Czech Republic tax system: audit, reporting and optimization of taxation of Czech companies and individuals: VAT, income tax and capital gains
Basic taxes (briefly)
|Corporate tax (in detail)||Income tax is paid at the rate of 19%. With regard to income in the form of dividends, tax is paid at the rate of 15%|
|Capital gains tax. Details||generally included with other taxable income and taxed at the regular corporate income tax rate|
|VAT. Details||The standard VAT rate is 21%. Reduced rates of 15% and 10% apply to some goods and services|
|Other taxes||Social contributions, Real estate tax|
International tax agreement
|Albania, Armenia, Australia, Austria, Azerbaijan, Bahrain, Barbados, Belarus, Belgium, Bosnia and Herzegovina, Brazil, Bulgaria, Canada, Chile, China, Colombia, Croatia, Cyprus, Denmark, Estonia, Ethiopia, Finland, Former Yugoslav Republic of Macedonia, France, Georgia, Germany, Greece, Hong Kong (China), Hungary, Iceland, India, Indonesia, Iran, Ireland, Israel, Italy, Japan, Jordan, Kazakhstan, Korea (Democratic People's Republic of), Korea (Republic of), Kosovo, Kuwait, Latvia, Lebanon, Liechtenstein, Lithuania, Luxembourg, Malaysia, Malta, Mexico, Moldova (Republic of), Mongolia, Montenegro, Morocco, Netherlands, New Zealand, Nigeria, Norway, Pakistan, Panama, Philippines, Poland, Portugal, Romania, Russian Federation, Saudi Arabia, Serbia, Singapore, Slovakia, Slovenia, South Africa, Spain, Sri Lanka, Sweden, Switzerland, Syrian Arab Republic, Tajikistan, Thailand, Tunisia, Turkey, Turkmenistan, Ukraine, United Arab Emirates, United States, Uzbekistan, Venezuela, Viet nam|
|Andorra, Aruba, Bahamas, Beliz, Bermuda, Cayman Islands, Cook Islands, Guernsey, Isle of Man, Jersey, Monaco, San Marino, Sint Maarten, Virgin Islands, British|
Personal income tax
Czech tax residents pay tax on their worldwide income, non-residents – on income from Czech sources.
The income tax is paid at 15% on income up to CZK 1,867,728 and at 23% on the excess.
Certain types of income from foreign sources, such as dividends and interest, are included in a separate tax base and taxed at the rate of 15%. Dividends and interest received by residents from Czech companies are subject to 15% withholding tax.
Gains from the sale of assets are included in the general tax base. However, there are various exemptions. Thus, income from the sale of securities is tax exempt if securities have been held for at least 3 years, or if the income does not exceed CZK 100,000; income from the sale of participation in limited liability companies is tax exempt provided the participation has been held for at least 5 years; income from the sale of a house or an apartment is tax exempt if the property has been owned for at least 2 years, etc. Gains from the sale of assets used for business purposes are subject to tax.
Corporate income tax
Czech companies pay corporate income tax on their worldwide income, while foreign companies – on income from Czech sources.
The corporate income tax rate is 19%.
Dividend income is subject to tax at the rate of 15%.
Gains from the sale of assets are included in the general tax base.
Gains from the sale of shares and dividends are tax exempt if the Czech parent company has held at least 10% of shares of a Czech subsidiary or of an EU company for at least 12 months, and both companies are taxable, and certain other conditions are met.
Gains from the sale of shares in and dividends from non-EU companies are tax exempt if there is a double tax treaty with the respective country, the subsidiary is taxed at least at 12%, and the above criteria for the size of participation and holding period are met.
A foreign company is considered a controlled foreign company (CFC) if more than 50% of its capital or voting rights or rights to profits is held, directly or indirectly, solely or jointly with related parties, by a Czech company, and if the foreign company does not conduct genuine economic activity and is taxed at a rate of less than 50% of the tax that would otherwise be payable in the Czech Republic.
In this case, the CFC’s non-distributed profit from passive income is included in the tax base of the controlling Czech entity. For these purposes, passive income includes interest, dividends, royalties, lease income, capital gains from the sale of shares, income from banking and insurance activities and other financial services, income from the sale of goods and provision of services in transactions with related parties with little value added.
Payment of dividends, interest and royalties is subject to 15% withholding tax.
Dividends, interest, and royalties paid to non-DTT (Double Tax Treaty) or non-TIEA (Tax Information Exchange Treaty) countries are taxed at 35%.
Tax rates are reduceable under double tax treaties and EU directives.
The standard VAT rate is 21%.
Some goods and services are subject to the reduced rates of 15% and 10%.
Social security contributions
Social security contributions are 6.5% for the employee and 24.8% for the employer. At the same time, this contribution is not paid on remuneration exceeding the average salary increased 48 times (i.e. CZK 1,701,168).
The health insurance contribution is 4.5% for the employee and 9% for the employer.
Immovable property tax
Immovable property tax is levied on land and buildings.
The rates are set by local authorities and vary greatly depending on the location and type of the property.
Double tax agreements
The Czech Republic has entered a number of double tax and tax information exchange mechanisms:
90 DTCs: Albania, Armenia, Australia, Austria, Azerbaijan, Bahrain, Barbados, Belgium, Belize, Bosnia and Herzegovina, Brazil, Bulgaria, Canada, Chile, China, Colombia, Croatia, Cyprus, Denmark, Estonia, Ethiopia, Finland, France, Georgia, Germany, Greece, Hong Kong, Hungary, Iceland, India, Indonesia, Iran, Ireland, Israel, Italy, Japan, Jordan, Kazakhstan, Korea (Republic of), Kosovo, Kuwait, Latvia, Lebanon, Liechtenstein, Lithuania, Luxembourg, Macedonia, Malaysia, Malta, Moldova, Mongolia, Montenegro, Morocco, Netherlands, New Zealand, Nigeria, Norway, Pakistan, Panama, Philippines, Poland, Portugal, Romania, Russia, Saudi Arabia, Serbia, Singapore, Slovakia, Slovenia, South Africa, Spain, Sri Lanka, Sweden, Switzerland, Syria, Tajikistan, Thailand, Tunisia, Turkey, Turkmenistan, UAE, Ukraine, USA, Uzbekistan, Venezuela, Vietnam.
14 TIEAs: Andorra, Aruba, Bahamas, Belize, Bermuda, British Virgin Islands, Cayman Islands, Cook Islands, Guernsey, Isle of Man, Jersey, Monaco, Saint Martin, San Marino.
Foreign exchange transactions can generally be made without restrictions.
Taxes of Czechia
|Min. rate for corporate tax||19%|
|Capital gains tax||Regular rate|