Labor law success at the Supreme Court

A five-year battle with a happy ending! That’s how you could describe the story of our client, who faced bullying and humiliating treatment from her employer after returning from a year of sick leave. As the sales director of a shopping center, our client was assigned a new “office” in a workshop shared with the building’s maintenance worker, who, according to the new company hierarchy, was supposed to be her superior. When she objected to this treatment, she was dismissed for serious breach of duty.

The Supreme Court upheld our client’s appeal and overturned the judgment of the Municipal Court in Prague, which had dismissed the client’s action for a declaration of invalidity of the termination of employment, ruling that the termination of employment given to the client was invalid. Following the Supreme Court’s ruling, an out-of-court settlement was reached between the client and the defendant employer, under which the employer paid the client financial compensation for her wage claims.

More:Ženu po návratu z nemocenské šoupli do kumbálu a ponižovali. Když se ozvala, dostala padáka. Zastal se jí Nejvyšší soud – Novinky

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IPG Naples Conference

As part of our membership in the International Practice Group, we participated in the IPG international conference in Naples on May 15-18, 2025, represented by JUDr. Tomáš Bělina.

Past conferences (ipg-online.org)

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Equal pay for employees – what to be prepared for

Equal pay today

Zaměstnavatel je dle stávající právní úpravy povinen zajišťovat rovné zacházení se všemi zaměstnanci, a to i pokud jde o jejich odměňování za práci a o poskytování jiných peněžitých plnění a plnění peněžité hodnoty.1) Dle zákoníku práce přísluší všem zaměstnancům u zaměstnavatele za stejnou práci nebo za práci stejné hodnoty stejná mzda, plat nebo odměna z dohody. Stejnou prací nebo prací stejné hodnoty zákoník práce výslovně rozumí práci:

  • stejné nebo srovnatelné složitosti, odpovědnosti a namáhavosti,
  • konanou ve stejných nebo srovnatelných pracovních podmínkách,
  • při stejné nebo srovnatelné pracovní výkonnosti a výsledcích práce.

Zákoník práce dále konkrétně rozvádí, podle jakých hledisek je na místě posuzovat složitost, odpovědnost a namáhavost práce; pracovní podmínky; pracovní výkonnost a výsledky práce.2) Dle aktuální judikatury Nejvyššího soudu se jedná o taxativní (konečný) výčet hledisek, který nelze rozšiřovat. Rozdílnost v odměňování proto nelze odůvodnit např. ani odkazem na sociálněekonomické podmínky a jim odpovídající výši nákladů na uspokojování životních potřeb v místě výkonu práce zaměstnance (tzv. vnějšími vlivy jako např. cenou práce v dané lokalitě).3)

Under the current legislation, the employer is obliged to ensure equal treatment of all employees, including with regard to their remuneration for work and the provision of other monetary benefits and benefits of monetary value.1) According to the Labour Code, all employees of an employer are entitled to the same wage, salary or remuneration for the same work or for work of equal value. The Labour Code expressly defines equal work or work of equal value as work:

  • of equal or comparable complexity, responsibility and exertion,
  • performed under the same or comparable working conditions,
  • with the same or comparable work performance and results.

The Labour Code furthermore specify the aspects according to which it is appropriate to assess the complexity, responsibility and strenuousness of work; working conditions; work performance and work results.2) According to the current case law of the Supreme Court, this is an exhaustive (definitive) list of aspects which cannot be extended. Therefore, a difference in remuneration cannot be justified, for example, by reference to socio-economic conditions and the corresponding cost of living in the employee’s place of work (so-called external influences such as the price of work in a given locality).3)

If an employer sets or agrees with an employee a wage for work that is higher than that of other employees performing the same work or work of equal value, without substantial reasons (aspects according to the Labour Code), the employer is in breach of a legal obligation. An employee who is paid less than a comparable employee has the right to claim compensation for the damage. The amount of the damage is determined as the difference between the wage of the employee who has the higher wage and the wage of the affected employee.4) Moreover, according to the Supreme Court, the assessment of the same work or work of equal value is not limited to the performance of work in the same time period, i.e., employees working for the employer in different time periods may also be compared.5)

At present, a significant obstacle to employees‘ claims for equal pay is the lack of transparency (lack of information) within the employer as to the levels of wages and other remuneration provided for each position. Simply put, employees do not know how their colleagues are remunerated, which significantly eliminates compensation disputes. However, this is set to change in the future, partly with effect from 1 June 2025.

What to prepare for from 1 June 2025

On 29 April 2025, the so-called Flexi Amendment to the Labour Code was published in the Collection of Laws under No. 120/2025 Coll., and will become effective as of 1 June 2025. The Flexi Amendment to the Labour Code now explicitly obliges employers not to restrict employees in the handling of information on the amount and structure of their wages, salary or remuneration. This prohibition is based on previous case law and the opinion of the Ombudsman, according to which such confidentiality is contrary to the Labour Code and therefore unenforceable. Although employers have often been aware of the unenforceability of such clauses, they have kept them in employment contracts for psychological reasons to discourage employees from sharing information about wages and other income with each other. However, it will now be an offence under Act No. 251/2005 Coll., on Labour Inspection, and negotiating such clauses, as well as otherwise restricting employees from sharing information about their wages, salaries or remuneration, can therefore be sanctioned with a fine of up to CZK 400,000.

Employers should thus avoid including similar clauses in employment contracts, collective agreements, pay schedules or internal regulations. At the same time, it can be recommended that the existing restrictions be removed from all employer documents, or that the employer documents be amended/added/replaced so that they do not give rise to a possible inspection by the Labour Inspectorate.

Inevitable changes in 2026

The anchoring of the described prohibition of confidentiality on remuneration in the Labour Code is a reflection of one of the obligations under Directive 2023/970 on transparent remuneration, which Member States are obliged to transpose by 7 June 2026 at the latest. As a result of this directive, the Czech legal system should, by the first half of next year at the latest, guarantee, among other things:

  • the right of employees to request from their employers information on their individual level of remuneration and on the average gender-specific remuneration levels for categories of employees performing the same work or work of equal value.

Employers will be obliged to provide the information on request by the employee, in writing and within a reasonable time, within a maximum of two months. If the information received is inaccurate or incomplete, employees will have the right to request additional reasonable explanations and details concerning any information provided and to receive a reasoned response from the employer. At the same time, employers will be required to inform all employees annually of their right to receive the information and the steps to be taken by employees to exercise that right.

Employers will thus no longer be able to rely on the lack of information provided to employees about the remuneration of comparable colleagues within the same employer, which has until now virtually protected them from potential claims for damages by those employees. Furthermore, employers themselves will be obliged to inform employees that they are entitled to such information and what steps they should take to obtain it.

Conclusion

It is evident that the pressure for equal pay is gradually increasing. The number of lawsuits filed by employees under the current legislation is clear evidence of this. In order to avoid an increase in such disputes in the context of the Flexi Amendment to the Labour Code as of 1 June 2025 and, in particular, in the context of the expected transposition of Directive 2023/970 on transparent remuneration, it is up to employers to asses as soon as possible that all their employees are entitled to the same wage, salary or agreed remuneration for the same work or for work of equal value. As numerous Supreme Court cases demonstrate, the criteria for this assessment are not unambiguous. Thus, a qualified assessment by employment law experts is certainly in order.

Bělina & Partners advokátní kancelář s.r.o.

Our services focus, among other things, on comprehensive advice in the field of labour law, including the preparation and review of labour law documents.

References:

1) See Section 16(1) of Act No. 262/2006 Coll., the Labour Code, as amended.

2) See Section 110 of Act No 262/2006 Coll., Labour Code, as amended.

3) See the judgment of the Supreme Court of the Czech Republic of 20 July 2020, Case No. 21 Cdo 3955/2018.

4) See the judgment of the Supreme Court of the Czech Republic of 20 November 2024, Case No. 21 Cdo 2000 /2024.

5) See the judgment of the Supreme Court of the Czech Republic of 16 April 2025, Case No. 21 Cdo 3521/2023.

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Success at the Court of Appeal in the dispute between SOCDEM and the heirs of JUDr. Altner

We have been representing Sociální demokracie for a long time in the media-monitored dispute with JUDr. Zdeněk Altner, currently being fought with his heirs. In this litigation, we have succeeded in the Court of Appeal, which, on the basis of an appeal by Sociální demokracie, overturned the November 2024 Judgment of the District Court for Prague 1 commented on many times in the media.

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The works contract – handover and acceptance of the work

Handover and acceptance of the work – is it really true that the more detail we describe in the contract the better?

The works contract is one of the most frequently concluded contracts. The contractor undertakes to carry out the work at his own expense and risk for the client, and the client undertakes to accept the work and pay the price for it. In practical life, the subject of a works contract may be, for example, the construction of a house, the renovation of a flat, the creation of a computer program, the assembly of furniture, but also, for example, the creation of a hairstyle by a hairdresser, the execution of a work of art or the making of a dress. The price for the work is also related to this, which can be in the value of units of crowns or, on the contrary, in many hundreds of millions.

Methods of concluding a contract for a work

The aim of the contractor is generally to carry out the work in such a way that he will be paid in full by the client; the client, on the other hand, is interested in being paid only for work that is carried out without defects. It is natural that if the value of the work is low, a written contract for the work will not be concluded – for example, when we normally use the services of a hairdresser, we do not expect the hairdresser to provide us with a written contract specifying exactly how, when and at what price the hairdresser will do the haircut. We only verbally agree with the hairdresser how we would like the haircut and then hope that the result will match our wishes. If this does not happen, we have limited defences as it is likely to be disputed exactly what the hairdresser should have done – this may be difficult for us as the customer to prove. We accept this low level of formality (an oral contract) because the risk of the work not going well is not great (especially if we visit the hairdresser regularly) and mainly because our initial financial investment is only in the order of hundreds or thousands of crowns.

However, if we are entering into a contract for a work of significantly higher value, it is undoubtedly worthwhile to have the contract in writing. This is not only if we act as the person to whom the work is delivered (we are interested in the completion date, quality of workmanship, price), but also if we are in the position of the contractor (when and how we will be paid, when the client will consider the work completed, etc.).

Execution of the work – a key moment for both parties

The moment of execution of the work is crucial for the execution of the work (according to Section 2604 of the Civil Code, the work is executed if it is completed and handed over). By performing the work, the contractor completes its activity and expects to be paid for the work (the right to payment of the price arises when the work is performed), while the client takes over the work, checks whether it has been performed properly and, as a rule, is subsequently obliged to pay for the work. This is a significant moment for both parties in terms of the performance of the work contract, among other things because it is often linked to a certain penalty for failure to meet the agreed deadline – if the contractor fails to perform the work by a certain date, he may be obliged to pay the client a contractual penalty for the delay, if the client refuses to accept the work, he may be obliged to pay the contractual penalty to the contractor.

Specification of the method of handing over the work

As mentioned above, the moment of handover of the work is important for the performance of the work – it is therefore important to properly specify in the work contract how the handover and acceptance of the work will take place. As a precaution, the parties often specify the manner of handover and acceptance in the works contract in great detail, sometimes perhaps too much. Although it may be somewhat surprising, by regulating in great detail the manner of handover and acceptance of the work, the parties may unwittingly get into considerable trouble later on. Why?

The Civil Code does not stipulate how the work is to be handed over. It can be handed over, for example, simply physically, by email or by means of a handover protocol. The contracting parties are free in this respect and can agree on any method of handover that is objectively possible. They do not even have to agree on any particular method of handover and acceptance, with the understanding that it will take place in a de facto manner. On the contrary, they can agree in the works contract on a very detailed handover method, i.e. according to a model handover protocol, which must be signed by specific persons on behalf of the parties to the contract, must have certain elements, etc. This meticulousness can ultimately be a trap.

The Supreme Court’s strict approach to deviation from the agreed method of handing over the work

When assessing a works contract, it is necessary to take into account not only the text of the law but also settled case law. In its decisions, the Supreme Court has repeatedly held that the handover of the work may be agreed in any conceivable way, but if the parties have already chosen a particular method of handover in the contract, then that method must be complied with. If the agreed method is not followed, the result is that the work cannot be considered to have been handed over and accepted, and therefore not to have been performed (e.g. the Supreme Court’s decisions 32 Cdo 542/2018, 23 Cdo 4979/2014, 32 Odo 296/2005, 32 Odo 2399/2012, 23 Cdo 4092/2007 and many others).

The Supreme Court has even taken such a formalistic approach that if the parties have agreed on the handover of the work by means of a handover protocol, this protocol cannot be substituted for the handover of the work; even if the parties only hand over the work in fact and both act as if the work had been handed over – e.g. the client fully uses the work (Supreme Court decisions 23 Cdo 4979/2014, 32 Cdo 542/2018); even in such a case, the work cannot be regarded as having been completed. Such conclusions may come as an unpleasant surprise to both parties, who have been acting all along as if the work had already been handed over and accepted (and performed).

What happens if the agreed method of handing over the work is not followed?

The fact that the work cannot be deemed to have been handed over has quite practical consequences, which can be fatal for the contracting parties, or especially for one of them in the event of a dispute. The contractor is not legally entitled to payment of the price for the work that he has actually completed and is in default of his obligation to carry out the work, which may result in contractual penalties being applied by the client. At the same time, the guarantee is not triggered, the contractor is not entitled to payment of the retainer, etc. On the other hand, if the failure to comply with the agreed handover procedure is caused by the client, the client may be in default and may again be subject to penalties for failure to provide proper cooperation to the contractor.

How to prevent possible future complications?

It follows that if a contract for work is to be concluded, it is of course advisable to conclude such a contract in writing (unless it is a relatively marginal matter). At the same time, however, careful thought should be given to the manner in which the parties will demonstrably hand over the work to each other and what the requirements of such handover must be. Extreme care must be taken in this respect, not least because the execution of the work may take several years and the method of handing over and taking over the work, which appears to be quite simple when the work contract is signed, may become extremely problematic in a few years‘ time.

In any case, no matter how the handover of the work is agreed in the work contract, the agreed method must be followed; if this is not possible, it is better to agree with the other party to the contract on an amendment to the work contract and to contractually modify the method of handover. If any of the requirements set out are not complied with, the other party may take advantage of this or even abuse it to its advantage and essentially turn the whole contractual obligation around (refund the price already paid for the work, demand payment of a penalty for delay, etc.). It can be very difficult to defend against such an abusive approach in the event of objective non-compliance with the agreed handover requirements and the courts cannot be relied upon to automatically consider such conduct by the other party to be an abuse of law or an act against good morals.

In order to prevent future problems, it is always advisable to consult a specialist in relation to a major work contract and thus tailor it to each contractual relationship according to the subject matter of the work, its value and who is entering into the contract with us as the other party. Prudence at the beginning can pay off in the end.

Bělina & Partners advokátní kancelář s.r.o.

Our services also focus on the preparation of contracts on works, including works in construction, intellectual property and other areas.

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Principle of subsidiarity of criminal repression

Interpersonal relations are often complicated by irreconcilable differences of opinion or attitudes to life, which often escalate to such an extent that the feuding parties seek help from the civil courts or even the law enforcement authorities. This raises the question of whether the matter in dispute can be brought within the norms of civil or criminal law. For example, a false review published on the Internet may give rise to a private law dispute for the protection of reputation (Article 82 of the Civil Code), as well as to criminal prosecution of the author of such a review for defamation (Article 184 of the Criminal Code), or to proceedings for an offence against civil coexistence (Article 7 of the Act on Certain Offences).

As far as the application of criminal law rules is concerned, in these situations it is not sufficient to merely formally classify the facts under the elements of the offence set out in the Criminal Code. The prosecuting authority is also obliged to take into account the fact that criminal law should be used as a last resort (ultima ratio) to protect rights and interests in society. This means that criminal liability should only be applied when other legal instruments or measures are not sufficient or appropriate to achieve the necessary protection or redress. This principle is enshrined in section 12(2) of the Criminal Code, cited:

„The criminal liability of the perpetrator and the criminal consequences associated with it may be invoked only in socially harmful cases in which the invocation of liability under another legal provision is not sufficient.“

Translated into the example of defamation above, this means that prosecution for defamation is only permissible in cases of the most serious interference with personality rights that cannot be sufficiently remedied by private law. In general, this principle of subsidiarity of criminal repression means that criminal law always plays only a subsidiary role, i.e. the protection of social interests is primarily entrusted to other branches of law. Criminal law is to be applied only when the possibilities of other branches of law are insufficient to protect the interests.

Bělina & Partners law firm s.r.o.

Our services also focus on criminal law, including advice on criminal liability and defence in all stages of criminal proceedings.

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Investment and Doing Business in the Czech Republic

The Czech Republic (CR) is a landlocked country in Central Europe. It has about 10.8 million inhabitants. After the fall of the communist regime in 1989, a period of major economic changes begun. It was necessary to reconstruct the economic system in the country towards a market economy, with an emphasis on private ownership and effective economic competition. In the following years the Czech Republic joined the Organisation for Economic Cooperation and Development – OECD (1994), joined NATO (1999) and the process of system transformations in the entire country was completed significantly when the Czech Republic affiliated with the European Union in 2004. Membership in the European Union means for the Czech Republic a number of economic and other benefits. First of all, it is a single market as an area without internal borders where the free movement of goods, services, persons and capital is applied. The single market of the European Union allows the Czech Republic to maintain close business relations with other members of the European Union. Today the Czech Republic is modern, developed and democratic country with parliamentary democracy and market economy, making it able to guarantee a stable environment for foreign businessmen and investors.

1) Investment of Foreigners

Czech law enables foreigners to conduct trade activities under the same conditions and to the same extent as Czech entrepreneurs. Foreigners may become founders or co-founders of a company, or may join an existing Czech company. Foreign companies may operate in the Czech Republic either by establishing a branch office registered in the Czech Republic or by establishing a Czech company. There are four different legal forms of companies. Unlimited liability company and limited partnership company are little used by foreign investors. Most convenient for the investors is the establishment of a limited liability company or possibly a joint stock company in the Czech Republic.

Limited Liability Company – Ltd. (společnost s ručením omezeným – s.r.o.)

This is the most common form of company for small and medium-sized businesses and subsidiaries of foreign parent companies. Partners in a Limited Liability Company are liable for company’s debts and obligations only up to the amount of unpaid contribution according to the state registered in the Commercial Register.

Limited Liability Company is established by the Memorandum of Association (MOA), or the Deed of Incorporation (DOI) if the company is being founded by one person.

Member of a Limited Liability Company could be a natural or legal person.

Membership Contribution of a Member

Minimum registered capital is CZK 1. The Memorandum of Association or the Deed of Incorporation can determine higher amount of the capital; if non-monetary investments are included, the MOA or the DOI must state the object of such investments and the method of valuation.

Bodies of Ltd.:

  • General Meeting
  • Executive Director/s – could be also foreigners (even non EU nationals)
  • Supervisory Board – Is not required, however, may be set.

Joint Stock Company – JSC. (akciová společnost – a.s.)

A Joint Stock Company is established by the Memorandum of Association (MOA), or the Deed of Incorporation (DOI) if the company is being founded by one person.

Shareholder of a Joint Stock Company could be a natural or legal person.

Shareholders in a joint-stock company are not liable for company’s debts and obligations.

Membership Contribution of a Shareholder

Minimum registered capital is CZK 2,000,000. At least 30% of the amount to be subscribed for in cash must be paid upon incorporation. If non-monetary investments are included, the MOA or the DOI must state the object of such investments and the method of valuation.

Bodies of JSC.:

  • General Meeting
  • Board of Directors / the Statutory Director – members could be also foreigners (even non EU nationals)
  • Supervisory Board / Administrative Board

The Czech law recognizes two systems of a Joint Stock Company’s management. More frequent dualistic system means that the company has the Board of Directors as the statutory body elected by the General Meeting. The Supervisory Board oversees the operation of the company. In the monistic system there is an Administrative Board also elected by General Meeting, the statutory body is represented by the Statutory Director – an individual who may also be the Chairman of the Administrative Board.

Branch Office

A Branch Office of a foreign company is not a Czech legal entity, but functions as the representative of a foreign company and incurs obligations on the foreign company’s behalf. Branch Office must fully list its planned activities in the application for entry in the Commercial Register, as it is only allowed to engage in the listed activities. The name and registered office or location of the branch and the name and registered office or location of the foreign company registered abroad, including the number of its registration in the foreign register, shall also be entered into the Commercial Register.

A director, who may be either a Czech natural person or foreign natural person, must be appointed as head the Branch Office. A director subjects to the same regime as a statutory body of a company.

The law according to which the Branch Office’s parent entity was founded also applies to the Branch Office’s internal dealings.

Joint Venture

Joint Venture of Czech and foreign shareholders may be established as any of the above-described forms of business companies; usually Ltd. or JSC. are established as Joint Venture of Czech and foreign shareholders.

2) Procedure for Setting up a Company

Foundation of the Company:

The company is founded by the Memorandum of Association (MOA), or by the Deed of Incorporation (DOI) if the company is being founded by one person, both in the form of a notarial deed.

For the purpose of the establishing a company it is necessary to determine among others:

  • business name (firm)
  • registered office address
  • business activity
  • the person(s) nominated to the statutory bodies

Incorporation of the Company

A company comes into existence through its registration in the Commercial Register. Before submitting an application for entry into the Commercial Register it has to be paid at least 30% on each of the members or shareholders cash contribution.

For setting up the company and its incorporation the following documents are required:

  • Power of Attorney granted by the founder(s) of the company with officially certified signature, apostilled/superlegalised depending on the country where it is signed
  • Affidavit of the person(s) nominated as the statutory body with officially certified signature, apostilled/superlegalised depending on the country where it is signed
  • Excerpt from the Criminal Register of home country of the statutory body, apostilled/superlegalised depending on the country where it is issued
  • Trade Certificate
  • Declaration proving the registered office address
  • The Memorandum of Association or the Deed of Incorporation, both in the form of a notarial deed
  • Evidence of payment of the registered capital
  • If the shareholder would be a legal entity, then also its extract from the Commercial Register, apostilled/superlegalised depending on the country where it is issued.

The process of registration is carried out through a notary or an application to the local commercial court. Legal assistance is not obligatory but certainly recommendable.

Only after incorporation into the Commercial Register is the company allowed to launch its business activities. The registration usually takes just a few days.

3) Residence permit

The matters related to foreigner’s stay in the Czech Republic are regulated by the Act No. 326/1999 Coll., Act on Foreigner’s Stay and Residence in the CR, as amended.

Members and Statutory Body of Limited Liability Company or Joint Stock Company (non-EU national)

To be a member of Limited Liability Company (Ltd.) or Joint Stock Company (JSC.) incorporated in the Czech Republic basically mean to have property rights or voting rights in it. In such a case there is no special requirement which would relate to citizenship; even non-EU nationals entered in the Commercial Register as authorized person to act on behalf of the company and not regularly present in the Czech Republic needs no working and residency permit.

However, if a non-EU person (member or statutory body) will be active for Ltd. or JSC. (providing activities for running its business, i.e. dealing with day to day business), a working permit and residency permit will be required.

Following from the above, the Czech Ltd. or JSC. could be established and registered into the Czech Commercial Register without its founder’s and statutory body member’s residency permits. However, if the non-EU person intends to be regularly present in the Czech Republic and participate on the local activities of the Czech company as its member or statutory body, it is necessary obtaining a long term residency permit and working permit for the Czech Republic.

The time-limit for issuing a decision on an application for a long term residence permit for the purpose of business is 90 days.

4) Acquisition of Real Estate

Foreign natural and legal persons are allowed to acquire realties in the Czech Republic under the same conditions as Czech persons. The most frequent title for the transfer of the ownership right is a written purchase agreement. The purchase agreement is valid if it contains a specification of the real estate according to the records of Land Register and certified signatures on the same deed. Property rights to real estate are acquired on its entry in the Land Register; this process usually takes 1 month. For the security reasons it is usual for the buyer to transfer funds for the purchase price to an attorney, notarial or bank custody until the entry in the Land Register is successfully processed.

5) Taxation Rules

Personal Income Tax:

  • Taxpayers: Natural persons, who can be resident or non-resident. Resident is a person, who has permanent residence in the Czech Republic or habitually resident here (he stays here at least 183 days in a year); he has tax duty related to all of income (from CR as well as foreign countries); Non-resident is the natural person who do not fulfill conditions of a resident; he has tax duty only for income from resources in CR.
  • Subject matter of personal income tax: Income from employment, Income from self-employment, Income from capital, Rental income, Other income (for example casual activities, transfers, winnings).
  • Tax base: The amount by which the income accruing to the taxpayer in a tax year exceeds the costs demonstrably incurred to generate, assure and maintain the income.
  • Tax rate: 15% for the part of the tax base up to 48 times the average wage and 23% for the part of the tax base exceeding 48 times the average wage.
  • Taxation period: Calendar year.
  • Assessment of the tax: The taxpayer has a duty to assess the tax himself and fulfil a tax return. The tax can be assessed on the ground of the tax return or ex officio (tax assessment). Anyone whose annual income subject to personal income tax exceeds CZK 50,000 is required to file a tax return, unless it is exempt income or income on which tax is withheld at a special tax rate.
  • Paying taxes: Advance/at once.

Corporate Income Tax:

  • Taxpayers: Legal entities, investment funds, mutual funds, or trust funds. Taxpayers can be residents or non-residents too. Resident is a legal entity, which has registered office or management of the company in the Czech Republic; it has tax duty that applies on both incomes from sources in CR and on incomes from foreign sources. Non-resident is a legal entity, which does not have registered office in CR or international agreement determines it; he has a tax duty, which applies only to incomes from sources in CR.
  • Subject matter of corporate income tax: The incomes from all activities and management of all property (unless the law provides otherwise).
  • Tax base: A difference by which income exceeds expenses, while respecting their accruals.
  • Tax rate: 21 %, in case of investment funds or mutual funds only 5%.
  • Taxation period: Calendar year, financial year, the period from the record date of the merger or division of the business corporation or the transfer of assets to the shareholder to the end of the calendar year or business year in which the conversion or transfer of assets became effective; or the accounting period, if that accounting period is longer than 12 consecutive months.

Value Added Tax (VAT):

  • Taxpayer: A taxable person who has a registered office or place of business in the Czech Republic and whose turnover exceeds the statutory threshold (CZK 2,000,000 for 12 calendar months in most cases). A person who concludes a contract of association or other similar contract with another taxable person also becomes a taxable person on the date of conclusion of that contract. Another alternative is to become a voluntary VAT payer. This means that a company or an individual applies as a VAT payer of its own volition, in spite of the fact that its turnover has not exceeded the sum required by the law.
  • Subject matter: Supply of goods or transfer of immovable property or transfer of immovable property at auction for consideration by a taxable person; the supply of services for consideration by a taxable person; the acquisition of goods from another EU Member State by a taxable person in the domestic territory and the acquisition of a new means of transport from another EU Member State for consideration by a person who is not a taxable person; importation of goods with a place of performance in the domestic territory.
  • Tax base: Everything received or to be received by the taxable person as consideration for the taxable supply, including the amount for payment of excise duty, from the person for whom the taxable supply is made or from a third party, exclusive of tax on that taxable supply.
  • Tax rate: As of 1 January 2024 there are only two VAT rates, 12% (reduced) and 21% (standard). In practice, there is also a third VAT rate which is 0% (VAT exemption for e.g. books, long-term accommodation rentals, arts, non-profit sport activities, etc.).
  • Taxation period: Calendar quarter, if the turnover of the taxpayer for the previous calendar year did not exceed CZK 10,000,000 and it is not an unreliable taxpayer; calendar month in other cases.

Other Business-related Taxes:

  • Capital duties: There is no capital duty levied in the Czech Republic.
  • Stamp duties: Only on certain legal transactions during administrative or court proceedings.
  • Customs duties: In general, all goods crossing the Czech border are subject to customs duties, except from EU.
  • Other excise duties: E.g. on tobacco, alcoholic drinks and mineral oils.
  • Environmental taxes: For electricity, natural gas or coal supplies.
  • Advertising duty: There is no advertising duty levied in the Czech Republic.
  • Road tax: For vehicles weighing over 12 tonnes registered and operating in the Czech Republic.
  • Immovable property tax: Tax on land and buildings located in the Czech Republic.

Double Taxation Treaties:

In addition to Czech domestic arrangements that provide relief from international double taxation, the Czech Republic has also entered into double taxation treaties with more than 90 countries to prevent double taxation and allow cooperation between the Czech Republic and overseas / EU tax authorities in enforcing their respective tax laws.

6) Investment Incentives

Investments incentives are mainly available to subjects investing in industry: they can be received by investors launching or expanding production, technological centres and strategic service centres (the field of real estate services is not included). Incentives are primarily regulated by Act No. 72/2000 Coll., on Investment Incentives, as amended. The responsible authority is CzechInvest, the Investment and Business Development Agency, which is an agency of the Ministry of Industry and Trade. Maximum amount of incentives may differ depending on the region of the Czech Republic, while projects implemented in the territory of the city of Prague are excluded from the possibility to receive investment incentives.

Investment incentives are usually applied in the form of a corporate tax credit. Other forms of investment incentives are: material support for the creation of new jobs, material support for the retraining or training of employees, material support for the acquisition of tangible and intangible fixed assets for strategic investment projects, exemption from real estate tax and the transfer of land at a preferential price. These forms of aid can be combined with each other. When combining forms of aid, the public aid thresholds cannot be exceeded.

The funds saved in taxes can be used by the company for its further development. To facilitate the creation of jobs in regions where this is desirable, material support is provided for the creation of new jobs.

An application for investment incentives must be submitted to the CzechInvest agency before work begins on the investment project for which the investment incentives are requested. This obligation is based on the Investment Incentives Act which also lists all documents that need to be submitted.

The process of granting investment incentives:

  • The investor applies for investment incentives through the agency Czechinvest;
  • The competent authorities (Ministry of Industry and Trade, Ministry of Finance, Ministry of Labour and Social Affairs, Ministry of Agriculture, Ministry of Environment, Government of the Czech Republic) assess the application in accordance with the Investment Incentives Act;
  • The investor is informed of the result of the evaluation of the application;
  • In case of a positive evaluation, the investor receives a promise of investment incentives. The decision on the promise of investment incentives is issued by the Ministry of Industry and Trade;
  • The investor applies for investment incentives on the basis of the promise made; The providers of specific investment incentives are the Ministry of Industry and Trade, the tax authorities and the labour offices;
  • The investor draws investment incentives in accordance with the terms of the Act.

7) Legal Services for Foreign Investors

Bělina & Partners Law Firm is very pleased to provide potential foreign investors with all legal services associated with the implementation of investments in the Czech Republic or provide the foreign investors with details of doing business in the Czech Republic. We may help with the establishment of companies, purchase of companies or businesses, representation before state authorities, preparation of contractual documents, processing the application for investment incentives or obtaining a residence permit or possibly working permit.

Bělina & Partners Law Firm could also arrange for providing additional services through proven partners with whom we cooperate on long-term basis. These additional services include for example tax consultancy or property management.

Bělina & Partners Law Firm may arrange for help with finding investment opportunities in the Czech Republic based on the specific requirements of foreign investors and we may represent foreign investors in negotiations with sellers or Czech business partners and analyse legal conditions of the investment.

Bělina & Partners Law Firm has many years of experience in providing legal services in the area of investments, establishment of companies, purchase of companies or businesses and shares of them. We have successfully implemented a number of mergers and acquisitions for Czech and foreign clients for example in the area of energy or real estate.

ARE YOU INTERESTED? CONTACT US!

If this article appeals to you, please contact us and we will prepare a personalized offer for you.

Please do not hesitate to contact us via:

E-mail: recepce@belinapartners.cz

Phone: +420 226 287 000

Alternatively, please contact any of our partners: Our team – Bělina & Partners

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Labour law audit

In the first half of 2024 alone, the labour inspection authorities carried out a total of 10,006 inspections of employers, which corresponds to a trend of around 20,000 inspections per year. More than 50% of these inspections revealed breaches of legislation, for which fines in excess of CZK 254 million were imposed. Clients often turn to us only when an inspection is underway, the identified deficiencies can no longer be corrected and sanctions are in sight.

Don’t be caught off guard by an inspection by the Labour Inspectorate! Stay one step ahead and update old processes with the latest legislation and possibilities. Have an employment law audit prepared by employment law experts.

What will an employment law audit bring you?

  • Review of processes and documents: our specialists will review your established processes and employment law documentation.
  • Identification of weak points: they will discover potential weak points not only in terms of potential sanctions, but also in terms of flexibility and cost-effectiveness of employment relations and the prevention of employment disputes.
  • Recommendations for concrete improvements: It will provide concrete suggestions for improvement in specific areas.
  • Preparing for the audit: Prepares employers and employees for possible scrutiny by inspection bodies.

INTERESTED IN MORE? CONTACT US!

If this service appeals to you, please contact us and we will go through a short questionnaire with you and based on the answers we will be able to prepare a personalised offer for you.

Please do not hesitate to contact us via:

E-mail: recepce@belinapartners.cz

Phone: +420 226 287 000

Alternatively, please contact any of our partners or attorneys: Our team – Bělina & Partners

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Labour law training

We understand how challenging the dynamic environment of employment relations can be, especially in the recent period of numerous amendments. We would therefore like to invite you to attend our professional training courses in the field of employment law. We can help you stay up-to-date and deal effectively with both your day-to-day agenda and legal developments.

Why choose our employment law training?

  • Up-to-date information: you will gain knowledge of the latest legislative changes and their practical implications.
  • You can learn about the latest legal developments, including the latest news and updates: You can choose between face-to-face and online training.
  • Interactive format: Opportunity for lively discussion and questions.
  • Practical advice: actionable tips and recommendations from industry experts.

Training content is optional. We will fully adapt to your requirements and needs.

If you do not have specific requirements for the content of the training, you can choose, for example, from the following topics (which can also be combined in various ways):

  • „Valmech“ amendment to the Labour Code No. 230/2024 Coll.
    • New mechanism for minimum wage indexation
    • the so-called self-scheduling of working time by the employee
    • abolition of the employer’s obligation to draw up a holiday plan
    • lump-sumisation of certain allowances in the case of FTEs and changes to the personal allowance
    • adjustment in the area of subcontractor liability in the construction sector
    • abolition of the so-called stop earnings in the calculation of compensation for loss of earnings following incapacity for work caused by an occupational accident or disease
    • plurality of trade unions
  • Agreements on work performed outside the employment relationship 2025
    • negotiation and content of agreements, concurrence of agreements and employment
    • registration of the VPA
    • working time schedules and holidays
    • consolidation package – legislator’s intention and final form
  • Flexible amendment to the Labour Code 2025
    • Changes in the termination of employment relationship (notice period, modification of notice grounds, reimbursement of compensation for non-pecuniary damage, etc.)
    • Changes to the regulation of the probationary period
    • Delivery of wage/salary statements
    • Performance of work by minors from the age of 14
  • Work-life balance
    • Flexible instruments of employment relations
    • shorter working hours for caring employees
    • earlier return from parental leave
    • replacement of employees on maternity and parental leave
    • gainful employment during parental leave
  • Termination of employment
    • An overview of the methods of termination of employment with a focus on the employer’s grounds for termination
    • Current case law and ‚good practice‘ in employer termination of employment
    • Planned changes in the area of flexi-employment termination, including the calculation of notice periods, extension of termination periods, etc.
  • Equal treatment and non-discrimination
    • Definition of equal treatment and non-discrimination
    • Manifestations of the principle of equal treatment before and during the employment relationship
    • Ways of defending employees against unequal treatment or discrimination in the workplace, risks and implications for employers
    • Whistleblower protection, focusing in particular on the prohibition of retaliation
  • Remuneration of employees
    • An overview of the ways and settings of remuneration of employees in the payroll sector, including remuneration of „contingent workers“
    • Equal treatment in pay and non-discrimination
    • Current case law on remuneration
    • The Transparent Remuneration Directive – what to expect from an employer’s perspective?

ARE YOU INTERESTED IN MORE? CONTACT US!

If this service appeals to you, please contact us and we will go through a short questionnaire with you and based on the answers we will be able to prepare a personalised offer for you.

Please do not hesitate to contact us via:

E-mail: recepce@belinapartners.cz

Phone: +420 226 287 000

Alternatively, please contact any of our partners or attorneys: Our team – Bělina & Partners

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Simultaneous assertion of a causal and promissory note claim in insolvency proceedings

In practice, when filing creditors‘ claims in insolvency proceedings, it is not uncommon to encounter the issue of simultaneous application of a causal and a promissory note claim, where the promissory note secures the causal obligation. On the part of insolvency administrators or debtors themselves, it is possible to encounter the argumentation that such a procedure is not possible, as double performance cannot be claimed. Let us explain how this works and why such an argumentation does not hold up in court.

What is the difference between a causal claim and a promissory note claim?

A causal claim is a claim that has arisen on the basis of a specific legal reason (cause). It may have arisen from a contract, a court decision or other legal fact. It is therefore important that it is linked to a specific legal fact. In order to be successful in bringing a claim in court, a creditor must be able to prove the existence of a specific cause of action from which the claim arose. The burden of proof lies with the creditor.

A bill of exchange claim is a specific type of claim that is closely linked to the existence of a bill of exchange. Unlike the aforementioned causal claims, which are always linked to a concrete legal fact (e.g. a contract), a promissory note claim is an abstract type, which is reflected in the fact that the legal reason for the existence of the promissory note (the cause) is not important and does not follow from the promissory note. This means that its validity does not depend on any specific cause that would have to justify the creation of the promissory note. The Supreme Court is settled in its conclusions regarding the so-called secured promissory notes that a promissory note can be defined as a debtor’s perfect security which, provided that strict formalities are met, creates a direct, unconditional, undisputed and abstract obligation of a certain person to pay the holder of the note a specified sum of money at a certain place and time. The promissory note obligation is entirely separate and distinct from any obligation which gave rise to it. The circumstance that, according to the agreement of the parties, the purpose of the promissory note is to secure the fulfilment of a certain obligation is then reflected in the range of so-called causal objections by which the debtor of a security promissory note may defend the obligation to perform under the promissory note (cf. e.g. the judgment of the Supreme Court of 26 February 2014, Case No. 29 ICdo 4/2012).

Is it possible to file both types of claims simultaneously in insolvency proceedings?

Yes, it’s possible. From the creditor’s point of view, the simultaneous filing of a bond and a promissory note claim in insolvency proceedings is a perfectly legitimate and legally approved procedure.

In the case of a promissory note claim, neither the principle of accessoriality applies, it is not dependent on the existence of the claim it secures, nor the principle of subsidiarity, i.e. the creditor does not have to first seek satisfaction from the claim secured by the note, but can directly seek satisfaction from the note claim. It follows from the above-defined nature of the secured promissory note that the secured claim is not extinguished by the performance on the secured promissory note (unlike performance under a surety or pledge), nor is the secured claim extinguished by the performance on the secured claim (cf. e.g. the judgment of the Supreme Court of 28 August 2008, Case No. 29 Odo 1141/2006).

The creditor has the right to assert both types of claims, as the causal and promissory note claims are separate obligations arising from their own legal basis. They are not duplicate claims based on one legal cause of action, but are entirely separate and independent legal claims with different legal regimes, which are cumulative. This does not mean, however, that the creditor should receive double benefit from an economic point of view. The promissory note serves as a higher security for the creditor’s rights and, although it is independent of the claim secured by the promissory note, it acts in effect as a substitute benefit. The debtor performs on the promissory note which secured the causal claim. Thus, the debt on the causal claim is thereby vicariously discharged by the ‚substitute performance‘ of the promissory note.

It is possible to file both claims simultaneously in insolvency proceedings, and to the extent that these claims „overlap“, they are treated as one claim in the insolvency proceedings and are not added together for the purposes of voting at the meeting of creditors or for the purposes of the distribution (cf. the Supreme Court judgment of 27 May 2009, Case No. 29 Cdo 3716/2007).

At the same time, we can also file a claim from a secured promissory note and a causal claim, which is also secured by a lien, in insolvency proceedings. However, if a creditor files only an unsecured promissory note claim and then wishes to satisfy the lien securing the causal claim, this will not be possible because the creditor has not filed the causal claim in the proceedings and has no valid legal title to satisfy the lien in the proceedings. The promissory note claim is separate and entirely distinct from the bailee’s obligation and is not subject to the lien.

Is it necessary to specify the cause of the promissory note in the application?

The promissory note is, as already mentioned, an abstract legal act in which the cause is not expressly expressed, nor does it follow from it. In practice, we often encounter a situation where insolvency administrators call on registered creditors to supplement their promissory note claims with a bond. They explain this by claiming that they need sufficient information to be able to assess the claim properly. The Insolvency Act requires an assessment of the factual description of the cause of the claim, but this cannot be interpreted as meaning that the cause of the promissory note should be assessed. The explanation of the cause of the claim may be relevant in assessing the existence of the claim, but this does not apply to abstract claims.

In the case of abstract claims, the pure existence or non-existence of the claim will be examined. The insolvency administrator will thus only need factual information that enables him to conclude whether the promissory note claim in question has been created and whether it is entitled to be enforced. The bill creditor is thus not obliged to assert facts that shed light on the cause of the bill or to prove the factual basis for the obligation.

Do I need to produce the original promissory note?

The question arises whether it is necessary to submit the original promissory note as an attachment to the application for a promissory note in insolvency proceedings. What is relevant for the assessment of this situation is whether the claim is enforceable or unenforceable.

We will first stop with the unenforceable claim. A security is a document to which a right is attached in such a way that if the document is absent, the right cannot be exercised or transferred. For this reason, in the case of so-called unenforceable promissory note claims, the original note must always be attached as an annex to the application or produced afterwards, but this must always be done before the start of the examination procedure. If the creditor fails to do so, the insolvency administrator will be forced to deny the claim, as there is no certainty as to the authenticity of the promissory note or its owner. The High Court in Prague added the following in its resolution of 6 January 2017, Case No. 101 VSPH 126/2016: „If the creditor does not present the promissory note even in an in-court litigation to determine the authenticity of the claim under the promissory note, the creditor cannot succeed in this in-court litigation. In such a case, there is no room for a challenge under Section 114b CCC. And it is not possible to rule in favour of the plaintiff by a judgment for recognition issued pursuant to Article 114b(5) of the Civil Procedure Code.„

The only exception to the obligation to submit the original promissory note to the insolvency court is the procedural situation where court proceedings for payment of the promissory note are already underway and the note is therefore deposited in court custody. In such a case, it is up to the insolvency administrator to verify the deposit of the original promissory note with the competent court.

If we look at the situation with the so-called enforceable promissory note claims, we find that a creditor should only need a final decision of the competent authority by which the claimed claim was granted to successfully submit the claim (cf. e.g. the judgment of the Supreme Court of the Czech Republic Case No. 29 ICdo 99/2015 of 21 December 2017). The creditor is not obliged to prove the original promissory note. However, the opinion that resulted from the above-mentioned decision may not hold in all circumstances. If the insolvency administrator denies an enforceable claim as to the authenticity or amount of such claim, there will be a need to produce the original bill of exchange also in the case of an enforceable claim.

Bělina & Partners law firm s.r.o.

Our services also focus on debt recovery and representation in insolvency proceedings.

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