Audit of a Czech company, financial statements, accounting, consulting in Czech Republic

According to the Accounting Act (Zákon o účetnictví č. 563/1991 Sb.), keeping accounting records is compulsory for the following entities:

• legal entities incorporated in Czechia;
• foreign companies that conduct business in Czechia;
• individual entrepreneurs who are VAT payers and whose annual turnover exceeds 25 000 000 CZK;
• foreign branches in Czechia;
• private persons who decided to keep standardized records on a voluntary basis.

National accounting standards of Czechia are based on the international financial reporting standards (IFRS).

Financial statements in Czechia include:

• Annual balance sheet;
• Profit and loss statement;
• Annexes (on cash flow, on changes in the structure of assets and capital, etc.).

Small and micro enterprises file a simplified annual report: without review of cash flows and without review of changes in equity.

Financial statements and an annual report (in the case of an entity that must be audited) must be filed with tax authorities and published in the commercial register. The filing deadline for entities that must be audited is 6 months after the reporting date, and for others it is 3 months.

Enterprises that do not fulfill the obligation to publish the report are imposed with a penalty of up to 3% of the total gross assets.

The obligation to grant public access does not apply to entities that:

• are not registered in the Trade Register;
• make tax reports in accordance with Act No. 586/1992 on profit tax as amended;
• make expenses in the form of percentage of income (lump sum expenses) without accounting.

Normally, tax period in Czechia is a calendar year.

An income tax return of legal entities shall be filed by 1 April of the year following the reporting year. If accounts are prepared and filed by a licensed specialist (accredited by tax authorities of Czechia), the filing deadline can be extended to 30 June.

The following must be enclosed with a tax return:

• Annual balance sheet;
• Profit and loss statement;
• Annexes (on cash flow, on changes in the structure of assets and capital, etc.).

Tax shall be paid on the general grounds by 1 April of the year following the reporting year.

The limitation period for unpaid taxes in the Czech Republic is 3 years. The limitation period starts on the day of the deadline for filing the tax return.

Penalty for late filing of tax returns is:

• 0,05% of the amount of tax for each day, over 5 days of delay in filing the tax return;
• 0,01% of the amount of tax for each day, if the company or individual entrepreneur had a loss;
• the minimum of 200 CZK – the maximum of 5% of the amount of tax or tax losses (the maximum amount of the penalty is 300 000 CZK);
• 5% of the tax imposed (the minimum is 500 CZK) for not filing a tax return after a reminder from the Czech tax authority.