The main idea of this paper is to analyze opportunities to start business abroad by the Czech investor point of view. The question is – which factors could cause that domestic business units move to another country? The analysis is mainly based on „comparative advantage” approach – minimum cost, maximum benefit. Useful is to keep in mind that one advantage could not bring more satisfaction with entrepreneurship abroad. Are all business conditions comparative or competitive?Registered capital, mobility of capital, VAT rate, insurance costs, minimum wage rate

Jarmila Šebestová, M.Sc.

Marek Smysl, M.Sc.

English

Research Papers in Economics

47
Management – Marketing - Tourism 
NEW  MEMBER SEEKS FOR OPPORTUNITY TO START BUSINESS IN THE EU– WHERE ?
Assoc. Prof. Ph.D. Jarmila Šebestová, M.Sc. 
Assoc. Prof. Ph.D.   Marek Smysl, M.Sc. 
Silesian University Opava 
School of Business Administration 
Karviná, Czech Republic 
 Abstract:  The main idea of  this paper is to analyze opportunities to 
start business abroad by the Czech investor point of view. The question is 
– which factors could cause that domestic business units move to another 
country? The analysis is mainly based on „comparative advantage” 
approach – minimum cost, maximum  benefit. Useful is to keep in mind 
that one advantage could not bring more satisfaction with entrepreneurship 
abroad. Are all business conditions comparative or competitive? 
Keywords: Registered capital, mobility of capital, VAT rate, insurance costs, 
minimum wage rate  
Introduction
Entry conditions on integrated market brought many new structural impulses to 
Czech business subjects – protective duties have been abandoned, our farmers have 
been involved in integrated agricultural policy, changes in the tax system, growth of 
personal mobility, liberalization of capital flow, subventions for  economically 
backward regions or  bad structuralized regions. 
The united EU market offers other new possibilities, such as market without 
frontiers with 500 million consumers. It is necessary to have a wide international view, 
higher education in investment and management, finally, speaking other foreign 
languages, especially English to be successful on this market. If you do not understand 
their philosophy, you could suffer from severe competition on the market, and then you 
could have problems with international law, which protects the united market in the EU. 
It may not be forgotten that the “old” EU members have an advantage – time spent on 
the European market. It is the reason why Czech investors could have some other 
problems to face. These were the fundamental reasons why we have prepared this 
analysis. 
 The purpose of the analysis is to map out conditions for founding a company in 
the EU by using its keystones “Free mobility of goods, services, persons and capital” in 
real life. In our analysis we shall put special emphasis on the sections concerning 
persons and capital.
Methods of analysis 
To found a company in another country than the Czech Republic, it is critical to 
make a comparative analysis of future costs of carrying on business in our republic and 
the EU. We have divided these into the three following sections (see Table 1). 48
Revista Tinerilor Economi ti
Table no. 1 Methods of business costs analysis 
Section Criterion 
Goods and services free 
mobility  Basic principles in the integrated  EU market  
Free mobility of persons 
 Wages and salaries costs,
 Insurance costs paid by employer 
 Long-term residence in EU, permission for working 
in another country 
Free mobility of capital 
 Amount of registered capital for foundation of 
common company forms such as limited liability 
company, joint stock company or self proprietor  
 administrative costs and barriers, 
 VAT rate 
Free mobility of capital 
 Comparison of  requests on registered capital in the EU countries 
When we intend to carry on business in the Czech Republic, we are obliged to 
follow the Czech Commercial Code, which stipulates the amount of the registered 
capital, which depends on the company legal form. In order to be permitted to establish 
a company with  limited  liability in  the Czech  Republic, you  will  need    CZK 
200,000     (€ 6,329) and for joint stock company you need CZK 2,000,000 (€ 63 291).  
In our business law there are other business forms, such as self proprietor, 
partnerships, limited partnerships, in which you do not need to have a registered capital 
except in the case of a co-operative, but on our market there are only two dominating 
forms - company with limited liability and joint stock company. Why are the other 
forms inessential for our analysis? In majority of countries their definition is not 
identical. This is the reason why we specialize on these two forms – limited liability 
company and joint stock company. This could be illustrated by the statistics in the 
selected EU countries as showed in the table below: 
Table no.2 Comparison of the amount of registered capital 
Country Common forms of
company type  Currency  Request on capital  Capital in € 
Company with limited 
liability (CLL)  not requested   
Great Britain 
Joint Stock company 
(JSC) not requested   
CLL  DKK     125,000  16,788 
Denmark 
JSC DKK   500,000  67,152 
CLL  EEK        40,000  2,547  Estonia
JSC EEK      400,000  25,467 
CLL not requested    Ireland 
JSC not requested   
CLL  EUR        10,000  10,000  Italy
JSC EUR      100,000  100,000 
CLL  HUF   3,000,000  12,173  Hungary 
JSC HUF 20,000,000 81,153 49
Management – Marketing - Tourism 
Country Common forms of
company type  Currency  Request on capital  Capital in € 
CLL  EUR         25,000  25,000  Germany
JSC EUR         50,000  50,000 
CLL  EUR         18,000  18,000  The Netherlands
JSC  EUR         45,000  45,000 
CLL not requested    Portugal 
JSC EUR       25,000  25,000 
CLL  EUR         35,000  35,000  Austria
JSC EUR       70,000  70,000 
CLL  EUR         18,000  18,000  Greece 
JSC EUR         60,000  60,000 
Slovenia  CLL  SIT      1,500,000  6,249 
CLL  SKK       200,000  4,998  Slovak rep. 
JSC SKK    1,000,000  24,989 
CLL  PLN         50,000  11,450  Poland
JSC PLN      100,000  22,900 
Finland  CLL  EUR          8,000  8,000 
CLL not requested    France 
JSC EUR       37,000  37,000 
CLL  LTL      10,000  2,895  Lithuania 
JSC LTL 100,000 28,951 
CLL not requested    Belgium 
JSC BEF 2,500,000 61,982 
From the viewpoint of “minimum costs”, the cheapest company with limited 
liability can be established in Estonia, Lithuania and Slovakia, while the most 
expensive will be in Austria, The Netherlands and Greece. 
The cheapest joint stock company could be founded in Slovakia, Poland and 
Portugal, but the most expensive countries include Austria, Hungary, and Italy. 
 Common administrative and other barriers 
Each country has a priority to protect their own market and their producers, 
because the EU countries have not fixed uniformity of business law. It is the reason, 
why they impose barriers and restrictions. A common restriction is in a form of tax 
from registered capital, ranging from 0.5% to 1% (e.g. Belgium, Greece, Poland) or in a 
form of registration fee, ranging from € 30 (GB, Ireland) to € 800 (Hungary), banking 
guarantee amounting to  50 000 USD (Greece). 
Establishing of a company in other country is more complicated also due to the 
fact, that corporate statutes will have to be translated into the local language (which 
extends the process of registration and raises administrative costs), while it is customary 
to translate the articles of association into English. This barrier exists in Estonia, 
Finland, Latvia, Slovenia, or they require that a country resident be a manager or a 
lawyer in the particular company (e.g. Denmark, Estonia, Ireland, Lithuania, Spain, 
Portugal and Slovenia). 
The best conditions and minimum administrative costs are offered by Malta, 
where registration process will be accomplished within 3-4 days, the same will take 1-2 
weeks in Portugal in the case of establishing a joint venture company with a Portuguese 50
Revista Tinerilor Economi ti
person; on the other hand, this process will take approximately 3-4 months in The 
Netherlands and Austria (and, moreover, you will have to hand in the certificates of 
education, tax receipts, etc.). 
Table no. 3 Examples of administrative fees in EU  
Country  Administrative cost (mainly)  Total 
in € 
Number of 
procedures
Time
(days) 
Belgium tax from registered capital 0.5%   1,607 4 27 
Czech Republic  fee for notification in Trade register  -  CLL, JSC  747 10 24 
Denmark 0 3 5 
France registration fee , fee for incorporation in Trade 
Register 305 7 8 
Germany  registration fee, fee for notification  1,775 9 24 
Great Britain  registration fee  209 6 18 
Greece tax from registered capital 1%   3,712 15 38 
Hungary registration fee, fee for notification in Trade 
Register 1,635 6 38 
Ireland registration fee  102 4 19 
Lithuania tax from registered capital 1%  155 7 26 
Poland notary fee –3% from reg.capital, registration fee  1187 10 31 
Slovakia fee for notification in Trade register  -  CLL, JSC  299 9 25 
 Comparison of VAT rates 
One of the EU priorities is to reduce differences between the basic VAT rates, 
but at the present time these figures are considerable – about 10%. For a businessman, 
who intends to commence his production in the particular country, this factor is vital, of 
course. The VAT rate has an influence on the sales price of the product and its rate 
increases or reduces competitiveness on the foreign markets. 
Table no. 4 VAT rates in EU 
Country  EU 15  Basic  VAT rate 
Luxembourg 15  % 
Germany 16  % 
Spain   16 % 
Great Britain  17.5 %
Greece 18  % 
The Netherlands  19 % 
Portugal   19 % 
France 19.6  % 
Italy 20  % 
Austria 20  % 
Belgium 21  % 
Ireland 21  % 
Finland 22  % 
Denmark 25  % 
Sweden 25  % 
Basic  VAT rate  - new EU members  
Country  Basic VAT rate 
Cyprus 15  % 
Malta 15  % 
Estonia 18  % 
Lithuania 18  % 
Latvia 18  % 
Czech rep.  19 % 
Slovakia 19  % 
Slovenia   20 %
Poland 22  % 
Hungary 25  % 51
Management – Marketing - Tourism 
The minimum VAT rates are offered by Cyprus, Malta, Luxembourg, Germany 
and Spain – 15-16.5%, the maximum VAT rates are imposed in Hungary, Poland, 
Denmark, Sweden and Finland. 
Free  mobility of persons 
After the big expansion of the EU in May 2004, many EU countries have 
accepted a “transition period”, which restricts free mobility of persons - employees in 
the EU. This period will definitely expire in 2011. Only Ireland and Great Britain 
opened their labour markets at once. We have illustrated the situation in Table 5. These 
restrictions are affected by their own situation on the labour market and their concern of 
inexpensive, but qualified foreign labour force arriving from the new EU countries.  
Table no.5 Focus on free mobility of people 
EU Country   Requirements  
Germany
- residence permission,   
- you cannot have the following sectors -
building industry, security services, health 
services, accommodation services  
Austria - residence permission,  
- abstract from the criminal register  
Luxembourg  - residence permission, 
Denmark  - application fee -  2800,- CZK (approx. € 89),  
- residence permission for 2 months 
Sweden  Employer must guarantee a minimum wage 
rate, accommodation, labour permission. 
Spain Entry visa, abstract from the criminal register, 
administrative fee, translation to Spanish 
Italy  Quota of  8,000 permissions per year  
Finland  Labour permission, employment contract, 
abstract from the criminal register 
New Members from May 2004 Without  barriers 
 Comparison of minimum wage rates 
Minimum of wage cost is another factor playing role in the making of the 
decision as to where you intend to set up your business. We have made a comparison in 
Table 6. The cheapest labour force is offered by Estonia, Lithuania, Latvia, Slovakia, 
while the most expensive can be found in Luxembourg, Belgium and the Netherlands. 
Table 6 Comparison of minimum wage rate 
Country currency  Rate per 
month
Amount
in  €  Commentary 
Belgium  EUR 1,233.54 1,233.54
Czech rep.  CZK 6,700 212.23
Denmark  DKK Not
defined
Problem is solved by collective 
agreement 
Estonia EEK 2,480 158.5052
Revista Tinerilor Economi ti
Country currency  Rate per 
month
Amount
in  €  Commentary 
Finland  EUR Not
defined
Problem is solved by collective 
agreement, minimum  wage rate is 
different in concrete sectors 
France  EUR 1,090.48 1,090.48 35 hours per week  
1,227.57 1,227.57 39 hours per week 
Ireland  EUR 1,092.00 39 hours per week 
Italy EUR Not
defined
Cyprus  CYP 345 598.20
Lithuania  LIT 450 130
Latvia  LVL 80 122
Luxembourg  EUR 1,403 1,403 Rate is for unqualified staff 
Hungary  HUF 54,000 219.11 For the unqualified -  HUF 54,000;  
For qualified - HUF 100,000. 
Malta  Lira 230.23 542.40
Germany EUR Not
defined
Problem is solved by the collective 
agreement, it depends on business 
sector
the
Netherlands  EUR 1,264.80 1,264.80 For people aged over 23  
Portugal  EUR 365.60 365.60
Austria EUR Not
defined
Problem is solved by collective 
agreement 
Greece  EUR 504.83 504.83 Employees must receive 13th and 
14th  salary
Slovakia  SVK 6,080 151.93
Slovenia  Tolar 103.64 442.60
Spain EUR 460.50 460.50 Employees must receive 13th and 
14th  salary 
Sweden  Not
defined
Problem is solved by collective 
agreement 
Great Britain  GBP  702 1,028
39 hours per week; GBP4,5 per 
hour 
For workers between 18-21 years- 
GBP 3,80 per hour,  
 Insurance costs 
You can see that the minimum costs for insurance paid by the employer are in 
the Great Britain, where an employee pays it on his own, the list is followed by 
Slovenia and Poland. The maximum rate is in France because they guarantee a pension 
at 70% of your wage rate. 
 53
Management – Marketing - Tourism 
Table no. 1 Outline of insurance costs 
Country Employer’s
costs in €  Commentary 
Great Britain  0   SI- GBP 2  per week is paid by employee, employer 
7% from profit above € 4,385  
Slovenia 79.5  SI-employee 22,1%, employer 15,9% 
Poland 104.1 
SI -  employee 18,71%, employer 18,29% 
- contribution to labour fund 2,45% 
- wage fund 0,08%,  
total 20,82%
Portugal 118.75  SI-employee 11%, employer 23,75% 
Lithuania 155  Employer HI- 3%, pension fund 27%,accident insurance 
1%, employee 3% 
Hungary 165  employer HI - 11%, pension fund 22%, employee 2-8% 
Estonia 165  employer pays all  - 33% - health + social insurance 
France 230  Employer 46%, employee 22% 
SI – social insurance, HI – health insurance, the Calculation was made from a monthly wage rate 
of 500 € 
Conclusion
Considering the simplified analysis of the named factors the following results 
may be concluded: the best conditions for founding a limited liability company are in 
Estonia or Lithuania (minimum rate of registered capital), for registration in Great 
Britain (minimum administrative costs), employing staff from Estonia (minimum wage 
rate), and considering insurance duty in again Great Britain (minimum insurance costs), 
VAT registration in Cyprus or Malta. 
If we are agree that the combination of the above is not good to implement in 
common life, we could recommend staying in Estonia, having to stand the disadvantage 
of a long administrative process. 
There is, of course, another possibility – not setting up “your own” company, 
but taking an opportunity to expand with an existing company abroad in the form of 
joint venture or strategic alliance – good conditions are in Portugal. Then, you could 
take the opportunity to get money from the EU funds, where good chances are offered 
at Cyprus and Malta by fast registration process and interest of the local government in 
supporting small and medium sized enterprise.   
To act as a self-proprietor is more difficult in the EU than in our country – it is 
more complicated to obtain a trade license, because one must have a qualification in the 
particular branch of business, than long-term experience and also, one has to be a 
member of the national professional institutions. 
 A business activity like commercial representation is not recommended, since 
many countries EU impose severe restrictions, which prohibit independent business - 
they view these as a mere representation. A clear reason – tax is paid to the country 
where the company has a registered place of business and it brings no benefits to the 
host country. 54
Revista Tinerilor Economi ti
Benefits from the enterprise can be defined in two ways: firstly, a profit for the 
company’s owner, secondly, state revenue from the settled taxes. Low rate of 
corporation tax are offered at Cyprus a Malta. Tax rate is about 10%. 
Business environment in the EU is very different, varying markedly country-to-
country. Advantage for the new EU member states is good rate of exchange for Euro 
and this factor decrease costs for capital and wage rate. Disadvantage is that economic 
system has not developed properly so far.  It may be the reason why they offer better 
conditions for foreign investors – they intend to facilitate their own development. 
Finally, I would like to add that this material has not been drawn up to seek 
solutions for all the problems, but we would like to present a new way  for Czech 
businessman and Czech companies in  the EU environment and make up a simple 
analysis on possibilities and  opportunities for their expansion. 
REFERENCES 
1. Kozak, M., 
Leventhal, S.  
Micro, Small, and Medium Enterprises: A Collection of 
Published Data , [accessed.14.10.2006], URL: 
http://rru.worldbank.org/Documents/Other/MSMEdatabase/
msme_companion_0706.pdf
2. Šebestová, J.  Globalization tendencies in the Czech SME'S - Historical 
Approach (1997-2004).In From Transition to Sustainable 
Development: The Path to European Integration (+CD). 
Sarajevo: University of Sarajevo, School of Economics and 
Business, Bosna i Herzegovina, 2006. ISBN 9958-605-89-
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3. Vyakarnam,S., 
Leppard,J. W. 
Plánování podnikatelských strategií. Praha: Grada,1998.
ISBN 80-7169-533-5. 
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B.A.
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Journal, 1984 Vol. 5, 171-180 
5. * * *  www.euroskop.cz 
6. * * *  www.czechinvest.cz 
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NEW MEMBER SEEKS FOR OPPORTUNITY TO START BUSINESS IN THE EU – WHERE ?

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