The European Union has long sought to increase business transparency and place greater emphasis on sustainability. With the adoption of the Non-Financial Reporting Directive (hereinafter the “CSRD”), the obligation to report non-financial information has been significantly expanded. The Czech Republic is now implementing the CSRD through an amendment to the Accounting Act, which, in addition to modifying the non-financial report itself, also introduces other changes – the most significant of which is an increase in the limits for categorising accounting entities. This change has a direct impact on which companies will be required to prepare a sustainability report. In other words, the change in accounting categories rearranges the group of entities subject to the obligation.
Legal framework and implementation of the CSRD
The CSRD replaces the original Non-Financial Reporting Directive (hereinafter the “NFRD”) and represents a comprehensive reform in the area of non-financial reporting. This regulation introduces mandatory standardised requirements for reporting ESG (Environmental, Social, Governance) data, with companies now required to provide credible and transparent information about their impact on the environment, society and their own corporate governance.
Implementation is taking place simultaneously through several pieces of legislation. The primary vehicle for the changes is the amendment to Act No. 563/1991 Coll. on Accounting (hereinafter the “Amendment”), which defines the basic obligations and categorisation of accounting entities. At the same time, amendments are being made to Act No. 93/2009 Coll. on Auditors and Act No. 256/2004 Coll. on Capital Market Undertakings.
Change in the categorisation of accounting entities
The Amendment increases the limits for dividing companies into micro, small, medium and large accounting entities, effective from 1 January 2026. The change is a response to inflation and economic developments and has a significant practical impact: a company that was previously considered “large” may now find itself among medium-sized companies. The conditions for each category are set out below.
Micro accounting entities (does not exceed at least 2 of the specified thresholds)
- Total assets: from CZK 9 million to CZK 11 million
- Annual net turnover: from CZK 18 million to CZK 22 million
- Number of employees: unchanged (up to 10 employees)
Small accounting entities (does not exceed at least 2 of the specified threshold values)
- Total assets: from CZK 100 million to CZK 120 million
- Annual net turnover: from CZK 200 million to CZK 240 million
- Number of employees: unchanged (up to 50 employees)
Medium-sized accounting entities (does not exceed at least 2 of the specified thresholds)
- Total assets: from CZK 500 million to CZK 600 million
- Annual total net turnover: from CZK 1 billion to CZK 1.2 billion
- Number of employees: unchanged (up to 250 employees)
Large accounting entities
If at least two of the three criteria are exceeded: assets exceeding CZK 600 million, turnover exceeding CZK 1.2 billion, or more than 250 employees.
Practical implications of the change in limits
The 20% increase in financial criteria gives medium-sized enterprises more time to prepare for reporting. According to estimates by the Ministry of Finance, the change in limits will affect approximately 15-20% of companies on the borderline between categories, which represents several hundred companies in the Czech Republic.
Who will be required to prepare a sustainability report?
The non-financial reporting obligation under the CSRD applies to:
Large accounting entities
- Companies that exceed at least two of the three criteria (assets, turnover, number of employees) according to the new limits;
- Parent companies of large groups of accounting entities;
- Public-interest organisations above a certain size.
Small and medium-sized listed companies
- Small and medium-sized accounting entities, if they are issuers of securities traded on a regulated EU market and;
- the obligation arises from the accounting period beginning on 1 January 2026.
Implementation of changes and transitional provisions
Under the transitional provisions, the accounting entity will assess the increased thresholds already for the financial year ending 31 December 2024. Accounting entities with a financial year corresponding to the calendar year will thus assess the new limits at the end of 2024 and 2025, with any change in category taking effect from 1 January 2026. The amendment to the law concerning the categorisation of accounting entities will take effect on the day following its promulgation.
Mandatory audit
There will also be an increase in the limits for mandatory audits of financial statements, which will now only be performed by entities meeting two of the three criteria:
- turnover exceeding CZK 240 million;
- assets worth over CZK 120 million; and/or
- more than 50 employees.
The obligation to keep accounts will no longer apply to organisational units of foreign entities or natural persons. However, they will still have to keep records for the purposes of calculating tax liabilities. Under certain conditions, accounting entities will also be able to keep accounts in a selected foreign currency, known as a functional currency (dollar, euro or pound).
Opportunities and competitive advantages
Transparency in the area of sustainability is becoming a competitive advantage. Well-prepared companies can benefit from better access to financing, increased market competitiveness and improved operational efficiency through the monitoring of ESG indicators.
Conclusion
The Amendment to the Accounting Act fundamentally changes the structure of entities subject to mandatory non-financial reporting in the Czech Republic. The increase in the thresholds for categorising accounting entities will result in some companies losing their obligation, while others will gain it. Transitional periods and phased implementation give companies time to prepare, but the complexity of the legislation also brings considerable uncertainty.
Companies should therefore actively monitor their categorisation, assess the impact of legislative changes in a timely manner, and set up processes for collecting and verifying ESG data. This is not just a matter of compliance, but also an opportunity. Well-managed reporting can be a significant factor in market competitiveness.
If you have any questions about the amendment to the Accounting Act, non-financial reporting or ESG issues in general, please do not hesitate to contact us. Our PEYTON legal team is at your disposal.
Mgr. Jakub Málek, managing partner – malek@plegal.cz
Ráchel Kouklíková, legal assistant – kouklikova@plegal.cz
Tereza Hrudková, legal assistant – hrudkova@plegal.cz
4. 9. 2025