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Czech Republic Income Taxes and Tax Laws













Last partial update, May 2014.

Czech Republic Tax Rates 2014.

The Czech income tax rate for individual's income in 2014 is flat, a 15% rate.
A tax rate of 22% applies to income exceeding 48 times the average salary.
Corporate tax in 2014 is 19%. Pension and investment funds pay 5% corporate tax. The rate of corporation tax is reduced constantly to encourage economic activity, so that for instance, the rate of corporation tax in 1992 was 45% as compared to the present rate of 19%.


Czech Republic Taxation of Individuals
An individual pays tax on his income as a wage earner or as a self-employed person. Tax for an individual who meets the criteria of a "permanent resident" of the Czech Republic is calculated on his income earned inside the Republic and abroad. A foreign resident who is employed in the Czech Republic pays tax only on income earned in the Republic.
An employer is bound to deduct, immediately on a monthly basis, the requisite tax from employees salaries. A self-employed person must prepay taxes that will be offset on making an annual tax return. The advances are determined on the basis of the previous year's tax return. In the case of a new business, the prepayments are calculated on the basis of estimates made by the owner of the business.
Certain payments are deductible from taxable income as will be specified later.

Czech Republic Reporting Dates
The tax year in the Czech Republic is the calendar year ending on December 31.
If your income is derived solely from a salary, you are not bound to file a yearly return. In all other cases, the annual return must be submitted by March 31 (3 months after the end of the tax year).

If you are represented by an authorized Czech tax advisor, you may make an application to submit the return by June 30.
A delay in submitting an annual return will entail fines, in most cases, of 10% of the tax payable. Fines are imposed even after tax has been prepaid.




Czech Republic Corporate Tax
  • Czech Republic Corporate tax in 2014 is 19%.
  • A tax of 15% is imposed on dividends paid by Czech corporations.
  • Dividend paid between 2 Czech companies is tax exempt subject to certain terms.
  • Income from interest is deemed ordinary income and as such is taxed at 19%.


  • Czech Republic Capital Gains
  • In general, capital gains in the Czech Republic are taxed as income for companies. Individuals pay generally 15% on their capital gains.
  • Capital gains from sale of shares by a company owning 10% or more is entitled to participation exemption under certain terms.
  • For an individual, gain from sale of main private dwelling, held for at least 2 years is tax exempt. Or,when not used as main residence, if held for more than 5 years.






  • Czech Republic Depreciation of Fixed Assets

    The regulations on depreciation were amended in 1999 to enable a company to depreciate an asset over a shorter period than in the past.
    As a general rule, the classes of fixed assets are divided into 6 groups (categories).




    No. of years of depreciation Class of fixed asset Category
    3 Automobiles and buses
    Computers
    Office equipment and machines
    1
    5 Machinery & equipment
    Trucks & tractors
    Non-tangible rights
    2
    10 Motors and metal structures
    Industrial & agricultural machinery & equipment
    Ships
    Elevators
    3
    20 Gas & oil pipelines
    Water distribution systems
    4
    30 Buildings
    Bridges
    Roads and canals
    5
    50 Office buildings, Hotels 6



    The company may select either the straight line or the accelerated method of depreciation. However, during the period of depreciation, the company may not alter the method of depreciation. Similarly, should the ownership of the asset change during the period of depreciation, the new purchaser may not alter the method of depreciation that was selected by the original owner.


    Czech Republic Losses
    In the Czech Republic losses can be carried forward for 5 years.
    There is no carryback of losses.


    Czech Republic Consolidated Account
    Consolidated tax returns are not allowed in the Czech Republic

    Czech Republic Thin Capitalisation
    Financial expenses related to loans from related parties are not tax deductible when the loan to equity ratio exceeds 4:1 (6:1 for banks and insurance companies).

    Czech Republic Deduction of Tax at Source

    Czech Republic Social Security:
    Mandatory social and health insurance payments are:
    Employer - 34%.
    Employee - 11%.
    Self employed pay mandatory 42.7% for social security and health insurance.


    Czech Republic Other Deductions

    Tax is deducted at source from the following payments to non-residents:
    Dividends-15%/35%.
    Royalties-15%/35%.
    Interest-15%/35%.
    Technical Fees 15%/35%.


    Note:
    Payment of dividend between EU companies, subject to conditions, is exempt from withholding tax.





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