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The Buzz in the Czech Republic — Interview with Jiri Buchvaldek of Hruby & Buchvaldek

The Buzz in the Czech Republic — Interview with Jiri Buchvaldek of Hruby & Buchvaldek

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Jiri Buchvaldek, Partner at Hruby & Buchvaldek in the Czech Republic, is flabbergasted at the amount of new regulations being thrown at small businesses and entrepreneurs in the country. "It’s just freakish what’s going on," he says, shaking his head.

"I recently found out about an ‘improvement’ to the Czech Republic’s AML [anti-money laundering] law," he says of a law currently passed by the Senate. The new law, which should become effective on January 1, 2017, would require lawyers and everyone who provides escrow services ("it applies to all real estate agents as well," Buchvaldek notes, "though not everyone knows about it") to perform even more thorough checks of the sources of the funds being placed in escrow. The law also establishes a new register of real or ultimate owners/beneficiaries of businesses, which is to be kept by the Courts. Although not completely public, the registry will be open to all major authorities incuding the newly Financial Analytical Bureau, newly separated from the Ministry. All legal entities will be required to keep record of their ultimate owners / beneficiaries and record them in this register.

Even the current AML law, according to Buchvaldek, is "burdensome and complicated,” and this new obligation goes even further. Buchvaldek suggests that many clients have legitimate reasons for keeping a low profile and for staying out of the public eye, "but this makes it easier for everybody to know everybody’s business." In his opinion, the over-riding principle is that "nothing is private anymore."

Buchvaldek then turns to the new law on consumer loans scheduled to come into effect on December 1, which will require the 50,000 entities currently providing consumer loans in the country to obtain licenses from the Central Bank. The licensing requirement and the minimum capital requirements of the law aim to scale down the numbers of providers and increase consumer protection, shifting the risks and burdens to the providers. Despite the laudable goals of the regulation, Buchvaldek calls it "another new market regulation — another piece of the puzzle."

At this point he’s on a roll. Buchvaldek points to the new amendment to the country’s Capital Gains/Income Tax, empowering the Czech tax authorities to investigate the sources of income when they encounter discrepancies between income and expenditures of anything beyond “quite a low" 5 million Czech crowns. The law, which was in the works in one form or another for about 10 years before finally passing, "increases their ability to levy massive taxes on those who can’t account for the discrepancy to their satisfaction."

Buchvaldek is wide-eyed. "Sometimes I think this is incredible. What will happen next??"

Finally, he turns to the new Czech law on Public Tenders which came into effect on October 1st and which allows public authorities to exclude Joint Stock Companies with shares in paper rather than electronic form from participation in public tenders. Buchvaldek calls it "gross discrimination," and says that “it solves absolutely nothing, and again burdens the entrepreneurs with another costly burden." Buchvaldek sighs, explaining that converting from paper to electronic shares just to satisfy this law will cost "a minimum of EUR 2000 plus annual costs, because shareholders will have to have electronic accounts, pay fees, etc." For Buchvaldek, the obvious question "Why?" has a similarly obvious answer: "I think this is yet another attempt to eliminate "anonymous“ joint stock companies."

Again, as before, Buchvaldek explains, "they use the word ‘transparency,’ but from my perspective as a lawyer they may be damaging to individuals who may have legitimate reasons for wanting to stay private." Ultimately, he says, "it’s all about taxes, and an effort to keep everyone under their thumb."


In “The Buzz” we interview experts on the legal industry living and working in Central and Eastern Europe to find out what’s happening in the region and what legislative/professional/cultural trends and developments they’re following closely.

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