Investor Presentaiton
Withholding tax is a final tax that is generally reduced by
double taxation treaties.
Residents of other EU and EEA countries can file a tax return
in respect of some types of income subject to withholding tax
(e.g. interest, royalties, or freelance work) and claim a deduction
for any related expenses (this does not apply for withholding
tax from dividends). In such a case, the withholding tax is
considered an advance payment. The claiming of expense
deductions may result in a reduction in the tax burden as
withholding tax is calculated on a gross basis. Standard 19%
corporate income tax rate and up to 23% personal income tax
rate will be applied in such case.
The EU Parent-Subsidiary Directive has been implemented
in the Czech Republic; hence, dividends paid by a Czech
subsidiary to a parent company that is a tax resident in an
EU member state may be exempt from withholding tax.
These provisions also apply to dividends paid from a Czech
subsidiary to a Czech parent as well as dividends paid to
Swiss, Norwegian, Icelandic or Liechtensteiner parent entities.
The EU Interest and Royalties Directive has also been
implemented in the Czech Republic. As a result, interest and
royalties paid to qualifying associated companies resident
in the EU, Switzerland, Norway, Iceland or Liechtenstein are
generally exempt from withholding tax (subject to advance
clearance procedures).
Other types of income paid to non-EU or EEA residents,
notably from real estate and sales of securities, are in certain
circumstances subject to withholding tax that is not the final
tax, but a prepayment in respect of the ultimate tax liability.
This tax is generally levied at the rate of 10 % (1 percent for
sales of securities or payments for receivables purchased
from third parties), but may in practice be reduced by prior
negotiation with the tax authorities.
Companies are obligated to report Czech source income
which is paid abroad and is subject to withholding tax.
The reporting obligation is also applicable to income in
relation to which no withholding tax is due, either by virtue
of exemption under the Income Tax Act or through the
application of a relevant double taxation treaty.
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