Tag: #Czech Republic

Recently, the President of the Czech Republic has adopted the amendments to the Law "On the Residence of foreign citizens" (hereinafter - the Law). The basis for such changes to the Law was the obligation of the implementation of the EU Directives on seasonal employment and permits for the employees transferred within the framework of international concern. However, the bill introduces various measures to combat illegal employment, the problem of which is acute in the Czech Republic. In addition, a number of measures are being introduced for the immigration support of the new investors. The specified changes are the largest since the times of introduction of the institution of the Labor Card in 2014 and they will come into force during August of this year.

In view of the fact that the amendments to the Law are directly related to the creation and promotion of business in the Czech Republic, then we will focus on the key points and try to understand them.

Some of the changes will affect the certain categories of the citizens who are not the EU citizens and have seasonal employment, as well as the managers, specialists and trainees of the international corporations who have been expanded to work in the Czech Republic for a certain period of time. There will be a special type of work and residence permits for this category of employees, which implies a special order of receipt. This kind of permits will not replace the existing labor, as well as blue cards, and can be used along with them.

As for the new investors, the changes do not imply any simplification in obtaining a permanent residence permit or in obtaining citizenship, since this kind of procedures in the Czech Republic, unlike some EU countries, is simply absent. However, the entrepreneurs and official representatives of the companies will be able to obtain an investor's card that will legitimize a long-term stay in the Czech Republic. This type of card can be obtained in an accelerated order within 30 days. In addition, the family members of such investors will be able to obtain the long-term residence permits for the purpose of family reunification, on the basis of which they will be able to live and work in the Czech Republic. It should be noted that such an investor must meet a number of requirements, namely: the minimum investment size should be at least 75 million crowns and at least 20 jobs should be created within the framework of this investment.

At the present time, the investors who meet the requirements of the Czech legislation can use the existing "Welcome Package" project and get a work card, also in an accelerated order.

Moreover, today the citizens of the countries that are not the members of the European Union and are official representatives of the Czech companies ("jednatel") can exercise their powers on the basis of an entrepreneurial visa or a work permit and a work card.

In accordance with the new rules, the official representatives will exercise their powers solely on the basis of entrepreneurial visas or an investor's card.

It is also worth noting that, according to the changes, a new concept of "unscrupulous employer" is being introduced. The employer who do not fulfill their tax obligations, the obligations with respect to the contributions to social and medical insurance, performs the activities that differ from the indicated in the register or also has a fictitious place of registration will be considered unscrupulous.

In addition to all of the above, the changes will affect labor and blue cards. So, the action of the work card will automatically expire 60 days after the termination of the employment contract if no application for a new card has been submitted for this period or after this application has been rejected. At the same time, a period of 60 days is provided during which it is possible to apply for a new card in the Czech Republic after termination of the employment contract. For this moment, in the event of the expiry of the employment contract, a new application can be submitted only from abroad.

In conclusion, it should be noted that until now the blue card has not had significant advantages over the work card. For example, the presence of the blue card issued by another member of the European Union did not give the right to work in the Czech Republic. However, in view of the approved changes, now it will be possible to start working on the basis of the card issued by another member state of the European Union, provided that the employee has applied for a blue card in the Czech Republic.

Pre-contractual liability regarding M & A deals in the Czech Republic

If you are going to start negotiations on mergers and acquisitions of the companies, or you are already such party, you should pay attention to our next material. The new complex pre-contractual obligations of the parties are applied in the Czech Republic.

As we can understand from the title, pre-contractual obligations usually arise from the relations of the parties before the conclusion of the formalized contract. In case of mergers and acquisitions deals, they arise before the conclusion of a contract of sale or other similar contract. Until then, the mutual rights and obligations of the parties are often governed by a simple contract of intentions or an agreement on the non-disclosure of confidential information. As a result, the important aspects of the relationship between the parties before the conclusion of a sales contract or a similar contract may be consequently governed by the applicable legislative provisions on pre-contractual liability. Taking into account the importance of this phase of the preparation of M & A deals, as well as the costs incurred by the parties (for example, for legal and financial audits, negotiations on the transfer of technical documentation, or on obtaining financing) before signing the agreement, it is important the parties to understand the potential consequences of legislation on the pre-contractual liability and, if possible, limited and / or excluded its use.

Therefore, the Czech law defines the following types of the pre-contractual liability:

4 types of liability

1. Conducting negotiations without intention to make a contract
2. Termination of negotiations without good reasons
3. Obligation to disclose information
4. Protection of confidential information

Let's consider each point in more details.

1. Conducting negotiations without intention to make a contract.
This type of pre-contractual liability refers to the situations when the party begins or continues to negotiate without a real intention to conclude subsequently a contract. This applies to the cases when one of the parties intends to obtain certain information that is confidential, or intends to disrupt the negotiation with the third party. At the same time, we note that such claims are rare, since the legislation of the Czech Republic requires the aggrieved party to prove the intentions of its opponent. In most cases this is not possible.
2. Termination of negotiations without good reasons.
The second type of pre-contractual liability protects the parties in the event when the second party breaks the negotiations without a good reason (for example, because it receives a more favorable offer from the third party). However, this applies only in those cases when the negotiations have reached a sufficiently advanced stage to make one of the parties believe (in good faith) that the relevant contract will be concluded. However, the latest practice shows that the seller can try to exclude or limit his pre-contractual liability even at advanced stages, reserving the right to do so at the initial stage of the negotiations, for example, by informing the potential buyers at the auctions (auctioneers) that he reserves the right to refuse all bets or terminate the negotiations at any time.
3. Obligation to disclose information.
The Contracting Parties are obliged to notify each other of factual and legal circumstances that they are aware of or must know in order each party could make sure in the possibility of conclusion of the agreement which has full legal force and that the other party's interest in the conclusion of the agreement is justified. After determination of the information known to the buyer and seller that must be disclosed by the last ones for the purpose to conclude a merger and acquisition agreement, the parties must carefully consider legally established rules of information disclosure in order to make sure that such rules will not contradict the obligations on information disclosure.
4. Protection of confidential information.
The legislation of the Czech Republic requires each party that the confidential information obtained during negotiations not to be used for negative purposes and disclosed. Although, this rule is a simplified legislative version of non-disclosure agreements that have become a generally accepted standard, the Czech legislation also grants the parties the right to keep records of confidential information and messages exchanged during the negotiation process. This situation in many cases goes against the intentions of the parties (in particular, the sellers).

In conclusion, it should be noted that the parties of mergers and acquisitions deals, in particular, those ones in which mutual pre-contractual obligations are based on simplified agreements of intent or other limited agreements, should carefully consider the potential impact of normative regulations that regulate the pre-contractual relations of the parties and weigh the negative consequences, which they may cause.

Corporate tax in 2016

UK - The Corporation Tax main rate for 1 April 2016 is set at 20%. This rate will fall to 19% for the year beginning 1 April 2017, and to 18% for the year beginning 1 April 2020.

Hong Kong - Profits tax levied at rate of 16,5% for companies carrying on business in Hong Kong (and 15% for unincorporated businesses) on relevant income earned in or derived from Hong Kong.

Ireland - Standard corporation tax rate on trading income is 12,5% and 25% on non-trading income.

Cyprus - Corporate tax rate is 12,5%. Certain types of income subject to Special Contribution for Defense at rates of 17%(dividends), 30%(interest) and 3%(rents).

Latvia – Rate is 15%.

Belize - All non-CARICOM residents, who have any taxable receipts originating from Belize, or in respect of any service provided in Belize, are required to pay business taxes as follows: Dividends - 15%, Insurance Premiums - 25%, Interest on Loans - 15%, Management fees - 25%, Rental of plant and equipment - 25%, Technical Services - 25%.

British Virgin Islands - No income tax.

United Arab Emirates - Income tax decrees currently enforced on oil and gas companies and branches of foreign banks. Oil and gas companies subject to rates of 50%55%, depending on Emirate.

Panama - Standard rate is 25% of net income, alternative minimum tax is 1,17% of gross taxable income.

Seychelles - Taxable income up to Seychelles revenue commission (SCR) 1 million taxed at 25%, income above SCR 1 million taxed at 33%. Businesses with turnover below SCR 1 million taxed at 1,5% on turnover, unless they opt for normal regime. Special rates apply to certain businesses.

Czech Republic - Rate is 5% for basic investment funds and 0% for pension funds (with certain exemptions).

Estonia - rate is 20%.

Author: Sergey Panov

managing partner Finance Business Service