Trade Licensing Act

What it means

The Trade Licensing Act sets out what a trade is: an activity carried on systematically, independently, in one’s own name, at one’s own responsibility and for profit. It sorts trades into free, craft and regulated ones, with the licensed trade standing apart.

It does not cover every kind of business. Advocates, auditors, tax advisers, doctors, court experts and interpreters work under statutes of their own, while primary agricultural production and the bare letting of property without further services fall outside the Act altogether.

The Trade Licensing Act is not just for sole traders. An s. r. o., too, needs a trade authorisation, or a permit under a special act, for every activity it carries on. The scope of business entered in the commercial register follows from that authorisation; it does not replace it.

How it works in practice

A trade is notified to the district office, which acts as the single point of contact: one form also carries the notice to the health insurer, while for income tax the tax office registers the entrepreneur itself, from the register data. For a free trade the authorisation arises on the day of notification.

A craft or regulated trade first calls for proof of professional competence, and an entrepreneur who lacks it must appoint a responsible representative. Registered trades show in the trade register and, for a company, in its scope of business in the commercial register.

A sole trader who stops trading for a while, for example to take a job or go on parental leave, need not cancel the trade: its operation can be suspended for a notified period. Before notifying the office, we check the effect on health insurance and on compulsory insurance with the Social Insurance Agency, so the suspension does not collide with benefits the client is counting on.

What to watch out for

The responsible representative leaves, the company misses the statutory deadline to report it, appoints no replacement and keeps invoicing the regulated activity. Nobody is left to carry the professional competence: that is an administrative offence carrying a fine, the office may suspend the trade or cancel the licence, and the customer gains a reason to dispute the invoice.

A company invoices work that belongs to a craft trade while holding only free trades. Trading without authorisation is an administrative offence carrying a fine, grounds for exclusion from public procurement, and an argument for a customer who would rather not pay after a complaint.