Key tax factors for efficient cross-border business and investment involving Czech Republic.
||Rep. of Korea
||People's Rep. ofKorea
Limited Liability Company (s.r.o.), joint-stock company (a.s.), European
Company (SE), Limited Partnership (k.s.), General Commercial Partnership
s.r.o. - minimum registered equity is CZK 1
a.s. - minimum registered equity is MCZK 2
SE - minimum registered equity is TEUR 120
v.o.s. - minimum registered equity is not set
k.s. - minumum registered equity is TCZK 5
cooperative - minimum registered equity is not set.
A company is resident if it has been incorporated in the Czech Republic or if its management and control are exercised in the Czech Republic.
Resident companies are taxed on their worldwide income. Non-resident companies are taxed only on their Czech source income.
A standard form is used for CIT compliance purposes. The tax return must be filed within three months of the end of the taxable period (or six months if the company is audited/the tax return is filed by a registered tax advisor based on a power of attorney). The tax return has to be filed electronically under penalty of TCZK 2.
The standard corporate income tax rate is 19 percent.
35 percent for countries where no DTT or Tax Information Exchange
Agreement has been concluded, otherwise 15 percent.
Exemption from WHT on dividends* to an EU, Icelandic, Norwegian, Swiss or Liechtenstein parent:
* Implementation of Parent-Subsidiary Directive Amendment, i.e. no exemption if the dividend may be considered as an item decreasing tax base in the paying country.
35 percent for countries where no DTT or Tax Information Exchange Agreement has been concluded, otherwise 15 percent.
Exemption from WHT on interest paid to EU, Icelandic, Norwegian, Swiss or Liechtenstein affiliated companies:
On royalty and interest payments: 35 percent for countries where no DTT or
Tax Information Exchange Agreement has been concluded, otherwise 15
Exemption from WHT on royalties paid to EU, Icelandic, Norwegian, Swiss or
Liechtenstein associated companies:
Under Czech law, Czech-sourced income paid to a non-resident is generally subject to either 15 percent withholding tax or the non-resident must file a tax return. The WHT rate is increased to 35 percent if the income is paid to residents of countries which have not signed a DTT with the Czech Republic or where no arrangement is in place for the exchange of information on tax matters. Czech source income taxed through tax return:
- income from a permanent establishment;
- income from the sale and/or use of immovable assets;
- income from the sale of movable assets of a permanent establishment, investment instruments under the special regulation of capital market business, property rights registered in the Czech Republic;
- income from settlement of a receivable acquired by assignment;
- income from a transfer of shares in a company seated in the Czech Republic;
- income from a sale of business located in the Czech Republic.
Czech source income taxed at 15 percent:
- income from employment;
- income from provision of services*;
- income from an independent activity*;
- income of entertainers and sportsmen*;
- income from the use of movable assets*;
- remuneration of members of statutory bodies;
- winnings from lotteries and other games of chance;
- contractual fines;
- income from trust;
- gratuitous income;
- rental income from movable property located in the Czech Republic;
- income received by a shareholder of a company in connection with a registered capital reduction.
*performed/exercised/located in the Czech Republic
In principle, subject to 15 percent tax. An exemption (100 percent) applies to dividends from domestic and EU subsidiaries if the following requirements are met:
For dividends received from subsidiaries resident in non-EU countries that have entered into a DTT with the Czech Republic, the exemption can be applied if the minimum holding conditions are met and the subsidiary is subject to a minimum 12 percent tax rate. The exemption cannot be applied if the parent company or the subsidiary: are exempt from corporate income (or a similar) tax; or may claim some corporate income tax exemption or relief; or are subject to corporate income tax at a rate of 0 percent.
Exemptions may apply to
Losses can be carried forward for 5 years.
For corporate income purposes, a taxpayer must register with the tax
No. The definition of real estate company is based on the particular DTT.
The buyer is responsible for paying the real estate transfer tax at a rate of 4 percent.
Yes: computed based on the area of land occupied, category of land and other variables (number of floors, local coefficients determined by the local authorities).
OECD Transfer Pricing Guidelines.
The Czech Ministry of Finance has issued guidelines covering recommended documentation.
Interest and other expenses on credits and loans (e.g., loan arrangement fees, guarantee fees) from related parties and from unrelated parties where a related party is a guarantor are subject to thin capitalization rules, as follows:
Restrictions on loss utilization in corporate reorganizations and changes in ownership if there is also a change in the business ("same activities test").
"Subject to tax" requirement for the exemption of dividends and capital gains.
Where the interest rate or the interest payment is dependent on the borrower’s profit, the related expense is non-deductible.
Binding rulings can be obtained for the following:
Investment incentives can be granted if the particular conditions and all the administrative requirements are met.
The standard rate is 21 percent, with two reduced rates: 15 percent and 10
“Substance over form” rule; however in practice, “form” tends to be more
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