In the Czech Republic, every company is required not only to prepare financial statements (účetní závěrka), but also to officially approve them. At the same time, a decision must be made regarding the company’s financial result — whether profit or loss (hospodářský výsledek). These procedures are mandatory and strictly regulated by Czech legislation.
The main rules are established by two laws: the Business Corporations Act No. 90/2012 Sb. (zákon o obchodních korporacích, ZOK) and the Accounting Act No. 563/1991 Sb. (zákon o účetnictví, ZoÚ).
In this article, we will explain in detail how financial statements are approved in the Czech Republic and what formalities must be observed when distributing a company’s profit.
Procedure for Reviewing and Approving Financial Statements
Financial statements are prepared in accordance with the rules set by the Accounting Act (zákon o účetnictví, ZoÚ). A company is obliged to ensure that its financial position and business results are presented accurately and truthfully.
According to § 181, paragraph 1 of the Business Corporations Act (zákon o obchodních korporacích, ZOK), the annual financial statements must be approved by the general meeting of shareholders or partners (valná hromada) no later than six months after the end of the previous reporting period. This means that if a company’s financial year ends on December 31, the deadline for approval is June 30 of the following year.
If the company is subject to a mandatory audit, the general meeting may not approve the financial statements without the auditor’s report (zpráva auditora). In addition, all accounting and tax standards must be strictly followed — this includes the correct valuation of assets and liabilities, proper recording of income and expenses, and preparation of the cash flow statement (výkaz o peněžních tocích).
How Financial Statements Are Approved at the General Meeting
Financial statements are approved at the general meeting of shareholders or partners (valná hromada). The meeting is typically convened by the company’s executive body — for example, the managing director (jednatel) — who sends out the invitation no later than 15 days before the meeting date. The method and deadline for notification are governed by the company’s articles of association (společenská smlouva); if not specified there, the rules set out in the Business Corporations Act (ZOK) apply. Today, it is standard practice to send invitations via email, and in the case of joint-stock companies, also to publish them on the company’s website.
The invitation must clearly state the agenda and include draft resolutions for each item. In some cases, the articles of association may require additional conditions, such as providing participants with copies of the financial statements in advance for review.
If the company has a supervisory or other control body, the financial statements may be reviewed by this body before approval.
The general meeting can be held in person, remotely (e.g., via videoconference), or in written form — the so-called per rollam procedure. For in-person meetings, voting can take place either directly or through a proxy.
Approval of the financial statements usually requires a simple majority of votes of those present, although the articles of association may stipulate a different rule.
The results of the meeting are recorded in the minutes, including an attendance list. The adopted resolutions are issued separately as decisions of the general meeting (usnesení valné hromady) and must be submitted to official authorities, such as the Commercial Register (obchodní rejstřík), if registration is required.
Financial Statements Approved — What’s Next?
Once the financial statements are approved, the company is required to submit them within 30 days to the Collection of Deeds of the Commercial Register (sbírka listin obchodního rejstříku) — as stipulated in § 66 of the Act on Public Registers of Legal and Natural Persons No. 304/2013 Sb. (zákon o veřejných rejstřících právnických a fyzických osob). For companies subject to audit, the annual report (výroční zpráva) and the auditor’s report (zpráva auditora) must also be published alongside the financial statements. Since 2021, submission to the register can also be done via the tax office together with the tax return, as provided by § 21b of the Accounting Act No. 563/1991 Sb. (zákon o účetnictví, ZoÚ).
Failure to publish the statements may result in penalties. Initially, the registry court sends a notice setting a deadline to correct the omission. If the company fails to respond, the court may impose a fine of up to CZK 100,000 (§ 104 ZOK — zákon o obchodních korporacích), and in the case of a prolonged violation, initiate liquidation proceedings. In addition, non-compliance with ZoÚ may result in a separate fine of up to CZK 500,000 (§ 37a ZoÚ), depending on the specifics of the company (e.g., whether it uses full or simplified accounting).
If the company is subject to mandatory audit, the general meeting must also approve the annual report together with the report on relationships (zpráva o vztazích), drawn up in accordance with § 82 ZOK. This document is required not only for audited companies, but also for all firms that are part of a corporate group as controlled entities (ovládaná osoba). The report on relationships is also approved at the general meeting and submitted to the Collection of Deeds.
At the same meeting, the auditor for the next financial year is typically appointed as well (§ 17 ZoÚ).
Who Is Required to Publish the výroční zpráva?
Required:
- Companies subject to mandatory audit (e.g., medium and large s.r.o. and a.s., entities exceeding thresholds in assets, turnover, or number of employees)
- Public interest entities — banks, insurance companies, pension funds, listed companies
- Non-profit organizations such as foundations (in simplified form)
The annual report is published together with the financial statements and the auditor’s report in the Collection of Deeds.
Not required:
- Small s.r.o. not subject to audit — they only need to publish their financial statements.
Disposition of Financial Results
After the approval of the financial statements (účetní závěrka), the general meeting of shareholders or partners (valná hromada) — either at the same session or a separate one — typically decides how to handle the company’s financial result (hospodářský výsledek), whether it is a profit or a loss. This is provided for in § 34 of the Accounting Act No. 563/1991 Sb. (zákon o účetnictví, ZoÚ).
If the company reports a profit (zisk), it may be used in several ways:
- retained in the company as undistributed profit from previous years (nerozdělený zisk minulých let);
- used to cover losses from previous years;
- allocated to reserve or other funds;
- distributed among shareholders as a share of profit (dividends).
When distributing profit, the general meeting is required to carry out:
- a balance test (bilanční test) — to ensure the company has sufficient available funds for the payout;
- an equity test (test vlastního kapitálu) — to rule out any risk to the company’s financial stability after the distribution.
Both tests must be performed before the decision is made, and companies usually engage an accountant or auditor for this purpose.
Financial and Tax Aspects of Profit Distribution
In certain cases, dividend payments may be tax-exempt. According to the Income Tax Act No. 586/1992 Sb. (zákon o daních z příjmů, ZDP), an exemption applies if the profit is distributed to a parent company (mateřská společnost) that has held at least 10% of the subsidiary’s share capital for a minimum of 12 months. Similar rules apply to payments related to a reduction of share capital if the decrease results from previously taxed and distributed profit. Additional conditions for exemption apply when the subsidiary is a tax resident outside the European Union.
The standard dividend tax rate in the Czech Republic is 15%, withheld at the time of distribution and paid to the tax office by the end of the following month. A 35% tax rate applies to residents of countries with which the Czech Republic has not signed a double taxation treaty or an agreement on tax information exchange.
Czech law also allows for the payment of profit advances (zálohy na podíl na zisku). This decision is made by the company’s executive body — but only on the basis of interim financial statements (mezitímní účetní závěrka) and provided that the company has sufficient available funds. The amount of the advance is limited: it may not exceed the sum of the current period’s profit, retained earnings from previous years, and other funds, minus uncovered losses and mandatory contributions to the reserve fund (if one exists).
If, at year-end, it turns out that the actual profit is less than the advances already paid, the shareholders are required to return any excess amounts received.
Conclusion
The approval of financial statements and the distribution of profit in the Czech Republic is not merely a formality — it is a strictly regulated procedure that requires full compliance with both corporate and tax regulations. Missing deadlines, calculation errors, or ignoring mandatory tests can lead to fines, issues with the Commercial Register, or even the risk of company liquidation.
If you want to be certain that your calculations are accurate, your decisions are properly documented, and your reports are correctly submitted to the Commercial Register, contact DoMyTax — our experts are ready to help.
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