little to lose.
Still seems odd. It's alot of trouble for them, when they could just get you a work permit. |
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Kweez
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Mon Nov 7th 12:41 2005 / #15 |
Hi Ray,
I agree with Kraska that there's something not quite on with this s.r.o. thing. It's a unique way of setting up the relationship - your company would become more of a consultancy for them and there are much different regulations regarding commercial services on the one hand, and employee labour laws on the other. I'm still not sure what Kraska's on about with the work permits, as you clearly point out that you will not be an employee, but rather just a shareholder.
The information you have been given is correct. Tax rates, VAT as cash-flow only etc. All good. Kraska mentions '200,000 kc' - this is the registered capital of the company as required by law. The shareholder must put in AT LEAST this amount before the company can be entered into the commercial register. A bank account is opened, the 200,000 Kc is deposited into the account, and the bank issues an official letter confirming that the registered capital has been paid. This letter from the bank is part of the series of documents that is submitted to the commercial court when forming the company. When the company is formed, the cash is automatically on the company's accounting books. If it is withdrawn from the bank, it goes into the company's petty cash. If it is transferred to your account or to someone else’s, accounting documents must be drawn up to explain the transaction. If the company has already been established - a 'shelf' company that you just buy, you may or may not need to come up with the 200,000 Kc. For more details on this, I believe there are some formations companies / lawyers / tax advisors listed on this site who can help you.
You also need to take into account the cost of accounting and filing of the tax returns. Someone has to do all of this for you. The statutory obligations of an s.r.o. apply as long as the company is on the commercial register, and removing the company from the commercial register is a complicated and expensive process.
There is also the issue of designating an Executive Director (jednatel) for the company, which could be you or someone you trust. It is generally a paid position, so you may have to pay someone to do it.
Also, the company needs an official address or 'seat' (sidlo) where the government can reach the company directors. There are business service companies who can provide you with this service on a monthly fee basis, perhaps around 1,500 Kc.
There seem to be a few details missing from that 'quote' you gave, such as the ones above. I recommend you enquire with your source what I've mentioned above before making your decision. Owning an s.r.o. could end up being an endless source of headaches for you and a drain on cash. But if you've always wanted to own a limited liability company in the Czech Republic, this could be your dream come true.
Good luck. |
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kr??ska
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Mon Nov 7th 14:29 2005 / #16 |
Kweez, you don't know what I'm on about because you are not up to date on the law, despite my attempts to inform you. And if you can't voice your dissent without making it sound like I'm wrong, shut up.
HE NEEDS A SHAREHOLDER'S WORK PERMIT. He is NOT going to have employees - yet the company will be making money. Based on something HE will be doing for another company. HE will be the consultant, or whatever. There is no longer any such thing as the company earning money on it's own. THEREFORE HE WILL NEED THE PERMIT.
This is NOT a regular work permit. I've said that before. It is a permit to allow the shareholder to work. But is NOT the same thing as giving someone else a work permit to work for your company. You don't think he's going to work?? What do you think, some company is jut going to put money in his bank account? Are you for real??????
I own an sro. I work. I need one. It's the law. If I choose to hire someone to work for me, they need an entirely DIFFERENT type of work permit.
Do YOU own one? Do you work? If so, sounds like you are in violation of the law. If no to either question, it seems odd that you feel qualified to contest what I am saying. You aren't doing anyone any favors by making it sound like I am wrong.
Also, the information you gave is for companies who are required to pay VAT. Withdrawing company funds is a great deal less complex for non-VAT payers. As is paying taxes. And you don't HAVE to account for where it went. You can simply choose to pay tax on it as a salary. I could correct other things but since you insist on always being right, I'm sure it would only be a waste of my time.
Though I will say it was horribly misleading of you to imply he could be director from the start. Which is how that reads. He needs a director assigned before the company's incorporated. He will need someone else to fill in for that until he has a visa. And then he has to hope the director feels like stepping down.
And owning an sro can be a very simple matter. And in many ways is far better than having just a ziv list.
Bottom line, Ray should be contacting a company that handles sro formation, to get this info himself, so he doesn't have to try and figure out who's right and who's not. And whether or not this offer he has makes sense. |
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Kweez
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Mon Nov 7th 15:12 2005 / #17 |
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Kraska, I hope I never meet you. |
pragueboy
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Mon Nov 7th 15:34 2005 / #18 |
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we should make a club :) |
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kr??ska
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Mon Nov 7th 15:56 2005 / #19 |
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Sorry, didn't mean to give the impression I was eager to meet you, Kweez. |
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Ray
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[anon]
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Mon Nov 7th 16:29 2005 / #20 |
Hey Mates,
Thanks for all the that. Gr8 points to be considered. I would host a party with you folks if i do get to Prague. :-)
I am dealing right now with guys are registered and establsihed companies, who are giving me the information that iam giving you guys. DO YOU THINK U GUYS KNOW IT BETTER OR SOMEONE WHO IS INTO ALL THIS ALL THE TIME ( Geneva Consulting Finance) KNOWS BETTER!
No offence but i need the correct and exact information to help myself.
HELP ME OUT
RAY |
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kr??ska
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Mon Nov 7th 18:09 2005 / #21 |
Different situations have different legal requirements. No one here can help you out with as little information as you have provided. But at least two of us have mentioned we think your deal is fishy.
And that's probably the best advice ANYONE can give you on this.
But if it makes you feel better, I use GCF. And I use RMI, their associates who make sros/visas/work permits/ etc. So, by default, if my info is incorrect, so is theirs. |
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czechfriend
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Wed Nov 9th 15:06 2005 / #22 |
http://www.novinky.cz/ekonomika/69374-vlada-zjednodusila-lid em-zacatek-podnikani.html
konec of companies that provide companies v cechach. |
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kr??ska
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Thu Nov 10th 12:28 2005 / #23 |
That's a good thing. Those feckers were unscrulpulous, as far as I'm concerned. They sell companies to people and just barely whisper "psst.. if you want to do something this company isn't already licensed to do, you will have to change your companies constitution to add more ziv lists.. and that will be.. um.. half the price it cost to buy the sro from us in the first place.. and ..um... you could have just made one from scratch and saved yourself the time , trouble and moolah..."
Just so no one gets confused, the companies I referred to assist with forming them, they don't sell shelf companies. |
billjones
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Thu Nov 25th 14:35 2010 / #24 |
Before I even moved to prague I found a company that set me up with my own cz corporation - www.pobox24.cz - they work with this other company - www.companyconsults.cz.
One did the paperwork and the other rented me a po box so that my business would have a physical business address. All i really had to do was get a place to live, and get the owner to write me a letter saying that i actually lived there. That was it.
They even hooked me up with a notary (you need a notary a lot more then you need an attorney in cz) and a nice little lady who does all my bookkeeping for next to nothing.
I'm really happy! If you need any tips, just let me know.
Bill |
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Triactol
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Mon Nov 7th 09:34 2011 / #25 |
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For applying for the permanent residency, you will need 2 ID-card type photos, passport or other travel documents, evidence confirming purpose of your stay, the extract from the Criminal register from your country of origin or country of your permanent residence and countries where you stayed without interruption for more than 6 months in last 3 years, document proving your financial resources, document proving your accommodation and certificate that you passed test from the Czech language.
Triactol |
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Jonathan Elano
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Mon Nov 7th 10:16 2011 / #26 |
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I think Kweez is perfectly right!
Katy Cosmetic Dentistry |
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