Czech Branch Office (odštěpný závod) vs. s.r.o.: Which Should a Foreign Company Open?
A Czech branch office (odštěpný závod) is not a separate company. It is part of your foreign company, entered in the Czech Commercial Register, with a local head who can act for it. The parent stays fully liable for the branch’s debts. Branch profit is taxed at 21% in Czechia. A branch suits a company testing the market under its own name. A Czech s.r.o. suits anyone who wants liability ring-fenced locally.
Updated: 2026-09-24 · Tax year 2026. General information based on Czech law in force in 2026, not legal or tax advice. Treaty relief depends on where your parent company is resident.
What exactly is an odštěpný závod?
Czech law distinguishes a pobočka — a part of a business with its own economic and functional independence — from an odštěpný závod, which is a branch entered in the Commercial Register (Civil Code, § 503(2)).
That register entry is what makes a branch usable in practice. From the day the head of the branch (vedoucí odštěpného závodu) is registered, that person can represent the company in everything the branch does. The branch receives its own Czech company ID number (IČO), which you need for invoices, bank accounts and the tax office.
The branch has no legal personality; the parent’s internal affairs stay governed by its home law (Civil Code, § 3024(2)). Contracts are signed in the parent’s name and branch creditors can reach all of the parent’s assets.
Do you have to register a branch?
Foreign companies seated outside the EU that do business in the Czech Republic must register themselves, or their branch, in the Commercial Register (Public Registers Act, § 44). EU companies set up a registered branch for the same practical reasons. Without the entry there is no local head with authority to act and no branch IČO.
The entry shows the parent (name, legal form, capital, governing law and home register), the branch address and scope of business, and the head of the branch (§ 49).
Branch office vs. s.r.o. at a glance
| Branch (odštěpný závod) | Czech s.r.o. | |
|---|---|---|
| Legal personality | none, part of the parent | separate Czech company |
| Liability for local debts | the whole parent company | limited to the s.r.o.’s assets |
| Minimum capital | none of its own | CZK 1 |
| Who signs locally | head of branch (plus the parent’s directors) | executive director (jednatel) |
| Corporate income tax | 21% on profit attributable to the branch | 21% on the s.r.o.’s profit |
| Sending profit home | transfer to head office, no dividend | dividend: 15% withholding tax unless reduced by EU rules or a treaty |
| Czech bookkeeping | yes, for the branch’s activities | yes, full accounts |
| Ending it | deregister the branch | liquidation of the company |
A branch is lighter to own: no separate board, share capital or dividend process. But it carries the parent’s entire balance sheet into every Czech dispute. If you are leaning towards a company, our guide for non-residents registering an s.r.o. walks through that route.
How is a Czech branch taxed?
For tax purposes the branch is a permanent establishment of the foreign company. The profit attributable to it is taxed in Czechia at the corporate rate of 21% (Income Taxes Act, § 21). The branch files a Czech corporate tax return; the parent claims relief at home under the relevant double tax treaty.
Profit that the branch passes to head office is not a dividend, so no Czech dividend withholding tax applies to it. A Czech s.r.o. paying a dividend to a foreign parent withholds 15% (§ 36). EU rules or a treaty often reduce that, if the conditions are met.
VAT follows the activity, not the legal form. Once the branch’s Czech turnover passes CZK 2,000,000 in a calendar year, it becomes a VAT payer. More in our article on the Czech VAT registration threshold.
Worked example: 12 months of a sales branch
A German GmbH opens a Prague sales branch. In its first year the branch books CZK 6,500,000 of Czech revenue and CZK 5,300,000 of costs: local staff, office rent, and a share of head-office costs it can document.
- Czech tax base: 6,500,000 − 5,300,000 = CZK 1,200,000
- Czech corporate tax at 21%: CZK 252,000
- The branch remits the rest of its cash to the GmbH, with no Czech withholding tax on the transfer.
- The same revenue has passed CZK 2 million, so the branch is also a VAT payer and files monthly or quarterly returns.
Through a Czech s.r.o. the corporate tax would be identical; the difference appears only when profit leaves as a dividend. Either way, head-office charges must be at arm’s length and documented.
Setting up a branch step by step
- Board resolution of the parent deciding to open the Czech branch and appointing its head.
- A current extract of the parent from its home register. Foreign documents need a sworn Czech translation and verified signatures (Trade Licensing Act, § 5(3)); EU companies are exempt (§ 5(4)). Non-EU documents usually also need an apostille.
- A Czech address for the branch, which is entered in the register.
- Trade licence (živnostenské oprávnění). A foreign company can trade in Czechia “under the same conditions and to the same extent as a Czech person” (§ 5(2)). For regulated trades it must appoint a responsible representative, and the law points first to the head of the branch (§ 11(4)).
- Filing to the Commercial Register at the regional registry court, usually prepared with a Czech notary.
- Tax registration with the Czech tax office after the branch is registered, VAT registration when due, and a data box (datová schránka) for official mail, which the state sets up for entities entered in the Commercial Register.
- Czech bookkeeping from day one. The Accounting Act applies to foreign legal entities that do business in the Czech Republic (§ 1(2)(b)).
FAQ
Is a branch office in the Czech Republic a legal entity?
No. An odštěpný závod is a registered part of the foreign company. The parent signs the contracts and is liable for every debt the branch incurs.
Who can be the head of a Czech branch?
Any individual the parent appoints. Once entered in the Commercial Register, the head represents the parent in branch matters.
What tax does a Czech branch pay?
Corporate income tax of 21% on the profit attributable to the branch as a permanent establishment, plus VAT once Czech turnover exceeds CZK 2 million. Transferring profit to head office does not trigger Czech withholding tax.
Choosing the right vehicle
Whether a branch or an s.r.o. works better depends on your liability appetite, the parent’s home-country tax and how long you plan to stay. Our team sets up both and keeps the Czech books afterwards. Start with company formation in the Czech Republic or ask about ongoing accounting.