What to Do If a Bank in the Czech Republic Is Closing Your Account?
Unfortunately, if you have received a notice from a Czech bank informing you that your account will be closed, the bank has most likely already made its decision, and it can be quite difficult to prevent the closure.
Usually, this situation is connected in one way or another with a non-resident of the Czech Republic being involved with the account holder — either a personal account belonging to a non-resident or, for example, an account belonging to a Czech company whose corporate structure includes a non-resident.
Quite a large number of such accounts were opened in the country, particularly around 2016–2018, and banks generally exercised relatively little control over this process at the time. Later, banks received instructions from Czech regulatory authorities to restrict servicing such accounts. Banks were required to comply with these requirements and gradually began closing accounts belonging to affected clients.
One might assume that banks should generally want to retain their clients, but unfortunately, in practice, it proved easier for banks to close accounts than to review each individual client and look for ways to keep them. If you have already received a notice that your account will be closed, it is usually difficult to prevent this, although there are still some options that may be worth trying.
So, what can you do if you receive such a notice?
For an Individual Bank Account
Usually, this concerns accounts belonging to non-residents of the Czech Republic who do not have a long-term visa or temporary/permanent residence permit. In these cases, there are some ways to try to challenge the closure.
Typically, the bank wants an explanation of how the person actually uses the account in the Czech Republic. In other words, the bank needs to understand that the account is genuinely used for activities connected with the country — for example, the person receives payments for services or work from local clients, rents property in the Czech Republic, or owns property there and receives rental income.
There may also be other reasonable explanations, but the general principle is the same: you need to provide a convincing reason why the account is specifically needed in the Czech Republic.
There is no guarantee that the bank will consider this sufficient grounds to keep the account open; much depends on the particular circumstances. However, we do have successful examples where a bank ultimately allowed a client to keep the account.
Another question is how long this will last and whether, for example, another similar closure notice may arrive a year later.
For a Czech Company with Non-Residents in Its Structure
Usually, this concerns companies whose corporate structure includes non-residents of the Czech Republic, particularly where the director is not a local resident and does not have a long-term visa or temporary/permanent residence permit in the country. It can also concern situations where a company is registered in the Czech Republic but primarily conducts international business activities.
It is difficult to say exactly what may trigger the bank's decision to close the account in a particular case. The first step is to contact the bank, ask why the account is being closed, and find out whether anything can still be done.
If the issue is that the company's director or shareholder is a non-resident of the Czech Republic, one possible option is to replace that person with a resident. This is not particularly simple, and if the company's director is changed, the person authorized to operate the bank account will also need to be changed afterward.
If the problem is related to international transactions, another possible step is to urgently enter into additional cooperation agreements with Czech business entities.
Based on our experience, these measures rarely help and banks rarely reverse their decisions, but this is essentially what can be attempted if such a situation occurs.
In general, to reduce the risk of this situation occurring in the first place, we recommend appointing a Czech resident as the director of the legal entity and ensuring that at least a meaningful part of the company's business transactions involves Czech business entities. This should involve genuine counterparties in the country, rather than simply paying for accounting services and a registered office.
For a Foreign Legal Entity
In this situation, based on our experience, there is practically nothing that can be done. While at least some measures may be attempted in the two situations described above, Czech banks are extremely strict with this category of clients.
Approximately ten years ago, Czech banks were quite willing to open bank accounts in the Czech Republic for foreign legal entities, most likely because their policies for accepting such clients had not yet been properly developed.
In many cases, extremely questionable financial flows subsequently passed through such accounts, and several years later banks began a large-scale "cleanup" of these accounts. By now, almost all of the accounts that were opened during that period have been closed.
If, by some chance, you still have such an active account and have now received a closure notice from the bank, there is practically nothing that can be done to prevent the closure.
You can probably try the same measures described above for a Czech legal entity, but it is unlikely that you should expect any positive result in this situation.
