Types of Trader’s Licenses in the Czechia and How to Obtain Them

Are you considering becoming a sole trader in the Czech Republic? If so, understanding the various types of trader’s licenses available and their respective requirements is crucial. In the Czech Republic, there are four main types of licenses, each with its own set of conditions for acquisition. Let’s delve into how to obtain a trader’s license for freelance (živnost volná), restricted (živnost vázaná), craft (živnost řemeslná), and licensed (živnost koncesovaná) businesses.

Requirements for Becoming a Sole Trader in Czech Republic

Thinking about working for yourself? In that case, you’ll encounter the term “živnost.” A živnost is a systematic activity that you’ll conduct:

• independently,
• under your own name,
• at your own responsibility,
• with the intention of making a profit.

To become a sole trader and acquire a trader’s license, you must meet the conditions outlined in the Trade Licensing Act No. 455/1991 Coll. These conditions include:

• fulfilling general requirements,
• for certain fields, possessing professional qualifications,
• demonstrating a clean criminal record, which the authorities verify through the criminal register.

Professional qualifications are associated with craft, restricted, and licensed trades. The law establishes specific requirements you must meet to practice in a particular field. Typically, these requirements include education in the field, practical experience, or requalification.

Now that we’ve covered the basic requirements for becoming a sole trader, let’s explore the specific conditions for each type of trader’s license in the Czech Republic.

4 Types of Czech Trader’s Licenses

The Trade Licensing Act distinguishes between four types of trader’s licenses. Let’s explore each type in detail.

Freelance Trades (Volná živnost)

Freelance trades encompass a wide range of activities, totaling approximately 80 sectors. With a freelance trade license, you have the flexibility to engage in multiple sectors simultaneously. Obtaining a freelance license requires meeting general conditions at the trade licensing office, without the need for specific professional qualifications or experience.

Examples of Freelance Trades:

• Animal breeding and training
• Production and repair of upholstery products
• Motor vehicle maintenance and accessories
• Publishing, bookbinding, etc.
• Artistic and artisanal metalworking
• Photographic services

Craft Trades (Řemeslná živnost)

Craft trades cover various artisanal activities, each demanding specific professional qualifications in addition to meeting general requirements. Typically, these qualifications involve education in the relevant field, with or without prior practical experience. Alternatively, individuals with six years of experience in the field can also pursue craft trades. Craft trades require proof of expertise to operate.

Examples of Craft Trades:

• Baking and confectionery
• Glass grinding and etching
• Milling
• Blacksmithing and farriery
• Locksmithing and toolmaking
• Watchmaking

Restricted Trades (Vázaná živnost)

Restricted trades necessitate a formal declaration at any trade licensing office. Upon meeting general conditions, paying administrative fees, and demonstrating professional competence, you can begin operations. The specific requirements for professional competence vary for each restricted trade, detailed in Appendix No. 2 of the Trade Licensing Act. If lacking the required qualifications or experience, you can appoint a responsible representative for a certain period.

Examples of Restricted Trades:

• Geological work
• Optometry
• Construction project management
• Real estate mediation
• Mountain guiding
• Driving school operation

Licensed Trades (Koncesovaná živnost)

Licensed trades require permission from the state or municipality to operate. Acquiring a license for these trades is the most complex and stringent process. The application process varies depending on whether you are an individual or a legal entity and your place of residence (within the Czech Republic, within the EU, or outside the EU). In addition to meeting general conditions, you may need to fulfill specific requirements and demonstrate professional competence.

Licensed trades serve as a regulatory measure to control the number of individuals engaging in certain activities in a given area and ensure safety in selected business sectors, such as alcohol production or firearm manufacturing. You can only commence operations in a licensed trade upon receiving the necessary license.

Examples of Licensed Trades:

• Shooting range operation and firearm training
• Travel agency operation – organizing tours and facilitating related travel services
• Inland water transport
• Production and processing of sulphite or synthetic alcohol

Do You Always Need a Trader’s License?

No, not always. There are fields where you don’t need a trader’s license, such as freelance activities like writing, acting, music, or legal services.

Even though you don’t need a trader’s license for these fields, you still need to operate as a self-employed person (OSVČ). Visit the trade licensing office to complete all necessary registrations, just as if you were starting a business. Remember to keep records of your income, expenses, and invoices. While your field may not require a trader’s license, it’s advantageous to obtain one. With a trader’s license, you can claim higher expense allowances or benefit from favorable flat tax conditions.

Starting a Business or Adding Additional Fields

What’s required to register a freelance trade? If you want to establish a trade, visit any trade licensing office. Here, you’ll demonstrate that you meet the general conditions, typically requiring only your ID card. Complete the Unified Registration Form and pay a fee of 1,000 CZK (or 800 CZK for electronic applications). Additionally, a trade register extract costs 100 CZK (or 80 CZK electronically). This process applies to all freelance trades.

For trades falling under craft, restricted, or licensed categories, you’ll need to provide proof of professional competence, usually through education, retraining, or relevant work experience.

Expanding your trader’s license to include additional activities is free for freelance trades. However, for crafts, restricted, or licensed trades, you’ll pay a fee of 500 CZK (or 400 CZK for electronic applications) at the trade licensing office.

Cancellation or Suspension of Czech Trader’s License

Various circumstances may lead to the cancellation or suspension of a trader’s license, including health or financial reasons, or discovering the trade is unprofitable. You’re not obligated to disclose the reason for your decision.

Suspension of Trader’s License

If you plan to return to business in the future, suspend your license to avoid reapplying and paying administrative fees again. Suspension is for a chosen duration, during which you won’t pay insurance premiums. Notify the relevant authorities within 8 days and submit a notice to the trade licensing office using a change form.

Cancellation of Trader’s License

To cancel your license, complete a change form at the trade licensing office, notifying the tax office, social security office, and health insurance provider. The trade licensing office has 30 days to process your request, during which time you’re still considered self-employed and must continue paying taxes and maintaining accounting records.

If you don’t use the trade licensing office form for cancellation, you must inform each institution individually within 8 days for health insurance and social security, and within 15 days for the tax office.

Filing Taxes in the Czech Republic as a Foreign Freelancer

As a freelancer (živnostník) in the Czech Republic, filing taxes is a crucial aspect of managing your business. The process involves reporting your income, expenses, and any applicable deductions to the tax authorities. One convenient option for expats in the Czech Republic is živno. With an English-friendly interface, živno streamlines the invoicing process, saving time and eliminating the complexities of adding exchange rates. Additionally, živno ensures that all necessary information is included on your invoices, helping you stay compliant with tax regulations.