1. Doing Business in the Czech Republic Schaffer & Partner s.r.o. Mr. Martin Felenda

2. Key data Habitants: 10,46 Million Area: 78 867 km² Density of population: 132 per km² Biggest cities: 1. Prague (Capital)1,24 Million 2. Brno0,37 Million 3. Ostrava0,31 Million Member in EU since 1.5.2004 Member in Schengen countries since 21. 12. 2007

3. Doing business in the Czech Republic Czech law offers a broad variations of conducting a Business in the Czech Republic:  Direct Business  Sole trader business or Sales Branch  Partnerships Civil-law partnerships Commercial partnership Limited partnership

4. Corporations The Czech law provides two major forms of corporations. Limited Liability Company  Corporate entity form most commonly used by foreign investors in the Czech Republic.  Wide range of possibilities to structure the articles of incorporation  Minimum share capital: CZK 200.000 (appr. USD 10.000).  No liability of the shareholder for companies obligations.  Legal bodies: managing director, general meeting of shareholders and (supervisory board).

5. Corporations Stock Corporation  Minimum share capital: CZK 2 Million (appr. USD 100.000).  Legal bodies: board of managing directors, general meeting of shareholders and supervisory board.  Limited liability of the shareholders as mentioned above. Incorporation takes: 4-6 weeks.

6. Corporations SE (European Company)  The seat can be transferred to another EU country.  More steps for establishment are necessary. Other Forms Beside the forms mentioned above a foreign investor can use  hybrid forms,  Joint Ventures, or  acquire existing companies.

7. Accounting / auditing in the Czech Republic Financial statements deadline : End of June Obligation for auditing (2 of 3):  50 employees  80 MCZK turnover (appr. 4MUSD)  40 MCZK sum of balance (gross)

8. Czech Tax System The Czech tax system includes following taxes:  Income tax  Corporate tax  VAT  Consumption tax (tobacco, alcohol, gasoline)  Real estate tax  Real estate transfer tax  Gift tax  Inheritance tax  Road tax  Ecological/energy tax

9. Taxation in the Czech Republic Double Taxation Treaty with 80 countries The tax system in the Czech Republic is very complicated. To get a first insight here are some basic information: Income Tax Natural Persons whose domicile or normal residence is within the Czech Republic are subject to Czech income tax on their worldwide income. Natural Persons who have neither domicile nor normal place of residence in the Czech Republic are subject to tax only on their Czech earnings. Income tax is levied on a yearly basis. For natural persons the income tax is linear : 15% No municipality tax, no “church” tax.

10. Corporate Income Tax Corporations that have their seat or management in the Czech Republic are subject to the Czech Republic corporate income tax on their worldwide income. Corporations that have neither their seat nor management in the Czech Republic are liable to corporate income tax only on their domestic income.  The Corporate income tax is also levied on a yearly basis.  The tax rate is 19%  No municipality tax, no trade tax  Dividends distributed by a Czech corporation are subject to withholding tax (WHT) at a percentage of 15%  Tax losses can be used in following 5 years unlimited

11. Practical issues for US investors Practical issues for US investors considering the entrance in the Czech Republic:  withholding tax for dividends 5 or 15%  No taxation in case of selling the company in the Czech Republic (not for real estate – companies)  No withholding tax for interest paid by the Czech company Services provided by US Parent company to the Czech subsidiary:  Permanent establishment if any long – term activity in the Czech Republic  Consultants active in the Czech Republic are basically obliged to tax their income in the Czech Republic

12. Practical issues for US investors VAT rates  Usually two different rates: 20% and 14% (2013: 21 & 15%)  Lower rate is used for some kinds of goods (e.g. food) and services (e.g. building services - only flats and houses) Zero rate (0%) - used in the following cases:  Supplies realized by local VAT payer but a place of taxable supply in question is outside the Czech Republic e.g. delivery of goods from the Czech Republic to other EU member state (customer = VAT payer in some EU country except the Czech Republic) >> Czech VAT = 0% VAT free supplies in general  Some kinds of services, e.g. bank services, post services etc.  Companies providing of these VAT free services cannot claim the VAT from their inputs

13. VAT filing in the Czech Republic  On a monthly or a quarterly basis  Based on turnover  Foreign VAT payers  always on a quarterly basis  Deadline for filing of VAT return: 25th day of the month following the relevant taxable period (i.e. 25th February for VAT return for January, 25th April for VAT return for 1st quarter etc.)  Payments of the VAT: deadline = deadline for filing

14. Why invest in the Czech Republic?  Strategic Location  Stabile Economic Performance  Educated Work force  Competitive Infrastructure  Supplier Base  Developed Real Estate Market  Quality of Life

15. Current economic data IndicatorPeriodYear-On-Year Increase/Decrea se (%) Gross domestic product2nd quarter 2012-1,0 Consumer price indexSept. 20123,4 Inflation rateSept. 20123,2 Industrial outputAugust 2012-3,1 Construction outputAugust 2012-4,7 Receipts from sales of retail trade (CZ-NACE 45, 47)April 2012-0,8 Average gross wages and salaries: Nominal Real 2nd quarter 2012 24.600 CZK (appr.1.200 US) 2,3 -1,1

16. Thank you for your attention Ing. Martin Felebnda Schaffer & Partner s.r.o. Vodičkova 710/31, CZ-110 00 Praha 1 Tel.: +420-221 506 300 E-mail: felenda@schaffer-partner.czfelenda@schaffer-partner.cz http://www.schaffer-partner.cz