Last modified: 08/07/2023 10:39

Corporate taxation

	Rate
Corporate income tax rate	19%
Branch tax rate	19%
Capital gains tax rate	19%

Residence: Unlimited tax liability – Generally, a company tax resident in the Czech Republic (“CR”) is subject to corporate income tax on its worldwide income. A company is a tax resident in CR if it is incorporated in CR and its effective management is situated in CR, or if it is incorporated outside CR and its effective management is in CR. Effective management is determined on the basis of the place of the day-to-day business decision making.

Basis: The starting point for the calculation of CIT base is accounting profit/loss according to Czech accounting standards (“CAS”). In case that company applies IFRS, the IFRS result has to be adjusted to correspond to the CAS. Tax non-deductible expenses are to be added to the CAS result (profit) and non-taxable revenues deducted from it.

Taxable income: The starting point for the calculation of CIT base is accounting profit/loss according to Czech accounting standards (“CAS”).

Significant local taxes on income: None

Alternative minimum tax: None

Taxation of dividends: Dividends from Czech companies can be distributed without standard 15 % WHT according to the Czech Income Taxes Act (“Czech ITA”) using EU Parent/Subsidiary Directive (participation exemption) or applicable DTT. When using EU Directive for WHT exemption, following conditions shall be met: 1) the EU recipient qualifies as capital company (e.g. limited liability company or joint-stock company, etc.) which 2) directly owns at least 10 % share for 12 months in the Czech subsidiary and 3) it is a beneficial owner of the dividends. Further applicable DTT could also exempt or reduce the Czech 15 % WHT. On the other side, dividends received by Czech companies from foreign companies are subject to special tax rate 15 %, unless exempt due to the participation exemption.

Capital gains: Capital gains (e.g. sales of shares) are included in the standard CIT base (specified above), unless they are subject to participation exemption (according to the EU Parent-Subsidiary Directive).

Losses: There is no limitation as to the amount of the tax losses that can be carried forward up to 5 years. From 2020, tax losses may also be carried back for 2 years. The maximum amount of the loss that can be carried back is CZK 30 million.

Foreign tax relief: Up to 100% of specific R&D expenses (or costs) incurred in a given tax year may be deducted from the tax base as a special tax allowance.

Participation exemption: Dividends from Czech companies can be distributed without standard 15 % WHT according to the Czech Income Taxes Act (“Czech ITA”) using EU Parent/Subsidiary Directive (participation exemption) or applicable DTT. When using EU Directive for WHT exemption, following conditions shall be met: 1) the EU recipient qualifies as capital company (e.g. limited liability company or joint-stock company, etc.) which 2) directly owns at least 10 % share for 12 months in the Czech subsidiary and 3) it is a beneficial owner of the dividends. Further applicable DTT could also exempt or reduce the Czech 15 % WHT. On the other side, dividends received by Czech companies from foreign companies are subject to special tax rate 15 %, unless exempt due to the participation exemption.

Holding-company regime: None

Tax-based incentives: Dividends from Czech companies can be distributed without standard 15 % WHT according to the Czech Income Taxes Act (“Czech ITA”) using EU Parent/Subsidiary Directive (participation exemption) or applicable DTT. When using EU Directive for WHT exemption, following conditions shall be met: 1) the EU recipient qualifies as capital company (e.g. limited liability company or joint-stock company, etc.) which 2) directly owns at least 10 % share for 12 months in the Czech subsidiary and 3) it is a beneficial owner of the dividends. Further applicable DTT could also exempt or reduce the Czech 15 % WHT. On the other side, dividends received by Czech companies from foreign companies are subject to special tax rate 15 %, unless exempt due to the participation exemption.

Group relief/fiscal unity: None

Small company/alternative tax regimes: None

Corporate taxation: compliance

Tax year: Calendar year or fiscal year

Consolidated returns: Not permitted.

Filing and payment: Generally, the first day of the following fourth month after taxable period (calendar of fiscal year) or if the return is filed electronically then first day of the fifth month is deadline for CIT return. And if filed by tax advisor the deadline is on the first day of seventh month after relevant taxable period.

Penalties: Standard penalty if the tax is additionally assessed is 20% from the assessed amount. Further, interest for late payment is assessed at a rate of 8% p.a. plus repo rate of Czech National Bank.

Rulings: Advance rulings – advance pricing agreements, utilization of losses, R&D projects. Rulings are effective just for three years.

Taxation of individuals

	Rate
	Federal Income Tax
Up to CZK 1,867,728	15%
Over CZK 1,687,728	23%

1. xxxxxxxx
2. xxxxxxxx

Residence: Individuals with permanent home in the CR or who stay in the CR for more than 183 days within calendar year

Basis: Tax residents on their worldwide income Non-residents only on Czech-source income

Taxable income: Five types of income – 1) employment 2) entrepreneurial activities 3) capital 4) leased assets 5) other income.

Capital gains: Generally taxed with other income (5) above) at progressive rates 15% and 23%, however could be exempted

Deductions and allowances: Deducted from tax base could be: – life and pension insurance – gifts, etc.

Foreign tax relief: Credit or exemption is available only under tax treaties.

Taxation of individuals: compliance

Tax year: Calendar year

Filing and payment: Tax from dependent activity (employment relation) is witheld by employer. Self-employed individuals (entrepreneurs) have to file tax return (PIT return). Standard deadline is 1 April (for returns filled in paper form) further deadline is 1 May (for electronical form of filling) and 1 July if tax return is filled by tax advisor based on PoA.

Penalties: Standard penalty is 20% of the additionally assessed tax liability and Interest for late payment is 8% plus 2T repo rate of the Czech National Bank

Rulings: Advance rulings may be obtained regarding: 1) ratio of expense incurred on real estate used for both business and private purpose. 2) recognition of repair/technical improvement of asset

Withholding taxes

Type of Payment	Resident recipients		Non-residents recipients
	Company	Individual	Company	Individual
	Rate (%)	Rate (%)	Rate (%)	Rate (%)
Dividends	0/15	15	15/35	15/35
Interest	0/15	15	15/35	15/35
Royalties	0	0	15/35	15/35
Technical services	0	0	15/35	15/35

1. xxxxxxxx
2. xxxxxxxx

Branch remittance tax: None

Anti-avoidance legislation

Transfer pricing: Transfer pricing (TP) – applies standard arm´s length terms. The current market price shall be used between related parties and by the unjustified difference could be adjusted a tax base. Advance pricing agreements may be obtained from the Czech tax authority. TP documentation is not obligatory, but recommendable for significant transactions.

Interest restriction: Thin capitalization rules apply to loans and credits from related parties. The ratio of loans/credits to equity cannot exceed 4:1 (6:1 for banks and insurance comp.).

Controlled foreign companies: Czech company must include in its tax base certain types of income of its CFC, under set conditions.

Hybrid mismatches: Applicable – based on implementation of the ATAD Directive – not allowed to apply double deductions / non taxation

Disclosure requirements: Country by country report (CBC report) applicable and reporting of cross-border transactions.

Exit taxes: An exit tax mechanism has been implemented based on the ATAD Directive. Set transfers of assets from the CR abroad without a change of their ownership are treated as sales of these assets and as taxable income subject to 19% CIT.

General anti-avoidance rule: GAAR has been implemented based on the ATAD Directive and it is applied based on relevant courts decisions which interprets principle substance over form.

Digital services tax and Other significant anti-avoidance legislation: No

Value-added tax/Goods and services tax

Type of tax: Applies standard EU model of VAT based on the VAT Directive.

Standard rate: 21%

Reduced rates: 15% and 10%

Registration: Czech businesses must register for VAT where taxable supplies have exceeded 1 mil. CZK in the previous 12 months. Voluntary registration is possible. No registration threshold for foreign businesses

Filing and payment: VAT period – Monthly (with revenues over 10 mil. CZK) and Quarterly. VAT return deadline – 25th day after VAT period. VAT payment the same day.

Social security contributions

Social security employer – 24,8%  Social security employee – 6,5%

Health insurance employer – 9%  Health insurance employee – 4,5%

Self-employed

Social security – 29,2% Health insurance – 13,5%

Other taxes

Capital duty: No

Immovable property taxes: Local taxes – land tax, building tax. Immovable property tax is calculated based on the area of the real estate, its location, and its type, as well as the tax rate of each self-governing region.

Transfer tax: No

Stamp duty: No

Net wealth/worth tax: No

Inheritance/gift taxes: No

Other: None

Tax treaties

The Czech Republic has concluded 92 double taxation treaties. It is also a signatory to the OECD Multilateral Instrument.