Import Procedures

The following documents must be presented to the Customs office:

1. a brief declaration (air or maritime manifest) of the goods.
2. a common law declaration (SAD, single administrative document), as well as the accompanying documents to allow their clearance. The SAD form can be obtained from Chambers of Commerce or an authorised printer. A computerised Customs clearance platform (SOFI: International freight computer system) can be accessed in Customs offices or in some Chambers of Commerce.
3. Commercial invoice
4. Packing list
5. Certificate of origine
6. Insurance certificate (where applicable)

In the case of deliveries and purchases within the European Union, the declaration of exchange of goods (DEB) or Intrastat declaration must be sent to the Customs service.
All companies established outside of the EU are required to have an Economic Operator Registration and Identification (EORI) number if they wish to lodge a customs declaration or an Entry/Exit Summary declaration.

As part of the 'SAFE' standards advocated by the World Customs Organisation (WCO), the European Union has set up a new system of import controls, the 'Import Control System' (ICS), which aims to secure the flow of goods at the time of their entry into the customs territory of the EU. This control system, part of the Community Programme eCustoms, has been in effect since January 1, 2011. Since then, operators are required to pass an Entry Summary Declaration (ENS) to the customs of the country of entry, prior to the introduction of goods into the customs territory of the European Union.

The Modernised Customs Code (MCC) of the European Union simplifies various procedures such as: introducing a paperless environment, centralised clearance and more. For more information, check the EU’s Customs website and the Czech Customs Administration website.

Specific Import Procedures

As a member of the European Union, goods entering the Czech Republic may be placed under any of the following treatments:

 

Transit, which comprises external and internal transit:

• External transit: non-Union goods may be moved from one point to another within the customs territory of the EU without being subject to import duties, other charges related to the import of the goods (i.e. internal taxes) and commercial policy measures. Moving goods to another EU Member State means the customs clearance procedures are transferred to the customs office of destination.
• Internal transit: Union goods may be moved from one point to another within the customs territory of the EU without any change to their customs status. This includes transporting goods through another territory that is outside the EU customs territory.

Storage, which comprises customs warehousing and free zones:

• Customs warehousing: non-Union goods may be stored in premises or any other location authorised by the customs authorities and under customs supervision ('customs warehouses') without being subject to import duties, other charges related to the import of the goods and commercial policy measures.
• Free zones: Member States may designate parts of the customs territory of the Union as free zones. They are special areas within the customs territory of the Union where goods can be introduced free of import duties, other charges (i.e. internal taxes) and commercial policy measures, until they are either assigned another approved customs procedure or re-exported. Goods may also undergo simple operations such as processing and re-packing.

Specific use, which comprises temporary admission and end-use:

• Temporary admission: Non-Union goods can enter the EU without the payment of import duties, provided they are intended for re-export without being changed. The maximum period for temporary import is two years.
• End-use: goods may be released for free circulation under a duty exemption or at a reduced rate of duty on account of their specific use.

Processing, which comprises inward and outward processing:

• Inward processing: Goods can be imported into the EU, without being subject to duties, taxes and formalities, to be processed under customs control and then re-exported. If the finished products are ultimately not exported, they become subject to the applicable duties and formalities.
• Outward processing: Union goods may be temporarily exported from the customs territory of the Union for processing purposes. The processed goods may be released for free circulation with total or partial relief from import duties.

The EU framework sets forth several regulations that can have an impact on import procedures: Waste Electrical and Electronic Equipment Directive (WEEE Directive), the ROHS Directive, Cosmetics Regulation, and Registration, Evaluation and Authorisation of Chemicals (REACH), agricultural documentation and sanitary certificates (Fisheries).

Distribution channels

By some measures, the Czech Republic has one of the highest proportions of supermarkets and superstore space per capita in the whole of Europe. Distribution channels in the Czech Republic are similar to those in the rest of the European Union. Fast-moving consumer goods (FMCG) has experienced some consolidation, especially in the sectors with strong competition. The principal economic zones of the country are concentrated around the capital Prague and in metropolitan cities like Usti nad Labem and Plzen in the west and Brno and Ostrava in the east.

The often pronounced focus of the Czech customer on the price of food is starting to slow down as the quality of produce starts to also heavily influence consumer behaviour. Even food discounters such as Lidl and Penny Market have recognised this trend and are investing in a store concept change in order to shake off their "cheap" image. Small retailers continue to face strong competition from large and modern grocery retailers. Czech Republic ranks among countries with the highest proportion of promotional sales, while consumer expenditures on food and non-alcoholic beverages accounts for 20.7% of total household spending (Czech Statistical Office, 2020). In recent years, food retail groups in the Czech Republic have recognized the growing importance of private labels, which account for nearly one-fourth of value spent of packed grocery excluding fresh products. In the Prague area, numerous smaller concepts are expanding - bakeries, wine stores, coffee shops.

The Czech food and grocery retail market had total revenues of USD 29.8 billion in 2020, growing by 4.7% between 2016 and 2020. The value of the Czech food and groceries market grew by 5.9% in 2020, as  consumers increased precautionary buying during the Covid-19 pandemic (MarketLine).

The main supermarket groups (including Billa, Ahold Czech Republic and Tesco Stores) are investing on the improvement of their points of sale, thus increasing their combined value share at the expense of smaller supermarket chains. Czech consumers are increasingly favouring smaller store formats, including smaller supermarkets supplied with only the necessary grocery products, whereas traditional grocery retailers continue to lose both value and outlet share due to struggling rural stores, rising wage pressure, a lack of investment and lagging innovation. Moreover, traditional grocery retailers is very fragmented compared to other grocery channels. The Covid-19 pandemic particularly impacted independent grocery retailers in small villages.
Internet sales have been growing at a fast pace, with online food sales increasing at a yearly average of 106% over 2019-2021 (Cushman Wakefield).

Distribution market players

The distribution structure in the Czech Republic increasingly resembles traditional western markets, with big groups dominating small local traders. In fact, until 1989, commercial distribution was under State control, but today it is entirely privatised. In 1997, hypermarkets represented only 1% of retail business while traditional businesses represented 49%. Today, the trend has completely changed and supermarkets/hypermarkets largely dominate the market, with the share of traditional traders in constant decline.

Today, the distribution market in the country is dominated by German, UK and Dutch retailers: REWE Group with the brand Billa (supermarkets) and Penny Market (discount); Schwarz Group with the brands Lidl (discount) and Kaufland (Hypermarkets); Tesco Group with hypermarkets and supermarkets; Ahold with the supermarkets and hypermarkets Albert.
In 2019 (latest data available), the top three retail chains Schwarz Group, Rewe, and Ahold had a 57% market share, according to USDA figures. The German group Kaufland remains the leader in hypermarkets based on both the number of outlets and value sales.

In terms of sales value, retail channels have the following shares (USDA, 2019, latest data available):
- Hypermarkets: 30%
- Supermarkets: 17%
- Discounters: 24%
- Convenience: 11%
- Specialists: 5%
- Other: 13%.

Retail Sector Organisations

Czech Ministry of Industry and Trade
Czech Confederation of Commerce and Tourism

Consumption Taxes

Nature of the Tax

Value-Added tax (VAT)

Tax Rate

21%

Reduced Tax Rate

A 15% rate applies to food products including non-alcoholic beverages and animal food; plants, flowers, trees and seeds; specific devices to assist persons with disabilities; specific pharmaceuticals and medical devices, except pharmaceuticals subject to the second reduced VAT rate; child car seats; firewood; repairs of certain medical devices and wheelchairs; collection, transport, preparation and disposal of municipal waste; transportation of passengers and their luggage by air; certain social work services that do not qualify for an exemption from tax; services of writers and performers; specific pharmaceuticals and medical devices, except pharmaceuticals subject to the second reduced VAT rate; child car seats; firewood; repairs of certain medical devices and wheelchairs; collection, transport, preparation and disposal of municipal waste; transportation of passengers and their luggage by air; certain social work services that do not qualify for an exemption from tax; services of writers and performers.

A 10% rate applies to water treatment and distribution through public networks; mass public transportation of passengers and their luggage by land and sea; drainage and wastewater treatment and ancillary services; accommodation services; certain catering services, including in restaurants and cafes, provided tobacco products are not within the scope of the service. The second reduced rate generally does not apply to alcohol, apart from draught beer; entry into cinemas, museums and other cultural events; library services; certain household cleaning services; home care for children, and elderly, sick and disabled persons; access to gyms, fitness centers, other recreational facilities and sporting events, and fireworks and light and sound shows; services connected with the operation of recreational parks and beaches; repairs to footwear, leather products, clothing and textiles;; bicycle repair; hairdressing and barbers’ services; Turkish baths and saunas, steam baths and salt caves; baby food and formulas; mill products, including certain cereals, potato and dried legumes; malt, starches and wheat gluten; processed cereal products and ready-mix gluten-free products; drinking water; various medicines and pharmaceuticals for medical and veterinary purposes; printed books, children’s picture books, newspapers and magazines and music, provided that no more than 50% of the space is allocated to advertising. The second reduced rate also applies to colouring books, maps, and audiobooks on tangible media. Article 47(5) of the VAT Act provides that supplies in electronic form are also subject to the second reduced rate.

A 0% rate applies to exports, intra-community supplies, international transportation, transport and services directly related to the importation or exportation of goods.

Other Consumption Taxes

Tobacco and related products, oil productions, alcohol produced in or imported to the Czech Republic, fuel, and mineral oils are all subject to excise taxes, which are applied according to the type and the quantities of products. Energy tax on electricity, natural and other gases, and solid fuels is levied on energy suppliers and distributors.
A road tax is payable annually on all vehicles used for commercial purposes (rates vary depending on engine capacity and vehicle size).

Corporate Taxes

Company Tax

19%

Tax Rate For Foreign Companies

A corporation is resident in the Czech Republic for corporate income purposes if it is registered in, or has a place of management located in, the Czech Republic.

Capital Gains Taxation

Capital gains are taxed at the normal corporate income tax rate. Capital gains on the sale of shares and participation in EU/EEA resident companies are exempt from tax if conditions similar to those required to qualify for the dividend exemption are satisfied (10% ownership for 12 uninterrupted months minimum). EU/EEA resident companies that invest in Czech companies can benefit from this exemption if they fulfil the same criteria.

Capital gains obtained by non-resident companies of the EU/EEA or Czech companies investing outside the EU/EEA may be exempt from tax under the following conditions: the non-resident company is a tax resident in a third country with which the Czech Republic has signed a tax treaty; it satisfies the conditions for dividend exemption (10% holding for an uninterrupted period of 12 months) and is subject to a tax in the country of origin comparable to the Czech corporate tax at a minimum rate of 12%.

Main Allowable Deductions and Tax Credits

Expenses incurred to obtain, secure or maintain taxable income are generally deductible, such as amortisation of tangible and intangible assets, equipment and services purchased, business travel expenses, salaries and social security contributions. The start-up costs are fully deductible while the goodwill resulting from the acquisition of a new company can be amortised over 180 months. Goodwill resulting from a merger is not deductible. Taxes paid are generally deductible (except for corporate income tax).

Charitable donations over CZK 2,000 may be deductible up to 10% of the tax base (30% for donations in the tax periods ending from March 2020 up to the end of February 2023). Accrued interest under the generally accepted Czech accounting principles is in most cases tax-deductible, as are contractual fines and remuneration paid to members of the statutory bodies of a company. Payments for travel expenses and meal allowances for employees are in general deductible.

Tax losses can be carried forward for up to five years (unless there is a significant change in the company's ownership structure). From 2020, tax losses may also be carried back for 2 years (capped at CZK 30 million).

Investment incentives are available for the manufacturing sector and the technology and data centres in the form of exemptions from property tax or corporate income tax, financial support for job creation and employee training. Research and development expenses give rise to a tax allowance of up to 100%. An additional 10% tax credit is granted to companies whose research and development expenses in a tax year exceed those of the previous tax year.

Other Corporate Taxes

Companies are subject to a 15% to 35% tax on income paid to a non-resident for technical services, a real estate tax (varies according to the area, location, and usage of the land or buildings), environmental tax and road tax.

The employer contributes 9% of the gross salary of the employee to the health insurance fund and 24.8% for contributions to the social security fund, for a total of 33.8%. The maximum assessment base for social security purposes (i.e., old-age pension contributions and unemployment insurance, applicable in the case of both the employee and the employer, as well as for a self-employed individual) is 48 times the average wage for the calendar year (CZK 1,935,552 for 2023).

An exit tax is levied on the relocation of assets without a change of ownership between a Czech company and its foreign permanent establishment or when a Czech tax resident moves its residency abroad. The rate is the same as that of corporate income tax (currently 19%).

The transfer tax (imposed at a rate of 4% of the transaction price or the officially appraised value of the real estate transferred, whichever is higher) has been abolished with retroactive effect, hence it does not apply to real estate whose transfer was registered in the cadastral register on or after 1 December 2019.

A tax is payable annually with respect to vehicles used for commercial purposes, at variable rates according to engine capacity and vehicle size.

No stamp duties are levied in the country.

Starting in 2023, major banks and energy companies will be subject to a windfall tax. This entails a 60% surcharge on their corporate income tax for any profits exceeding their average historical earnings. The windfall tax is expected to remain in effect for a duration of three years. Banks are subject to a windfall tax if they achieve a net interest income of at least CZK 50 million and had the same income of at least CZK 6 billion in 2021. Non-bank taxpayers are subject to the windfall tax if their total annual net turnover from specific activities reaches at least CZK 50 million, and they achieved a turnover of at least CZK 2 billion from these activities in 2021. The activities include mining of coal, oil, and natural gas, production of coke oven products and refined petroleum products, electricity generation, transmission and distribution (with exceptions), gas production and distribution, wholesale of fuels, and pipeline transport of oil and gas. Taxpayers are also subject to the windfall tax if their total annual net turnover from mining and treatment of coal, oil, and natural gas, as well as production of coke oven products and refined petroleum products, reaches at least CZK 50 million, and their income from these activities accounted for at least 25% of their turnover in 2021.

Other Domestic Resources

Financial Administration of the Czech Republic

Double Taxation Treaties

Withholding Taxes

Dividends, interest and royalties are subject to 15/35% tax rates, where the upper margin applies to jurisdictions that have not concluded a tax treaty or an agreement for the exchange of information on tax issues with the Czech Republic.
No WHT is levied on royalties paid to resident companies and individuals.