Why Austrian companies set up a branch or an s.r.o. in Czechia

Austrian companies are among the most visible of the foreign businesses in Czechia — you will find manufacturing plants, trade offices and small family firms that simply want to open a door onto the Czech and Central European market. The reasons are usually practical rather than complicated: proximity, costs and convenient access to another market within the European Union.

Thanks to the EU freedom of establishment, an Austrian entrepreneur has two clear routes for operating fully in Czechia. Either they set up a branch (odštěpný závod) of their existing Austrian company, or they found a new s.r.o. in Czechia. Both options are entirely legal and common; they differ mainly in how far the company wants to separate its Czech activities from the parent company. Let us look at why Czechia appeals to Austrian neighbours in particular and how the two routes differ.

Why Czechia appeals to Austrian companies

The first and most prosaic reason is distance. From Vienna to Prague it is roughly three hundred and thirty kilometres, the countries share a long border and their business cultures are close. For an Austrian firm that wants to serve Czech customers or expand further into Central Europe, a Czech operation is a logical and cheap bridge — you can hardly get closer coming from the west.

The second draw is the market itself. Czechia has over ten million inhabitants, a stable industrial base and a location from which Poland, Slovakia and Germany are all comfortably within reach. Many Austrian firms are therefore not looking for a one-off contract here, but for a more lasting presence with their own address and a Czech company number. We looked at similar motives in the piece on why foreign entrepreneurs choose Czechia.

Costs and taxes that make sense

Costs play a significant role. Rents, wages and running costs tend to be lower in Czechia than in Austria, which often tips the balance at a comparable quality of work. On top of that comes the tax difference: Czech corporate income tax is 21% (this rate has applied since 2024), whereas the Austrian KÖSt is 23%. A gap of two percentage points sounds modest, but on a profit of one million korun it means twenty thousand korun a year that stays with the company.

It should not be overrated, though — tax is just one item among many, and few firms relocate for two per cent. What decides is more the sum of the parts: lower wage and operating costs, a nearby sales market and straightforward administration. For an ordinary trading or manufacturing firm, it is this combination that tends to be more persuasive than any single rate.

A branch or a new s.r.o. — two routes into the Czech market

A branch — more precisely the odštěpný závod of a foreign person — is an organisational unit of the Austrian company registered in the Czech Commercial Register (governed by Act No. 304/2013 Coll.). It has no separate legal personality; in law and in assets it is part of the Austrian parent company, which is liable for its obligations. This route makes sense when a firm wants a presence in Czechia but intends to keep running everything from Austria under a single company.

A new s.r.o., by contrast, is a separate Czech legal entity with its own company number and limited liability. Under the Business Corporations Act (Act No. 90/2012 Coll.) the registered capital can be as little as one koruna, so the barrier to entry is low. A separate company comes across as more credible to Czech customers, suppliers and banks, and it clearly separates the Czech risk from the parent — which is why firms serious about the market more often choose it. The detailed procedure is set out in the piece on setting up a Czech s.r.o. as a foreigner.

What has to be arranged on entry

Both routes share the same foundation: the firm needs a registered seat in Czechia — a specific address with the property owner's consent — and an entry in the Commercial Register. For an s.r.o., a founding deed in the form of a notarial record is added, and usually the setting up of a data box as well. A great deal can be handled remotely these days; a personal visit to Prague is not necessary for most of the steps.

The key is to choose a credible address. For a firm entering Czechia from outside, a seat in central Prague is a clear signal of seriousness — especially if it is a carefully managed house for just thirty companies rather than an address shared with hundreds of firms. Order in the documents and a stable address turn a paper entry into a real presence.

Conclusion

Austrian companies do not choose Czechia by chance — proximity, lower costs, a corporate income tax two points lower and convenient access to the Central European market all play their part. Those who want to stay under a single company set up a branch; those who want a separate, credible Czech company found an s.r.o. with registered capital starting from a single koruna. In both cases the first practical step is a reliable registered seat and order in the documents — and everything else can be built on top of that.

Frequently asked questions

Can an Austrian company do business in Czechia without founding a new company there?

Yes. Thanks to the EU freedom of establishment, an Austrian company can set up a branch (odštěpný závod) in Czechia, which is entered in the Commercial Register and forms part of the parent firm. If it wants a separate entity that is more credible to Czech partners, however, it usually founds a new s.r.o. Both routes are legal and differ in how far they separate the Czech activities from the Austrian company.

What is the difference between a branch and an s.r.o.?

A branch (odštěpný závod) has no separate legal personality and, in law and in assets, is part of the Austrian parent company, which is liable for its obligations. A new s.r.o. is a separate Czech legal entity with its own company number and limited liability, with registered capital starting from a single koruna. A standalone s.r.o. comes across as more credible and separates risk more clearly, while a branch is simpler when the firm wants to stay under one company.

What taxes does a Czech s.r.o. pay?

The profit of a Czech s.r.o. is subject to corporate income tax at a rate of 21%, which has applied since 2024. When profit shares are paid out, a withholding tax on dividends is added. Depending on turnover and activity, the company may also become a VAT payer at the standard rate of 21%. The actual tax burden depends on the profit, the costs and whether and how much is paid out to the shareholders.