Context
NAWI Europe was approached by a client who is a US citizen and owns a company that operates exclusively in the US. After moving to the Czech Republic he needed to resolve the issue of his tax domicile and minimize his tax burden, as he continued to work as an employee of his American company.
Tasks
- Confirm and legally assess the client's tax domicile as an individual.
- Propose an optimal structure for tax relations between the American company and the Czech tax system.
- Prevent the need to register the American company as an employer in the Czech Republic.
- Create a contractual basis between the client and his own company.
- Register entrepreneurial activity (živnost) for the client and his partner, and establish mutual contractual relations.
- Cooperate with US tax advisors to coordinate all steps.
Legal analysis and procedure
- We confirmed that the client has tax domicile in the Czech Republic and is therefore subject to Czech tax legislation as a natural person.
- We assessed the tax implications of registering an American company as an employer in the Czech Republic and found this option to be disadvantageous.
- We proposed an alternative model of cooperation based on entrepreneurial activity. The client and his partner registered a živnost and entered into contracts with their US company.
- We prepared contractual documentation reflecting consulting and development activities, including provisions on intellectual property, tax liability, and schedule flexibility.
- Ensured compliance with Czech and US tax laws by working with partner tax advisors in the US.
- We prepared reporting mechanisms and contractual instruments to prevent the risk of double taxation.
Key point
Rather than going through the complicated process of registering a U.S. company as an employer in the Czech Republic, we opted for an alternative, legal model of cooperation based on a contract. This allowed us to maintain the client’s flexibility while minimizing their tax burden.
Result
- The client and their partner can now conduct business in the Czech Republic legally while maintaining a full relationship with their American company.
- They saved over $82,000 per year thanks to the right structure.
- Legal and tax certainty was achieved without the need for complex registrations or additional costs for the American company.
- All processes were carried out in accordance with Czech and U.S. laws.
“I was pleasantly surprised that we were able to find such a simple and legal solution. Instead of paying extra taxes, I can invest these funds back into the business.”
Legal areas
- International tax law and tax domicile
- Civil and commercial law
- Labor and contractual relations
- Income protection and tax optimization
Keywords
#taxdomicile #expat #taxoptimization #USA #entrepreneur #NAWI
