Investor Presentaiton
Taxation of legal entities
Corporate income tax is levied on the profits of
legal entities, primarily limited liability compa-
nies (s. r. o.) and joint-stock companies (a. s.).
Although partnerships are also legal entities,
the profits of a general partnership (v. o. s.)
are not subject to corporate tax; instead, the
partners' share of profits is taxed in their own
hands.
In the case of a limited partnership (k. s.), the
limited partner's share of the profits is sub-
ject to corporate income tax at the level of
the limited partnership, while the general
partner's share is taxed in the same way as in
the case of a general partnership. In addition,
trusts are subject to corporate tax even though
they are not legal entities.
A branch or permanent establishment of a for-
eign company is generally subject to tax on the
same basis as a company. They may also be
taxed on a deemed profit basis, which is usu-
ally a percentage of the revenues generated in
the Czech Republic, or a percentage of costs.
Since most of these legal entities by definition
exist for the purpose of carrying on a business,
virtually all the income and gains they realise
are included in the calculation of their business
profits (see below). There are special rules for
entities not established for the purpose of mak
ing profits as these enjoy certain restricted tax
privileges.
In 2016, the corporate income tax rate is 19 per
cent. A reduced rate of five percent applies to
the income of qualifying investment funds and
a reduced rate of 0 percent applies to qualify-
ing pension funds. Full or partial tax relief from
corporate tax may be claimed for certain quali-
fying investments (see Chapter 3 - Investment
incentives and state aid).
Capital gains are generally included in income
and taxed at the same rate. However, if at least
10 percent of the shares of a company are held
by a parent company for 12 months, income
from the sale of the shares is tax exempt if the
parent is a Czech tax resident company and the
subsidiary is resident in an
EU member state or a non-EU member state
with which the Czech Republic has concluded
a double taxation treaty (subject to certain con
ditions). Income derived by non-residents from
the sale of shares in a Czech company is tax-
able, unless the seller is a company resident in
the EU, Norway, Iceland or Liechtenstein, and
at least 10 percent of the shares have been held
for 12 months.
There is no tax consolidation in the Czech Re-
public. Each company within a group is taxed
individually, with no set-off of losses against
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