HSBC Treasury Management Profiles 2018 -

Current section, Introduction

Introduction

With its easy access to Central Europe and Russia, and its excellent infrastructure network, the Czech Republic has become a successful export-oriented economy (exports of account for 80 per cent of total economic output). These qualities, in addition to a multi-lingual and well-educated work force, have attracted high levels of foreign direct investment (FDI). According to the UNCTAD World Investment Report 2017, FDI inflows reached USD6.75 billion in 2016, their second highest level since 2008, with a significant percentage of inflows into the automotive-components sector. The World Bank’s Doing Business 2018 report ranks the Czech Republic 30th out of 190 countries. The country’s economy expanded 4.4 per cent in 2017 (up from 2.6 per cent in 2016), driven in part by strong foreign and domestic demand. Domestic consumption was boosted by an increase to the minimum wage in January 2017 and high employment rates (the unemployment rate dropped to 3.5 per cent in March 2018, from 4.8 per cent a year earlier). However, an increasing shortage of workers could cause economic growth to slow, and affect FDI, and will need to be addressed in order to sustain higher economic growth. The Czech National Bank forecast economic growth of 3.9 per cent in 2018 and 3.4 per cent in 2019 respectively (as announced May 2018). The European Commission expects growth will slow, citing a shortage of workers and inflation, and has forecast GDP expansion of 3.4 per cent and 3.1 per cent respectively.

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Legal and regulatory

  • Foreign exchange and domestic currency (CZK) accounts can be held by residents both domestically and abroad. Resident domestic currency accounts are convertible in to foreign currency
  • Non-resident bank accounts are permitted in both foreign and domestic currency. Non-resident domestic currency accounts can be held abroad and are convertible into foreign currency
  • A sample of companies chosen by the central bank are surveyed for balance of payments purposes

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Taxation

  • Resident companies are taxed on their worldwide income
  • Non-resident companies are taxed on Czech-sourced income only and are subject to the same taxation rules as residents
  • The rate of corporate taxation is 19 per cent
  • Dividends and interest paid to a non-resident are subject to a 15 per cent/35 per cent tax rate, unless the rate is reduced under an applicable tax treaty
  • The Czech Republic is a signatory to the Multilateral Competent Authority Agreement, under which information will be exchanged between tax administrations, giving a single, global picture on some key indicators of economic activity within multinational enterprises

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Payment instruments and systems

  • Credit transfers are used for both high-value corporate and low-value retail payment transactions. Cheque use in the Czech Republic is in terminal decline. Payment card use is rising; contactless cards were used in more than 50 per cent of all payment card transactions in 2016
  • The Czech Republic operates the CERTIS payment system. There are currently no plans for migration to TARGET2
  • PSD2 became effective in the Czech Republic as of 13 January 2018. PSD2 is expected to increase competition in the EU’s payment market, facilitate innovative payment services and ensure that payment services are safe and offer complete consumer protection

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Cash management

  • Single currency notional pooling and cash concentration is permitted between resident and non-resident accounts. Multiple-currency notional pooling and cash concentration is permitted within the same legal entity only. Cross-border sweeping is permitted
  • Automated collection methods are used by the majority of medium-sized and large businesses

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Electronic banking

  • There is no bank-independent electronic banking standard in the Czech Republic. Many banks offer the MultiCash and Gemini packages alongside their own proprietary systems for corporate banking purposes
  • Internet and mobile banking services are provided by all of the country’s banks for both corporate and retail purposes. Approximately 63 per cent and 30 per cent of account holders used online and mobile banking services respectively in 2016

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To read the full report on Czech Republic and to discover more on these and other topics, including banking and trade, please click on the Download PDF option.

Sources:

  • Czech Invest
  • Czech Statistical Office
  • World Bank
  • Organisation for Economic Co-operation and Development
  • Czech National Bank

The materials contained on this page were assembled in April 2017 (unless otherwise dated).


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