Dividend Tax in Czech Republic
Dividend Tax in Czech RepublicUpdated on Tuesday 11th April 2017
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Czech Republic applies the dividend tax at different rates, depending on the residency of the beneficiary and on the tax treaties signed by the local representatives with other states. A dividend represents a portion of the earnings incurred by the company which have to be paid to the company’s shareholders. Our team of lawyers in Czech Republic can offer an in-depth presentation on the regulations referring to Czech dividends and to their taxation.
Taxation of Czech dividends
The taxation legislation applicable in Czech Republic specifies that the payments performed by local companies - in the form of dividends, are to be taxed, as a general rule.
However, there are certain exemptions applicable in this case, provided that several conditions are met. Our team of Czech lawyers can offer more details on this matter.
The taxation of dividends in Czech Republic is generally imposed at the standard rate of 15%.
Parent – Subsidiary Directive in Czech Republic
In the situation in which the Czech company falls under the regulations of the European Union’s Parent – Subsidiary Directive, the dividend payments can be exempted from the withholding tax applicable in this case. It is important to know that the regulation is applicable to the companies which are registered in a EU member state, but also to those incorporated in Iceland, Norway and Switzerland.
A compulsory requirement in this case is that the Czech company will perform payments to its parent company, located in one of the above mentioned jurisdictions.
The provision can be enforced as long as the parent company owns 10% of the Czech business for at least 12 months (and the duration can’t be interrupted).
Foreign investors operating in Czech Republic must know that dividend payments carried out between two local companies will also be exempted from paying the withholding tax on dividends.
Czech Republic has concluded numerous treaties for the avoidance of double taxation and investors should know that, in the case of companies which are not direct beneficiaries of such agreements, the withholding tax on dividends will be imposed at the rate of 35%.
We invite businessmen to contact our law firm in Czech Republic for further legal information referring to the dividend tax.