The EU is an attractive investment opportunity with 27 union members and four additional EFTA countries having various tax, social and corporate incentives for newly established companies. If you have already established a company there following our detailed guide, you will need to get a few more insights into the regulations, hiring the personnel, accounting practices, and financial laws of the European Union.
Regulations for Companies
After establishing the company, you will start looking for talented professionals to help the business thrive. First of all, to be able to hire anyone, you must:
Have a Taxpayer Identification Number (TIN)
After registering your business, you will obtain TIN, which will be required to file for taxes. Specifications on TIN are set by every European country. For example, in the Czech Republic, TIN is called “Personal Number” and can be found on official documents.
Register with the Social Security Administration
According to the European Commission, in the Czech Republic, social security includes health insurance and sickness programs, the national employment policy system, the pension, and the non-contributory social benefits program. Again, each European country will have its own policies for social security administrations so be sure to check with the government’s website.
Set up a Payroll System
This is something you’ll be required to do even before starting a business – you will have to set up your bank account and prepare notarized statutory declarations. You will be required to declare your financial statements following the regulations of IFRS (see information below) and pay taxes in accordance with the laws of the country. In the Czech Republic, there is a 19% corporate tax and 15% income tax with 34% being paid to the social security administration on behalf of the employer. A secure payroll system will be essential for having clear records. Contact YeYe agency if you require any help with your financial matters.
After you are set, you can proceed with looking for employees. The Czech Republic has several rules for working with personnel (whether from the EU or outside of it). There are four main types of contracts: full-time, part-time, fixed-term, or temporary agency work agreements. The working week is defined at 40 hours per week (42,5 including lunch). Anything over 40 hours is considered overtime and must be paid for according to the rules set out in the contract. The contract must comply with the laws of the country and include the type of work, the place of work, and the starting date. Three main types of contracts in the Czech Republic are:
- Pracovní poměr (HPP) – a fixed-duration contract for a full-time/part-time job.
- Dohoda o pracovní činností (DPČ) – a fixed-duration contract for employment under 20 hours per week,
- Dohoda o provedení prace (DPP) – a fixed-duration contract for a temporary job with a maximum duration of 300 hours per year.
The national minimum wage is 14,600 CZK (around 556.53 EUR) and no bonuses are legally required. Each worker is entitled to at least 20 paid holiday days per year and a maximum of 14 sick calendar days. From 2019, employers must pay 60% of the average daily salary for all sick days (before, the first three days were unpaid).
How to hire someone from non-EU countries?
Outside of the EU, there are many brilliant workers perfect to take on the job, but hiring them comes with certain challenges. The main challenge is that the EU has laws to protect jobs for its citizens. However, it is in no way impossible to hire a desired professional – you will just need to know the rules for doing so.
Hiring an EU national is relatively easy because, first and foremost, the EU nationals are granted freedom of movement within the EU. However, non-EU nationals will (in most case scenarios) require a work permit to work in any EU or EEA (European Economic Area) country. The only exceptions would be holding dual citizenship (where second citizenship is of the EU or EEA country), having a permanent residence permit in the desired country, or applying for the Youth Mobility program visa (suitable for citizens of Canada, Australia, and New Zealand).
The worker will be required to obtain a working permit before moving. For example, if his desired destination is the Czech Republic, he will have two ways of obtaining such a permit.
Employee Card
Employee cards are suitable for all types of employment with any qualification level. The Employee card is of a dual nature, meaning that the person will have the right to both works and live in the Czech Republic. Special cases, when a non-dual Employee card is applicable, can be found here.
However, the job itself must meet an important condition – the vacancy must come from the central register of job vacancies. Once the worker obtains his Blue Card, the vacancy will be blocked by the Ministry in the database.
The card will be granted for the period of employment stated in the contract (but for no more than two years with the possibility to prolong) and will relate to a specific job position.
Blue Card
Blue cards are intended for high-level professionals with qualification proving their skills, who would like to stay in the Czech Republic for more than three months and work. To qualify, a worker must hold a university degree where he studied for at least three years and an employment contract for the duration of at least one year.
In this case, the vacancy must also come from the central register of job vacancies. Typically, if a worker is interested in obtaining the Blue Card, he will be facing positions in the central register which were not yet filled by Czech residents. Once the worker obtains his Blue Card, the vacancy will be blocked by the Ministry in the database.
The card will be granted for the period of employment stated in the contract (but for no more than two years with the possibility to prolong) and will relate to a specific job position.
Once the worker has the necessary permit, the employer must notify the Labour Office via an application form that he has hired a foreigner for a job within the Czech Republic. That must be done – the latest – on the day of the beginning of the employment as noted in the contract. The Labour Office must be chosen based on the employer’s legal address. After that, he should file with the necessary authorities, such as the Social Security Administration, and get the worker’s compensation insurance. When terminating the contract, the employer must submit a slightly different application to the Labour Office (the latest – ten days after the termination).
It is possible to have a virtual business address in the EU?
Virtual offices are an attractive option for international entrepreneurs as they are cost-efficient and come with all the benefits of regular working space. They became especially popular during the COVID-19 pandemic, protecting the entrepreneurs from long-term leases and rents for unused offices. It is indeed possible to set up a virtual business address in the EU, which will allow you to hold meetings, conferences, answer calls, and collect mails at the location of your choice. To compare the prices: in the US, such service will generally cost between $25 to $120 per month, in Russia – $20 to $100, in Hong Kong – from 77$ per month. Yet, the price for a virtual office in Germany starts at as little as $13 per month, in Czechia – from $20, in Poland – from $15, in France – at $13. YeYe agency has been helping international businesses set up their virtual addresses in Czechia for years now and is ready to help you next. However, if you only use a virtual company official seat, you might face issues while opening a bank account or registering for EU VAT Number.
Accounting for European countries
Outsource accounting for SMEs and micro-businesses
The EU enforces strict yet very clear rules for financial integrity and openness. In order to understand and assess the financial climate within the union, they make all EU listed companies keep and disclose their financial statements following the rules of IFRS (International Financial Reporting Standards) established by IASB (the International Accounting Standards Board). IFRS dictates how all accounting operations should be reflected in the financial statements. This allows companies and governments of more than 100 countries within and outside the EU to understand and analyze each other’s statements. Here is a full list of IFRS standards.
Non-listed companies usually do not have to comply with the IFRS guidelines, yet according to the laws established in most EU countries, they can use them for the consolidated accounts. For example, Belgium, Cyprus, Estonia, Greece, Croatia, Lithuania, Latvia, Malta, Slovakia, and Slovenia require non-listed companies to follow the IFRS rules for individual statements.
According to Your Europe, all statements must include “a balance sheet, profit and loss account, explanatory notes.”
The accounting is easier and simplified for small, medium, and micro-companies. In most countries, micro-companies are treated in the same way as small businesses since they do not have enough resources to comply with the regulations. Here is a table of thresholds as defined by the European Commission:
| Micro Business | Small Business | Medium Business | |
| Balance sheet total | Less Than 350 000 EUR | Less Than 6 000 000 EUR | Less Than 20 000 000 EUR |
| Net turnover | Less Than 700 000 EUR | Less Than 12 000 000 EUR | Less Than 40 000 000 EUR |
| The average annual number of employees | Less Than 10 | Less Than 50 | Less Than 250 |
All data for the table is taken from the article by the European Commission.
Those who are in charge of unlimited liability companies should comply with the rules of the regional authorities as there are no universal EU regulations for them.
Here at YeYe agency, we can manage all of your accounting activities and take care of the necessary paperwork, ensuring that it complies with the guidelines of the European Union.
Conclusion
Establishing a company in the EU is as rewarding as it sounds: being able to access the single market with many economic incentives and opportunities is a promising future for international start-ups. While some of the book-keeping and accounting regulations may sound intimidating, they shouldn’t stop you from pursuing ambitious goals in the country of your choice. YeYe Agency is ready to assist you throughout the whole journey and ensure that your expansion to Europe is pleasant and easy. YeYe Agency helps you to focus on your core business while the local financial procedures are organized.
