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Taxation in Czech Republic
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Taxation in Czech Republic

Corporate Tax

Standard rate: 24%

Resident companies are taxed on their worldwide income; non-resident companies are taxed only on Czech-source income. A company is resident if its legal seat or place of management is in the Czech Republic. Corporate tax is charged at a flat rate of 24%. Generally, dividends are not included in taxable income but are subject to a final withholding tax of 15%. Dividends are exempt from the tax if conditions for application of the EC Parent-Subsidiary EU Directive are met. Partnerships are treated as fiscally transparent, with the partners taxed on their shares of partnership profits.

Individual Tax

Progressive rates rising to 32%

Resident individuals are taxed on their worldwide income. An individual who has a permanent home in the country or stays there for 183 days in the calendar year is resident for tax purposes. Most income is aggregated and charged to tax at progressive rates up to 32%. Dividends are subject to a final withholding tax of 15%.

Capital Gains

Generally taxed as income

Capital gains of companies and individuals are generally taxed as income. Individuals are exempt from tax on gains on the disposal of non-business property held for five years or the sale of a dwelling that has been the main residence for at least two years. Capital gains derived from the sale of shares are tax-exempt for individuals if the shares have been held for more than six months in the case of a joint stock company and five years in the case of a limited liability company.

Indirect Tax

Standard rate: 19% ; Lower rate: 5%

Value-added tax (VAT) applies to most transactions. A lower rate of 5% applies to foodstuffs, pharmaceutical products and some services. Exemptions include the transfer and lease of land and buildings, financial and insurance services, medical services and education. Exports are zero-rated.

Registration is compulsory for businesses with an annual turnover above CZK 1m.

Tax Administration and Compliance

Tax year: Corporations: accounting year ; Individuals: calendar year

Corporate taxpayers make either two or four advance tax payments, depending on the size of the previous year’s liability. A self-assessment tax return must be filed by the end of the third month following the tax year, but the deadline may be extended on request.

Employment income is generally taxed by withholding.

Additional Tax Information

Withholding Taxes

Dividends 15%, Interest 15%, Royalties 25%. Rates may be reduced by tax treaties or EC directives.

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