Czechia’s economy relies heavily on SMEs, which provide two-thirds of business sector employment. However, they remain significantly less productive than large firms, operating at only about 60% of their productivity levels. In recent years, the Czech government has made progress in reducing administrative burdens, particularly through the digitalisation of company formation, permitting, and licensing procedures. However, further improvements are possible by streamlining current insolvency procedures, strengthening the digitalisation of government services (e.g., through the “once only principle” and a unified digital business ID) and a quicker implementation of digital government portals whose creation has already been planned. Czechia is also modernising its Regulatory Impact Assessment (RIA) system by clarifying methodologies, but the system would benefit from a more consistent application, enhanced public consultation, and ex-post evaluation. Finally, broadening the simplified tax regime beyond self-employed individuals to include smaller SMEs could ease compliance and support the transition to an employer status.
SME Policy in Czechia
Abstract
SMEs account for a large share of the Czech economy but are less productive than large firms. SMEs account for two thirds of business sector employment, but the average SME is only 60% as productive as the average large firm.
Czechia’s administrative burden has decreased in the past years, but the pace of improvement could further accelerate. Administrative processes related to company formation, as well as permitting and licensing, have been streamlined and digitalised. Between 2018 and 2023, Czechia improved by six places in the administrative burden indicator of the OECD Product Market Regulation (PMR) index, reaching the sixth place among OECD countries. Nevertheless, there is still room for improvements. Some of the business life events, such as those surrounding insolvency, have received less attention and could be further streamlined and digitalised.
Czechia could also accelerate the digitalisation of government services. A top priority should be ensuring that Czechia has the adequate digital infrastructure in place to respect the “once‑only principle” (i.e., asking companies for the same information only once), and that this be linked to a digital business ID. Czechia’s ratings of digital government infrastructure have not improved much in recent years. Several critical digital infrastructure portals (e.g., the Entrepreneur’s Portal and the Single Control Record Portal) are at various stages of development and should be completed as soon as possible, with a view to further streamlining the business environment for local companies.
Czechia’s Regulatory Impact Assessment (RIA) approach could be further strengthened. Czech authorities are currently working on streamlining the RIA methodology and making it easier to understand and follow. Such efforts are worthy and should continue. Authorities could consider three other measures to improve the process: applying RIAs more often and more consistently, improving public consultation (for instance, by building an online consultation portal), and applying ex-post assessments more consistently.
Finally, Czechia could consider broadening its simplified tax regime to a wider segment of the SME population. The country has a simplified tax regime for self-employed individuals (i.e., people running a business without employees). Creating a simplified regime for smaller SMEs could smoothen the transition from self-employed to employer SMEs and decrease the compliance costs associated with taxation. Depending on the design, such a scheme might have a small budgetary impact, as only 10% of national firms pay the corporate income tax.
SMEs account for two-thirds of business employment, but are less productive than large firms
Like in other EU countries, SMEs account for a large part of the national economy in Czechia, but they are less productive than large firms. SMEs account for the vast majority of firms (99.9%) and two-thirds of employment, similar to Poland but more than in Germany. At the same time, the average SME productivity is only 60% as much as that of large firms. Czechia’s productivity gap by firm size is larger than Germany’s, where SME productivity is two-thirds that of large firms, but smaller than in other Central and Eastern European (CEE) countries, such as Hungary (57%), Poland (51%) and Slovakia (48%). The difference between the productivity of SMEs and large firms was constant in Czechia between 2017 and 2020, whereas it decreased slightly in the other CEE countries (Figure 1.1).
Percentage values
Note: Value added at factor costs refers to 2020 for Czechia and Slovakia and 2021 for Germany and Poland. Numbers refer to the business economy except financial and insurance activities (BTNXK in ISIC rev. 4).
Source: OECD Structural Business Statistics Database
Czechia's business environment improved between 2018 and 2023
A supportive business environment is crucial to closing the productivity gap between SMEs and larger companies. SMEs can be disproportionately affected by regulatory and administrative burdens, as they have fewer resources to spend on compliance. Reducing these barriers, alongside improvements in access to finance, access to skills and digitalisation, can free resources for SMEs to invest in improvements in efficiency and innovation, boosting productivity and growth.
Czechia’s business environment improved between 2018 and 2023, as measured by the OECD Product Market Regulation (PMR) indicator (Figure 1.2, Panel A). The indicator, which contains a variety of measures, including the administrative and regulatory burden and the governance of state-owned enterprises, improved slightly in absolute terms and maintained Czechia’s position in the top third of OECD member countries. The most marked improvement was in the simplification of the administrative and regulatory burden, where Czechia leapt from the 24th place in 2018 to 9th place in 2023 among OECD member countries (Figure 1.2, Panel B).
Absolute values of the PMR indicator (Panel A) and Czechia’s ranking compared to other countries (Panel B)
Note: LLC stands for limited liability company. The LLC and personal enterprises scores refer to the administrative and regulatory burden of setting up such companies.
Source: OECD Product Market Regulation Database
Complexity and the uncertainty surrounding policy decisions remain important challenges
The complexity and uncertainty of administrative and regulatory requirements remain important issues for Czech businesses. According to a 2024 Eurobarometer survey, 72% of Czech firms identified the complexity of administrative procedures as a barrier to doing business in the country, above the EU average (66%) and higher than in Poland, Germany and Hungary. Similarly, 60% of Czech firms cited fast-changing legislation and policies as problems when doing business in the country, slightly below the EU average of 64% (see Figure 1.3, Panel A).1
Note: Both indicators are based on survey evidence. For Panel B, lower scores are better. Source: Eurobarometer (European Commission, 2024[1]) for Panel A and eGovernment indicators (European Commission, 2023[2]) for Panel B.
High uncertainty regarding government policy typically deters investments and can discourage compliance. Compliance with policies and regulations is costly and increases the cost of doing business. In cases of regulatory uncertainty, firms might decide to risk not complying at all with rules and regulations. One example of policy causing uncertainty was the repeal of the obligation to submit the VAT control statement (Kontrolní hlášení DPH) in 2023. The obligation, which had been imposed in 2016, required firms to declare detailed transactional data to the tax authorities. To do so, firms had to invest in technical infrastructure such as electronic invoicing systems. Despite this initial investment, representatives of the business community viewed the system positively, as it levelled the playing field by limiting the scope for tax evasion.2 However, the government repealed this policy in 2023, citing too many administrative burdens and a decrease in cash transactions. The sudden reversal clearly penalised the firms that had invested in the electronic invoicing system and recreated more room for tax evasion.
Czechia needs to accelerate the digitalisation of its government services
The pace of digitalisation in government services could accelerate. E-government services are a crucial instrument for cutting red tape and ensuring a hassle-free business environment. However, Czech businesses did not have, as of 2024, access to a one-stop shop that would allow them to manage their most common life events, such as start-up, licenses, taxation and hiring. According to the European Commission’s eGovernment benchmarking indicators, Czechia’s ranking in e-government services saw a decline relative to other European countries between 2017 and 2022, to the 23rd position in the EU, despite improvements in absolute values (Figure 1.3, Panel B). Despite a similar improvement in e-government services for regular business operations, the country’s ranking dropped even further, from the 9th position to the 13th position in the EU.
Czechia has reduced the administrative burden for firms and should continue efforts in this direction
Since the inception of the current SME Strategy, Czechia has introduced a wide range of policies to reduce the administrative burden on entrepreneurs, resulting in improvements in the business environment. For instance, a plan to reduce red tape in Czechia identified 90 sectoral measures to be simplified between 2019 and 2021, which were later widened to 124 according to the implementation reports of the SME Strategy (Ministry of Industry and Trade, 2019[3]; Ministry of Industry and Trade, 2022[4]; Ministry of Industry and Trade, 2023[5]). Such efforts should continue across all aspects of administrative reform and be expanded beyond purely administrative costs to regulatory burdens more generally, from legislative and administrative changes to the digitalisation of the government services and the simplification of business processes.3
The steps to set up a company have also been simplified. The requirement to obtain a trading license before registering a company has been abolished, shortening the duration of the process. Changes to the Notary Code have made it possible to establish a company entirely online without having to meet a notary in person.4 The government has made available examples of articles of association, further decreasing the information costs for setting up a company. In addition, changes to the beneficial ownership regulation5 have made it possible to register beneficial owners free of charge and make subsequent changes online in simple cases.6
Nonetheless, the process of setting up a business could be further simplified. First, entrepreneurs could benefit from a portal where they could submit all registration online. While there is a website which informs potential entrepreneurs of the process for starting a business (www.businessinfo.cz), there is no such portal to upload all documents for central processing. Registering a business still requires a notary's approval, which can be done online but slows down the process and increases costs. Other countries, such as Denmark and Estonia, have completely digitalised and automated the process of setting up a company, with no need for the presence of a notary.7 Second, VAT registration should be accelerated and simplified. It is currently a separate process that can take up to a week, and stakeholders met during the project mentioned that this has not improved much in the past years.
The licensing process has also been simplified through the elimination of some requirements considered superfluous. Examples include the health card for employees in food-related activities and the requirement for employees in non-risk professions to undergo regular occupational medical examinations, which were both abolished in 2023.8 Furthermore, a digital Trade Licensing Portal was launched, where businesses can find all the information and forms related to trade licensing. The Trade Licensing Portal is linked to the Citizen’s Portal, so people can, in principle, also obtain their license online.
A new Building Law, which came fully into force in July 2024, should simplify the process of obtaining a construction or building permit. The new law allows the permitting process to be completely digitalised and combines previous separate processes, such as zoning and building, into one streamlined procedure. An online one-stop shop for building permits called the Builder’s Portal (https://portal.stavebnisprava.gov.cz/) aims to bring together the builders and the authorities, digitalising the entire process and connecting separate databases such as the land register and the water register.9
Other events in a company’s life have received less attention from policymakers and could further improve. Czechia’s insolvency framework could still improve the treatment of entrepreneurs who have failed once, as well as the prevention and streamlining of the bankruptcy process (André and Demmou, 2022[6]).10 In 2019, the average insolvency procedure took more than two years, in line with the European Union average (European Commission, 2019[7]). Similarly, the process of liquidations could be further streamlined, to improve the recovery of assets. Between 2015 and 2018, the recovery procedure took one year longer than the EU average, which was three years (European Banking Authority, 2020[8]). The net recovery rate of SME loans in insolvency procedures was also low, standing at 12% or almost a third of the weighted EU average (33%). Liquidating a company takes at least four months even for small companies, as the law stipulates a waiting period of 90 days once the intention of liquidation is made in the Commercial Bulletin, to allow creditors to come forward and make their claims.11 Streamlining the insolvency and liquidation processes could provide more certainty to both creditors and entrepreneurs, as well as ensure that business closing does not prevent entrepreneurs from starting new businesses.
Czechia could accelerate the digitalisation of government services
The level of government digitalisation is in line with the EU average and there are several large projects in development which should further improve this dimension. Several large public digitalisation projects are being developed as part of the Recovery and Resilience Plan (RRP), and these should provide more efficient government services and improve the business environment for firms once they are completed (Box 1.1). The European Commission’s eGovernment Benchmark12 for regular business operations placed Czechia at 80%, in line with the EU average and with virtually no improvement between 2018-2019 and 2021-2022. The development of digital platforms such as the Entrepreneur’s Portal and the Information Obligations Database is expected to improve the e-government services for businesses, but this should become visible in future iterations of the benchmark indicator.
The Entrepreneur’s Portal, which was in Phase 1 (documentation and design) as of 2024, should further simplify the process of setting up and managing a business and act as a one-stop shop for entrepreneurs. The government is developing the portal internally, by partnering with the Czech Digital and Information Agency (DIA) and the National Agency for Communication and Information Technologies (NAKIT).
The partnership provides several advantages. First, it should speed up development, as the government can bypass the need to organise complex tenders which could take a long time. As of 2024, the plan was expected to be operational in Q2 2026. Second, the partnership benefits from the Agency’s experience in developing the Citizen Portal (Portál občana), the digital one-stop-shop for citizens. The Agency intends to re-use some of the work from that project, promoting an efficient use of resources. Third, the partnership ensures that public authorities continue to develop digital capabilities internally. Fourth, it should ease the connection between the entrepreneurship portal and other digital portals, either existing or in development, such as the Single Control Record Portal.
The Single Control Record Portal, which was also in Phase 1 as of end 2024, should allow public authorities to co-ordinate their inspections. The aim is to limit disruptions to businesses and allow communication between public authorities and businesses. The Record is also scheduled to be operational in the first half of 2026. As of 2024, the supplier had won the technical tender and Phase 2 (development) was scheduled to start at the beginning of 2025.
The Information Obligations Database (IOD) should provide businesses with an overview of legal obligations in a user-friendly language. The portal, which should provide links and explanations regarding general business requirements, is scheduled to be available to the public in 2025 and was in the final testing phases as of the second half 2024.
Some of the digital portals have developed more slowly than initially expected. Some solutions such as the Single Control Record Portal, which aims to co-ordinate firm inspections across government bodies, require complex inter-institutional communication, and the required legal clarifications have taken longer than expected.
Other portals have stricter deadlines, due to their funding structure. The Single Control Record Portal and the Information Obligations Database (IOD) are funded through the Recovery and Resilience Plan (RRP), so they have strict deadlines and requirements for development, which will need to be met as part of the funding agreement.
Czechia could investigate the feasibility of further improvements in the digital government infrastructure, such as a unique electronic ID (eID). An electronic ID recognised by all government entities should further simplify the processes of starting, managing and closing a business. Using a digital ID across all government services would limit the need for notaries in the process of setting up a business and allow seamless integration of other business services, such as licenses and permits and business de-registration. Furthermore, it could easily connect the information in the business registry, tax offices and employment offices with information from the upcoming portals (e.g. Single Control Record Portal, Entrepreneur’s Portal), allowing the creation of an ecosystem of digital government solutions accessible through a single digital ID.
Czechia should improve the Regulatory Impact Assessment (RIA) methodology, as well as the consultation and ex-post assessment processes
Czechia has a well-developed methodology for Regulatory Impact Assessment (RIA) and could consider adopting it more systematically. Czechia’s overall RIA score, based on the OECD “Government at a Glance” indicators, has been stable around 2.7 out of 4 for the past decade, placing the country in the top quarter among OECD countries and above the OECD average (Figure 1.4, Panel B). Czechia scores especially well on the oversight and transparency of RIA (7th place in the OECD in 2021, see Panel A relative to other countries). However, it only ranks in the 22nd place with respect to the RIA methodology and its systematic adoption. In fact, full RIAs are only required for draft laws proposed by the government and those expected to have significant impacts, as decided by the RIA Board of the Government Legislative Council (OECD, 2021[9]). Other draft laws and regulations, such as those proposed by Members of the Parliament or subnational authorities, do not need to be accompanied by full RIAs.
Note: For each category of regulatory tool (RIA, stakeholder engagement, ex-post evaluation), two composite indicators were taken into account, which can run from a minimum of 0 to a maximum of 2: (i) methodology and systematic adoption, represented in solid colours. Methodology scores how close is the existing methodology of the category to the best practices. Systematic adoption records the formal requirements for regulatory tools such as RIA or stakeholder engagement to be conducted, and how often that happens and (ii) oversight and transparency, represented in a striped pattern. Oversight records mechanisms to monitor and ensure the quality of the tool, while transparency covers the openness of the process. The total value for a tool is given by the sum of the two indicators, i.e. the sum of the striped and solid bars of the same colour.
Source: Source: OECD Government at a Glance Indicators 2023 (OECD, 2023[10]).
Czechia’s stakeholder engagement in the lawmaking process could also be improved. In 2021, the country ranked 28th among OECD countries for stakeholder engagement (Figure 1.4, Panel B). Both sub-indicators of the quality of stakeholder engagement (methodology and systematic adoption; oversight and transparency) score in the bottom third across OECD countries (28th place). The consultation process is not standardised, nor is it compulsory for all pieces of legislation. Consultations are part of the RIA process, so they are mandatory for laws initiated by the executive branch and those expected to have significant effects. For laws initiated by other bodies, such as the Parliament or subnational authorities, RIAs are not mandatory, which also makes public consultations not mandatory. Finally, there is no online portal for stakeholders to provide feedback, which can discourage participation by the civil society, including business associations and single entrepreneurs.
Ex-post evaluation of policies and laws could also improve. Czechia ranks 23rd among OECD countries on ex-post evaluation and close to 20th in the OECD for both subcomponents of the index (Figure 1.4). It is not clear to what extent the results of RIA assessments are reflected in the final result of the legislative process, as the RIA Board does not receive feedback on how the RIA reports have been used. The provision of such feedback could encourage a stricter adherence to better regulation guidelines along the entire policymaking process.
As of mid-2024, the government was evaluating and revising its RIA methodology; however, it is unlikely that the revisions will address all the abovementioned issues. Authorities expect the new methodology to streamline the RIA process and ease compliance with improved regulatory guidelines.13 However, there is no expectation that the RIA consultation process will change, nor are there any clear plans to build a public consultation portal or to standardise the consultation process. Similarly, there are no plans to communicate how the results of the consultation process feed back into the lawmaking process, and it is unclear whether the ex-post evaluation will be systematically applied to inform future legislative proposals.
A digital portal for public consultations could improve many of the issues affecting the current consultation process. It would facilitate stakeholder feedback on legislative proposals, thereby fostering their engagement. It would also increase transparency, showing both the stakeholder feedback and the responses of policymakers, thus allowing stakeholders to view different drafts and how they reflect past feedback14. Importantly, a digital portal could also help standardise the consultation process, providing clear deadlines and templates.15
Simplified tax regimes could be broadened to include employer SMEs besides the self-employed
The government has introduced several measures that aim to simplify the tax system, especially for SMEs. Since 2021, sole traders and self-employed entrepreneurs with a turnover below CZK 2 million (about EUR 80 000) can choose a flat tax, which is meant to simplify compliance and provide more certainty about their tax payments.16 With the introduction of an electronic channel of communication on the Tax Administration portal (MojeDane) in 2021, communication with the Tax Administration has also become easier.
The government could also consider simplifying the tax regime for employer SMEs. A simplified (or presumptive) regime could decrease compliance costs for SMEs while limiting revenue losses, provided it is carefully designed (Mas-Montserrat et al., 2023[11]). Three issues stand out regarding simplified tax regimes for SMEs: the scope, the conditions, and the transition out of the simplified regime into the standard one.
Regarding the scope of the simplified tax regime for SMEs, the threshold for qualifying should be low enough to target SMEs, but broad enough to avoid adding too much complexity in definitions. Some presumptive tax regimes for SMEs define a list of excluded activities, typically sectors with average high revenue and sufficient ability to pay and comply, such as financial and real estate services or liberal professions. Eligibility criteria should also include provisions against business splitting, thus preventing the use of the simplified regime for tax avoidance. For example, in turnover-based tax regimes, firms may have an incentive to split before reaching the turnover threshold to maintain eligibility. To avoid such issues, countries typically include provisions limiting the number of businesses that a single taxpayer can manage under a simplified regime or define eligibility criteria to include all the business income of a taxpayer across all their owned or managed businesses. Argentina’s Monotax regime allows qualifying taxpayers to manage maximum three business units. Another alternative to limiting business splitting can be found in Colombia’s Simple, which applies the income eligibility threshold to all the businesses managed or owned by an applicant to the simplified tax regime and excludes companies that have split in the last five years (Mas-Montserrat, Colin and Brys, 2024[12]).17
There are also multiple options for the conditions of the simplified tax regime, which are usually based on turnover thresholds. The simplest is a lump-sum regime, which requires (very small) firms to pay a fixed amount of tax. While such systems provide a simple way of calculating tax liabilities for small firms, they pose a disproportionate burden on firms with low or negative profits and can worsen the cash position of firms, especially during downturns. A flat tax regime requires a proportion of a pre-defined tax base, usually a share of the turnover, and is the more preferred option in the case of high-income countries. Flat tax regimes are expected to better reflect the ability of businesses to pay taxes but require businesses to introduce some minimum accounting standards and greater oversight by tax authorities. If eligibility is based on turnover and the threshold is high, progressivity should be considered, for instance through pre-defined brackets. Since simplified regimes typically limit the possibility of deducting business expenses from the tax liability, some sectoral differentiation might also be warranted to account for differences in profitability across sectors (Mas-Montserrat, Colin and Brys, 2024[12]). For instance, Poland’s flat-rate tax regime (Ryczałt) varies based on the source of income – from 17% of turnover for the income of freelance professionals to 2% for revenue derived from agricultural activities.
Another alternative is to calculate the tax payment based on a range of activity indicators. These systems require more administrative capacity but can, in theory, better approximate a firm’s ability to pay taxes. They are, however, more complex, as they require measuring multiple indicators and ensuring their accuracy. For instance, Spain’s simplified system (Módulos) calculates the due tax payment by using several indicators linked to the business activity (e.g. turnover, number of employees, surface area, kilometers traveled, etc.).
Finally, best practices suggest that simplified regimes should provide a smooth transition to the standard tax system, for instance through grandfathering clauses18 or some transition period between the two regimes. A gradual transition can avoid sudden changes in tax complexity and tax burdens for firms when crossing the threshold of the simplified regime, thus easing the transition to the standard tax system (Mas-Montserrat, Colin and Brys, 2024[12]).
Brownfield development for business real estates should receive more attention
Brownfield regeneration has been a government priority for the past two decades. The first National Strategy for Brownfields Regeneration was adopted in 2008, with the current version covering the period 2019-2024.19 The Business and Investment Development Agency, CzechInvest, has developed a useful tool for potential investors, in the form of a public database of brownfield sites. The website www.brownfieldy.cz offers an overview of mapped brownfield sites, with details such as surface area, photos, and ownership type (public or private). At the beginning of 2025, the database included 4 458 brownfield sites, with an average size of three hectares.
The main focus of Czechia’s brownfield strategy has been to access and implement EU projects rather than develop brownfields more generally (Ministry of Industry and Trade et al., 2019[13]). This focus has remained in the period 2019-2024, although brownfield development has lost importance in the list of government priorities. As of mid-2024, most government-financed projects related to brownfield development referred to lands under public administration, which are only 20% of all brownfields, as opposed to private brownfields, which account for 60% of the total. The Ministry of Regional Development has developed some calls for brownfield development by municipalities and towns, but they have mostly covered the development of brownfields for non-business use.
The development of private brownfields has also been slow. Since 2021, the government has set up the Brownfield Fund, a publicly support venture capital fund providing financing to brownfield revitalisation projects that aim to construct business premises in the Moravian-Silesian region. In total, the National Recovery Plan allocated CZK 500 million for brownfield sites for business use, but only CZK 110 million had been used by the end of 2022 and seven projects had received funding by 2023.
Accelerating the development of brownfields could provide firms, especially SMEs, with more space to develop and grow. While the new Building Law should facilitate the construction permitting process, authorities could consider policies to make the private development of brownfields more attractive. Such policies could go beyond development subsidies and include regulatory fast-tracks for the building process and dedicated support for co-ordinating all stakeholders involved in the land management process, from municipalities to landowners. Alternatively, Czech authorities could consider a brownfield development task force, which could provide other public authorities with the information required for developing brownfields.
Czechia has, in recent years, transposed into national law a range of European legislation that aimed to simplify administrative procedures for SMEs.
With respect to the business environment, Czechia’s SME Strategy is broadly in line with the broader European SME Strategy (European Commission, 2020[14]). Both strategies recognise the importance of administrative and regulatory barriers and how they can fall disproportionately on SMEs. However, while the European SME Strategy explicitly articulates the importance of the “Think Small First”, “once only” and “digital by default” principles in creating a business environment conducive for SME development, the Czech SME Strategy leaves these principles more implicit. Future versions of the Czech SME Strategy could make the importance of these principles more explicit, encouraging future regulations to be simple, digital, and SME-friendly by default.
Czechia’s commitment to regulatory streamlining could also be improved to be more in line with other European strategies, especially when it comes to Regulatory Impact Assessments. For instance, the Communication on long-term competitiveness specifically mentions streamlining EU legislation and regularly assessing it to limit unnecessary burdens (European Commission, 2023[15]). Czechia’s future SME strategy could include such a commitment to regularly review and simplify regulations.
Czechia has also transposed a range of Directives into national law. One first example is the Directive 2019/1023 on preventive restructuring, which became effective in September 2023. Preventive restructuring is a procedure which aims to avoid insolvency and enable a company in financial distress to survive by renegotiating new terms with its creditors. With the passing of the new law, companies in Czechia will now be able to use preventive restructuring to avoid formal bankruptcy. Another example is the Digitalisation Directive 219/1151, which was transposed into national law in January 2021. The legislation encourages countries to facilitate the full digitalisation of key events in the life of a company, including by making templates for such events freely available on registration portals. However, the implementation of such portals has been slow, and a digital one-stop-shop for businesses has yet to be fully operational in Czechia.
Czechia has significantly improved its business environment over the last decade but could accelerate its transformation to improve SME competitiveness. It should continue the process of administrative and regulatory simplification by streamlining rules and communicating changes in a clear language to firms. It should focus on the development of a digital ecosystem of government solutions, to make its administrative processes more efficient and provide firms with more transparency and certainty regarding standard events in a firm’s life (i.e., creation, licensing, development, hiring, bankruptcy, etc.).
Based on the analysis of this chapter, the following policy recommendations are proposed to strengthen the business environment for SMEs in Czechia.
Accelerate the process of government digitalisation through the development of digital portals for businesses, prioritising the Entrepreneur’s Portal and linking it with other business services through the system of the national digital business ID.
Continue the process of administrative simplification by ensuring regular reviews of existing regulations and processes.
Apply Regulatory Impact Assessments more often and more consistently by broadening the existing RIA methodology to include consultation and ex-post analysis, creating a public consultation portal, and ensuring that RIA outcomes better inform the policymaking process.
Further simplify business taxation for SMEs, for instance by introducing simplified requirements and regimes for other SMEs than the self-employed
Provide regulatory certainty by announcing legislative changes in advance and limiting sudden changes in direction (i.e., forward planning).
Consider introducing more often private brownfields in national brownfield regeneration programmes through the offer of regulatory fast-tracking, grants or fiscal incentives.
References
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[1] European Commission (2024), Flash Eurobarometer 543. Business’ Attitudes towards Corruption in the EU, https://europa.eu/eurobarometer/surveys/detail/3180.
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[13] Ministry of Industry and Trade et al. (2019), National Brownfield Regeneration Strategy.
[10] OECD (2023), Government at a Glance 2023, OECD Publishing, Paris, https://doi.org/10.1787/3d5c5d31-en.
[9] OECD (2021), OECD Regulatory Policy Outlook 2021, OECD Publishing, Paris, https://doi.org/10.1787/38b0fdb1-en.
← 1. The share of firms that find the complexity of administrative procedures a problem is 66% in Poland, 64% in Germany and 49% in Hungary. For the uncertainty of rules and policies, the numbers are 76%, 53% and 59%, respectively (European Commission, 2024[1]).
← 2. These insights were obtained during the OECD fact-finding mission, which took place in June 2024. Roundtable participants also mentioned that the costs for installing the e-invoicing infrastructure were between EUR 3 000 and EUR 6 000, a significant amount, especially for smaller SMEs.
← 3. Broadening the programme to reduce administrative burdens to other regulatory costs was also mentioned in the 2021 Regulatory Policy Outlook (OECD, 2021[9]).
← 4. See Act 300/2021, amending Act 358/1992 amending 358/1992 and recent amendments to Act 634/2004.
← 5. The beneficial owner is the person who ultimately owns a company, either directly or indirectly. According to European legislation (Directive 2015/849), a shareholding of more than 25%+1 share or more than 25% in the customer held by a corporate entity counts as being a beneficial owner.
← 6. In simple cases, the registration of the beneficial owner takes place automatically from the commercial register, so there is no need for the entrepreneur to take further steps for the registration.
← 7. However, it can also be argued that the presence of a notary in the process of business creation can also offer advantages, for instance providing advice on the articles of association or provisions for conflict resolution.
← 8. Further information available at: https://dostupnyadvokat.cz/en/blog/what-expect-from#povinnost.
← 9. A similar streamlining related to environmental permits for construction should further simplify the administration for construction processes.
← 10. In 2023, Czechia introduced a new legislation on preventative restructuring, which implemented Directive EU 1023/2019 on preventative restructuring frameworks. This should improve the indicators regarding the prevention and streamlining of bankruptcy, but as of early 2025, the most recent data was from 2022.
← 11. Accounting and law firms start the pricing of a basic voluntary liquidation at CZK 35 000, with the price increasing with the complexity of the case. Some firms quote a starting price of EUR 1 500 or CZK 35 000 (Czech-lawyers.com, 2024[16]; Altaxo, 2024[17]) but other websites geared towards foreign clients quote EUR 2 500 (DoMyTax.com, 2024[18]).
← 12. The eGovernment benchmark score is the average across four key dimensions (user centricity, transparency, key enablers, cross-border services), which is mostly obtained through mystery shopping and using the actual online government services. Some of those key dimensions are calculated as the average of further indicators. For instance, user centricity is the weighted average between online availability (67%) and user support (33%), each consisting of two sub-sub-indicators. Sub-indicators are determined by benchmarking against a best-practice scenario, which has a maximum score of 100% (European Commission, 2023[19]).
← 13. There are also plans to develop a curriculum for public servants to learn how to apply the new methodology, but this has been delayed, first by the pandemic and then by shifting priorities.
← 14. Needless to say, lawmakers are not obliged to take on board all stakeholders’ feedback, but it is generally good practice to report which feedback was positively received and which one was not, possibly offering a reason for it.
← 15. Past OECD reports have already suggested standardising the consultation process and stimulating stakeholders to participate in consultations (OECD, 2021[9]).
← 16. The choice between a flat tax and a lump-sum tax is permanent, i.e. taxpayers cannot easily choose to switch between the two depending on their yearly income.
← 17. To avoid issues associated with business splitting, most simplified tax regimes that apply to incorporated businesses only apply to companies held by natural persons (Mas-Montserrat, Colin and Brys, 2024[12]).
← 18. A grandfathering clause is a provision which allows old rules to apply for a finite time to existing or past situations, while the new rules apply to the new situations. Such clauses are typically used to smoothen the transition towards the new rules, as the new regime gradually becomes the dominant one.
← 19. The current National Strategy for Brownfields Regeneration can be found on CzechInvest’s website (in Czech): https://www.brownfieldy.cz/app/uploads/2023/08/nsrb-2019-2024-20190708.pdf