In both Slovakia and the Czech Republic, moving from a sole trader (živnosť / OSVČ) to a limited company is not an automatic conversion — you set up a new company and wind down the sole tradership separately. When you close the sole trade, both countries require you to adjust your final tax base for unpaid receivables, stock and liabilities. The biggest differences lie in the numbers: minimum capital, corporate tax rates and how dividends are taxed.
Why is switching to a company not a simple conversion?
Neither Slovak nor Czech law allows a self-employed individual to be directly transformed into a company. In both systems the sole trader and the limited company are separate legal persons with their own registration numbers, tax registration and assets. In practice the switch always means two parallel steps: you incorporate a new limited company and, at the same time, you formally end or suspend the sole trade.
Assets you used as a sole trader — a car, stock, equipment, work in progress — do not move to the new company on their own. You transfer them deliberately, and that has tax and accounting consequences in both countries. For the broader context of running an accounting-compliant business, see our overview of professional accounting in Slovakia.
How is the final tax base adjusted?
Both jurisdictions require a closing adjustment, but under different provisions. In Slovakia it is § 17(8) of the Income Tax Act: you increase the tax base by unused stock and unpaid receivables and reduce it by unpaid liabilities (under flat-rate expenses only stock and receivables are added). In the Czech Republic the equivalent is § 23(8) of its Income Tax Act, with a comparable logic — receivables and stock are added, debts deducted; under Czech flat-rate expenses only receivables are added.
The principle is the same on both sides of the border: the state collects the tax on income that was earned but not yet taxed while you were self-employed. It is worth calculating this figure before you close the business so the final return does not bring an unexpected balance to pay.
How do you move assets into the new company?
Both countries offer three routes: a clean start where the company acquires assets anew, a contribution of the business (or part of it) valued by an expert in exchange for a shareholding, or a sale of the business under a dedicated contract. The contribution route typically lets the new company continue depreciating the transferred assets rather than starting over. How assets are classified and depreciated is covered in our Slovak tax advisory overview.
What happens to VAT on the transfer?
Here the two systems agree in substance: the sale or contribution of a business as a going concern is outside the scope of VAT — under § 10 of the Slovak VAT Act and under the Czech VAT Act (Act No. 235/2004 Coll.). The practical difference is registration. In the Czech Republic the acquirer of a business from a VAT payer becomes a VAT payer from the date of acquisition automatically, regardless of turnover. In Slovakia the new company likewise becomes a payer by law when it acquires the business, but you should confirm its status separately.
How do taxes and levies differ after the switch?
This is where the numbers diverge the most. Slovakia applies corporate income tax of 10 % up to €100,000 of taxable income, 21 % above that and 24 % over €5 million, and taxes dividends paid to individuals at 7 %. The Czech Republic applies a flat 21 % corporate tax and a 15 % withholding tax on profit shares. Minimum share capital also differs sharply: €5,000 in Slovakia versus CZK 1 in the Czech Republic.
In both countries the underlying trade-off is the same: as a company owner you no longer pay social and health levies on profit taken as a dividend, but the profit is effectively taxed twice — once at the company level and again on distribution. Whether that math works in your favour depends on how much profit you actually take out.
What administrative steps close the sole trade?
The sequence is similar in both countries: notify the trade register, settle income tax for the final period with the closing adjustment, deal with VAT registration, and deregister from the social security and health insurance systems. In both cases it pays to time the switch to a clean period-end so the accounting periods do not overlap and the final self-employed return stays clear.
Planning to move from a sole trade to a limited company in Slovakia or the Czech Republic and want the closing tax adjustment and asset transfer done cleanly? We will run the numbers and set the whole transition up for you.
FAQ
Do I pay tax on assets transferred to the new company?
You usually do not pay a separate tax on the transfer itself, but both countries require a closing adjustment to the tax base when the sole trade ends — § 17(8) in Slovakia and § 23(8) in the Czech Republic. You add unpaid receivables and stock and deduct unpaid liabilities. Because this can create a balance to pay in the final return, it is best calculated in advance.
Where is the switch cheaper to start — Slovakia or the Czech Republic?
On paper the Czech Republic has a far lower entry barrier, with minimum share capital of just CZK 1 compared with €5,000 in Slovakia. However, the ongoing tax picture differs: Slovakia offers a 10 % corporate rate up to €100,000 of income and only 7 % on dividends, while the Czech Republic has a flat 21 % corporate rate and 15 % on profit shares. The better choice depends on your profit level and how much you distribute.
Does my VAT registration carry over to the company?
Not as a continuation of the same person, but in both countries acquiring a business from a VAT payer makes the new company a VAT payer by law — immediately from the date of acquisition in the Czech Republic. The transfer of the business as a going concern is itself outside the scope of VAT in both systems.