Annual Report on Exchange Arrangements and Exchange Restrictions 2005
Chapter

CZECH REPUBLIC

Author(s):
International Monetary Fund. Monetary and Capital Markets Department
Published Date:
September 2005
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(Position as of January 31, 2005)

Status Under IMF Articles of Agreement
Article VIIIDate of acceptance: October 1, 1995.
Exchange Arrangement
CurrencyThe currency of the Czech Republic is the Czech koruna.
Exchange rate structureUnitary.
Classification
Managed floating with no predetermined path for the exchange rateThe external value of the koruna is determined by supply and demand in the foreign exchange market. The Czech National Bank (CNB) may intervene in the foreign exchange market in order to smooth large intraday volatility swings of the euro-koruna rate. Effective January 2, 2004, the CNB publishes daily rates of 29 selected currencies against the koruna for customs and accounting purposes (previously, daily rates were announced for 16 currencies). Commercial banks set their own exchange rate with no limitation.
Exchange taxNo.
Exchange subsidyNo.
Forward exchange marketYes.
Arrangements for Payments and Receipts
Prescription of currency requirementsNo.
Payments arrangements
Regional arrangementsOn May 1, 2004, the Czech Republic became a member of the EU.
Administration of controlThe MOF and the CNB are responsible for the administration of exchange controls and regulations, in accordance with the Foreign Exchange Act. In general, the MOF exercises authority over ministries and other administrative authorities, municipal authorities, budgetary organizations, state funds, and all types of credits being extended to or accepted by the Czech Republic. The CNB exercises authority over the activities of all other agents.
International security restrictions
In accordance with UN sanctionsThere are blocked accounts in connection with embargoes against the Islamic State of Afghanistan and certain individuals associated with the previous governments of Iraq and the former Federal Republic of Yugoslavia.
Payments arrearsNo.
Controls on trade in gold (coins and/or bullion)No.
Controls on exports and imports of banknotesEffective May 1, 2004, reporting requirements apply to exports and imports of amounts exceeding €15,000 out of and into the EU customs territory. Previously, reporting requirements applied on exports and imports exceeding CZK 350,000.
Resident Accounts
Foreign exchange accounts permittedYes.
Held domesticallyYes.
Held abroadYes.
Accounts in domestic currency held abroadYes.
Accounts in domestic currency convertible into foreign currencyYes.
Nonresident Accounts
Foreign exchange accounts permittedYes.
Domestic currency accountsYes.
Convertible into foreign currencyYes.
Blocked accountsThere are blocked accounts in connection with embargoes against the Islamic State of Afghanistan and the individuals associated with the previous governments of Iraq and the former Federal Republic of Yugoslavia.
Imports and Import Payments
Foreign exchange budgetNo.
Financing requirements for importsNo.
Documentation requirements for release of foreign exchange for importsNo.
Import licenses and other nontariff measuresEffective May 1, 2004, the Czech Republic applies EU regulations on communal trade and agricultural policies, and the regime of import and export licensing and certificates of compensation determination for agricultural products.
Negative listYes.
Open general licensesEffective May 1, 2004, EU regulations based on common commercial policy apply, including surveillance of textile and clothing products, and of steel products. Previously, automatic import licenses were required for some agricultural and food products, tobacco and tobacco products, raw materials, fuels and mineral oils, chemical products and products of similar industries, used textile products, toxic substances, auxiliary chemical substances, certain seeds and plants, pharmaceutical products, certain steel products, and waste. For some armaments, a security license was required.
Licenses with quotasEffective May 1, 2004, the Czech Republic applies EU import regulations, including import quotas for textile and clothing products; import quotas for certain steel products from Russia, Ukraine, and Kazakhstan; and import quotas on certain consumer products from China. Previously, nonautomatic import licenses were required for sugar from the Slovak Republic and black coal from Ukraine and Poland.
Import taxes and/or tariffsEffective May 1, 2004, the EU Common Customs Tariff applies. Previously, all imports were subject to an ad valorem customs duty of up to 29.4% for industrial goods and up to 125% for agricultural goods. Imports are also subject to a VAT of 5% or 22%. Under a customs union agreement, imports from the Slovak Republic were exempt from customs duties. Imports from developing countries were granted preferences.
State import monopolyNo.
Exports and Export Proceeds
Repatriation requirementsNo.
Financing requirementsNo.
Documentation requirementsNo.
Export licenses
Without quotasEffective May 1, 2004, EU regulations apply. For some armaments, a security license continues to be required. Previously, automatic export licenses were required for some raw materials, raw leathers, wood and wooden products, precious and common metals, iron and steel products (when exported to the EU and the United States), toxic substances, auxiliary chemical substances and precursors, pharmaceutical products, and waste.
With quotasEffective January 1, 2005, nonautomatic export licenses for textile products exported to Canada and the United States no longer apply.
Export taxesNo.
Payments for Invisible Transactions and Current Transfers
Controls on these transfersNo.
Proceeds from Invisible Transactions and Current Transfers
Repatriation requirementsNo.
Restrictions on use of fundsNo.
Capital Transactions
Controls on capital transactionsYes.
Controls on capital and money market instruments
On capital market securities
Shares or other securities of a participating nature
Purchase locally by nonresidentsNonresidents’ foreign participation in the air transport sector may not exceed 49% of total participation. Also, controls apply on investment by nonresidents in lotteries and similar games.
Controls on derivatives and other instrumentsNo.
Controls on credit operationsNo.
Controls on direct investment
Inward direct investmentThere are controls on investment by nonresidents in the air transport sector and in lotteries and similar games. In order to register an aircraft, obtain a license to operate an air transportation enterprise as a Czech company, or obtain a Czech air-operating certificate, the entity must be a natural or a juridical person domiciled in the Czech Republic; Czech residents must hold at least 51% of the capital and voting rights; and Czech residents must have an effective influence on the management and full control of the activities of the enterprise. To carry out air taxi transport services, it is only necessary to be a resident of the Czech Republic. A license to operate lotteries or other similar games is granted only to a legal entity with a registered office in the Czech Republic. For most betting games, no license is granted to a domestic or foreign entity in which there is an out-of-state ownership stake, unless the government grants an exemption.
Controls on liquidation of direct investmentNo.
Controls on real estate transactions
Purchase locally by nonresidentsLand other than agricultural land may be acquired by the following: (1) nonresidents who are citizens of the Czech Republic; (2) nonresidents with a certificate of permission to reside as citizen of a member state of the EU; (3) nonresident legal entities that have an enterprise or branch in the Czech Republic; (4) nonresident legal entities that have an enterprise or branch and are authorized to conduct business in the Czech Republic; and (5) other nonresidents who acquire land (i) through inheritance; (ii) for diplomatic representation of another state on condition of reciprocity; (iii) through an unapportioned co-ownership of a married couple, only one of which is a citizen of the Czech Republic or a resident; (iv) from grandparents, parents, sibling, or spouse; (v) through the exchange from certain other land in the domestic territory whose price does not exceed the price of the original land; (vi) through a preemptive right by reason of apportioned co-ownership; (vii) by building a construction on his or her own plot; (viii) that forms one functional unit with an immovable construction in their ownership; or (ix) where expressly provided by a special act. Effective May 1, 2004, under the Foreign Exchange Act, the following may own agricultural land (defined as land that forms part of, or belongs to, the agricultural land fund and land set aside as woodland): (1) nonresidents who are citizens of the Czech Republic; (2) nonresidents who are citizens of a member state of the EU who have resided in the Czech Republic for at least three years and registered as a self-employed farmer; and (3) other nonresidents who acquire land (i) by inheritance; (ii) for diplomatic presentation of another state on condition of reciprocity; (iii) through an unapportioned co-ownership of a married couple, only one of which is a citizen of the Czech Republic or a resident; (iv) from parents, grandparents, sibling, or spouse; (v) through the exchange of other agricultural land in the domestic territory whose price does not exceed the price of the original agricultural land; (vi) through a preemptive right by reason of apportioned coownership; (vii) that forms one functional unit with an immovable construction in their ownership; or (viii) where expressly provided for by a special act.
Controls on personal capital transactions
Transfer of gambling and prize earningsThe operation of out-of-state or domestic lotteries and similar games where bets are paid abroad are prohibited, unless an exception is granted.
Provisions specific to commercial banks and other credit institutions
Open foreign exchange position limitsThe following limits apply: (1) the absolute value of the net foreign exchange position in each foreign currency, 15% of the bank’s capital; (2) the absolute value of the net foreign exchange position in koruny, 15% of the bank’s capital; and (3) the overall foreign exchange position, 20% of the bank’s capital.
On resident assets and liabilitiesYes.
On nonresident assets and liabilitiesYes.
Provisions specific to institutional investorsCredit unions, insurance companies, and pension funds may place their assets abroad, subject to specific prudential regulations.
Limits (max.) on securities issued by nonresidentsYes.
Limits (max.) on investment portfolio held abroadYes.
Limits (min.) on investment portfolio held locallyYes.
Currency-matching regulations on assets/liabilities compositionYes.
Other controls imposed by securities lawsNo.
Changes During 2004
Exchange arrangementJanuary 2. The number of currencies for which the CNB publishes daily rates was increased to 29 from 16.
Arrangements for payments and receiptsMay 1. The Czech Republic became a member of the EU.
May 1. The amount of currency imports and exports in excess of which reporting requirements applied was changed to €15,000 from CZK 350,000.
Imports and import paymentsMay 1. The EU regulations were adopted on communal trade and agricultural policies and the regime on import and export licensing and certificates of compensation determination for agricultural products.
May 1. The EU regulations on common commercial policy were adopted, including the surveillance of textile, clothing, and steel products.
May 1. The EU import quotas were adopted, including those on textile and clothing products; certain steel products from Russia, Ukraine, and Kazakhstan; and certain consumer products from China.
May 1. The EU Common Customs Tariff was adopted.
Exports and export proceedsMay 1. The EU regulations on export licensing were adopted.
Capital transactions
Controls on real estate transactionsMay 1. The Foreign Exchange Act was amended with respect to the categories of nonresidents that may acquire agricultural and forest land in the Czech Republic.
Changes During 2005
Exports and export proceedsJanuary 1. The requirement of nonautomatic export licenses for textile products exported to Canada and the United States was lifted.

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