Investor Presentaiton

Taxation of non-residents and cross border tax issues Companies with their registered office in the Czech Republic or whose place of effective management is in the Czech Republic are subject to Czech tax on their worldwide income and are referred to as Czech tax residents. Other companies (tax non-residents) are subject to tax only on their Czech source income, subject to the provisions of any double taxation treaties. Foreign source income of Czech tax resident companies is generally taxable in the Czech Republic, subject to the provisions of any double taxation treaties. The income of foreign branches or permanent establishments of Czech tax residents is included in their Czech taxable profit. Dividends from foreign companies are a separate source of income taxable at a special rate of currently 15 percent, although a full participation exemption applies for dividends received from qualifying participations. Also under certain double taxation treaties, certain categories of foreign income of Czech tax residents are exempt from Czech tax. In such cases, expenses related to such income are not tax deductible. Credit for foreign taxes on income that is also subject to Czech tax is available only if a double taxation treaty exists with the other state. Otherwise, the foreign tax can only be treated as an expense. Different tax rules are applicable to different categories of Czech source income which may be earned by tax non- residents including: • income of a permanent establishment in the Czech Republic; income from a dependent activity (employment) performed in the Czech Republic; income from services provided in the Czech Republic; income from the sale or use of real estate situated in the Czech Republic; royalties, dividends and other profit distributions, interest, and lease rentals; income from the transfer of shares in Czech resident companies; • income from the sale of a business located in the Czech Republic. 93

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