Czech Republic – Taxation of international executives

Taxation of international executives

Taxation of international executives

  

Income Tax

Tax returns and compliance

When are tax returns due? That is, what is the tax return due date?

The tax return has to be submitted by 1 April of the following year, or 1 May of the following year providing that the tax return is submitted by the taxpayer electronically (i.e. signed with the certified electronic signature or submitted through the electronic data box). In case that the tax return is prepared by a certified tax adviser or by a solicitor, the deadline is extended to 1 July of the following year.

In special cases the tax authority can postpone the date for submission of the tax return by up to 3 months at a written request of the taxpayer or their tax adviser (even if the deadline was already once prolonged due to filed power of attorney). The request needs to be filed before the respective deadline.

Residents

Generally, Czech tax residents are liable to declare and pay tax in the Czech Republic on their worldwide income, that is employment income, income from self-employment, rental income, investment income and capital gains, and other taxable income.

The deadlines for final tax payments are the same as for the tax return. The tax payment is transferred to the appropriate account of the tax authority under a unique tax identification number of the individual. In the case of foreigners, the tax identification number is generated by the tax authority upon registration.

Non-residents

Individuals who are Czech non-resident for tax purposes are subject to tax only on income from Czech sources. The deadlines for final tax payments are the same as for Czech tax residents.

Tax rates

What are the current income tax rates for residents and non-residents in the Czech Republic?

Residents

From the 1st January 2021 the super-gross salary concept was abolished. Instead, the aggregate income shall be subject to income tax which is calculated by applying a progressive tax rate schedule as follows:

  • 15% income tax will be applied on income up to 48 times the average wage (CZK 1,701,168 in 2021), and
  • 23% income tax will be applied on income exceeding 48 times the average wage (over CZK 1,701,168 in 2021)

In addition, there is a 15% flat income tax applicable on capital income from abroad which is taxed in so called the separate tax base.

Non-residents

The same as for Czech tax residents with the exception of members of board of directors whose remuneration for executive activities is subject to 15% final withholding rate.

Residence rules

For the purposes of taxation, how is an individual defined as a resident of the Czech Republic?

An individual will be considered Czech resident for tax purposes with worldwide income tax liability if:

his/her permanent residence (permanent abode) is in the Czech Republic or he/she resides usually in the Czech Republic.

Individuals who reside usually in the Czech Republic are understood to be persons who stay in the Czech Republic for at least 183 days in a given calendar year, either continuously or intermittently.

Is there, a de minimus number of days rule when it comes to residency start and end date? For example, a taxpayer can’t come back to the host country/territory for more than 10 days after their assignment is over and they repatriate.

Not applicable.

What if the assignee enters the country/territory before their assignment begins?

If the individual enters the country/territory before the assignment, the days spent in the Czech Republic are to be counted in the 183-day period for the purposes of determining the individual’s residence.

Termination of residence

Are there any tax compliance requirements when leaving the Czech Republic?

The tax authority shall be advised once foreign individual terminates their work activities and stay in the Czech Republic and thereby cancel their tax registration. The taxpayer has to file their annual income tax return for the year concerned including the income earned up to the termination of the residence. The tax return is to be filed within the standard statutory deadlines for filing.

What if the assignee comes back for a trip after residency has terminated?

Assuming that the individual comes back for a private trip after the residence was terminated, the entry does not have any personal income tax consequences.

Communication between immigration and taxation authorities

Do the Immigration authorities in the Czech Republic provide information to the local taxation authorities regarding when a person enters or leaves the Czech Republic?

Yes, the communication between both authorities is established and the tax authorities can contact the immigration authorities to obtain such information.

Filing requirements

Will an assignee have a filing requirement in the host country/territory after they leave the country/territory and repatriate?

The taxpayer also has to file their annual income tax return for the year in which the assignee leaves the Czech Republic, provided that in the year concerned, they performed activities in the Czech Republic and are not protected by applicable double tax treaty. The tax return is to be filed within the statutory deadlines for filing.

In the years following the year of leaving the Czech Republic, the assignee generally does not have any filing requirements.

However, please note that if the assignee received Czech-source income such as a bonus for the work carried out in the Czech Republic; or if they were granted with equity compensation such as stock options and worked in the Czech Republic between the moment of grant and vest/exercise, they may be liable to declare and pay tax on the proportionate part of the income from equity compensation/stock options in the year of option vest/exercise in the Czech Republic.

Economic employer approach

Do the taxation authorities in the Czech Republic adopt the economic employer approach to interpreting Article 15 of the Organisation for Economic Co-operation and Development (OECD) treaty? If no, are the taxation authorities in the Czech Republic considering the adoption of this interpretation of economic employer in the future?

Generally, the Czech Republic authorities adopt the economic employer approach to interpreting Article 15 of the OECD treaty providing that the seconded employee is working under the instructions of the Czech entity. Such seconded employee will be taxable in the

Czech Republic. That is, condition that the remuneration is paid on behalf of the employer who is not a resident of the Czech Republic is not met (usually Article 15 (2)b) of the double tax treaties). This approach (economic employer concept) also follows from the Czech tax legislation.

De minimus number of days

Are there a de minimus2 number of days before the local taxation authorities will apply the economic employer approach? If yes, what is the de minimus number of days?

Not applicable.

Types of taxable compensation

What categories are subject to income tax in general situations?

As a rule, it can be stated that all types of remuneration and benefits received by an employee for services rendered constitute taxable income regardless of where paid. Typical items of an expatriate compensation package that will be considered generally taxable are as follows:

  • base salary
  • school tuition reimbursement (cash consideration)
  • foreign location allowances
  • housing allowance (cash consideration)
  • housing provided by employer (rental contract is concluded between the employer and the landlord; employer pays rent directly to a landlord): fully taxable in case of a Czech tax resident; for Czech non-residents, housing provided by employer is exempt up to CZK3,500 per month
  • reimbursement of foreign and/or home country/territory taxes
  • home leave
  • company car provided by an employer for business and private purposes, 1 percent of the acquisition cost of the car (including VAT) per each month of usage is considered taxable benefit of the employee
  • cash allowances of any kind
  • expenses during business trips reimbursed by an employer (travel reimbursements) exceeding limits stipulated by Czech Labor Code.

Intra-group statutory directors

Will a non-resident of the Czech Republic who, as part of their employment within a group company, is also appointed as a statutory director (i.e., member of the Board of Directors in a group company situated in the Czech Republic) trigger a personal tax liability in the Czech Republic, even though no separate director's fee/remuneration is paid for their duties as a board member?

If there is no remuneration for director’s activities agreed there should be no personal tax liability of the director in the Czech Republic under condition that there is no recharge/allocation of part of their salary to the Czech company. If such recharge/allocation is realized, very likely shall be reclassified to director’s fee which shall be taxable in the Czech Republic regardless whether the activities are physically rendered in the Czech Republic or not.

  • Will the taxation be triggered irrespective of whether or not the board member is physically present at the board meetings in the Czech Republic Taxation is triggered irrespective of whether or not the board member is physically in the Czech Republic.
  • Will the answer be different if the cost directly or indirectly is charged to/allocated to the company situated in the Czech Republic (i.e., as a general management fee where the duties rendered as a board member is included)? Yes, see under letter a) above.
  • In the case that a tax liability is triggered, how will the taxable income be determined?

Very likely the whole amount recharged, including any locally provided benefits, shall be considered as director’s fee and shall be subject to personal taxation in the Czech Republic. Generally, the remuneration should be allocated based on the time spent while doing board member’s activities to total working time of the individual.

Tax-exempt income

Are there any areas of income that are exempt from taxation in the Czech Republic? If so, please provide a general definition of these areas.

The Czech tax legislation defines certain tax-exempt considerations, such as some employees’ benefits-in-kind provided in non-cash form by an employer as possibilities to use health care, sport, cultural, or educational facilities. Such considerations have to be provided from the employer's tax non-deductible costs.

Non-resident employees performing work for their parent company (employer) registered abroad can enjoy total tax exemption provided that the period relating to performance of these activities does not exceed 183 days in any 12-month period (or period as modified by the relevant double tax treaty) and their work is not carried on in a permanent establishment.

Expatriate concessions

Are there any concessions made for expatriates in the Czech Republic?

None.

Salary earned from working abroad

Is salary earned from working abroad taxed in the Czech Republic?

If so, how? Since the residents are liable to declare and tax their worldwide income in the Czech Republic, the income earned by a Czech resident from working abroad is subject to Czech tax (according to a respective double tax treaty or in accordance with the Czech Act in Income Taxes). Double taxation avoidance is applied according to the relevant double tax treaty.

Salary earned abroad by a Czech tax non-resident is not taxable in the Czech Republic.

Taxation of investment income and capital gains

Are investment income and capital gains taxed in the Czech Republic? If so, how?

Generally, Czech tax residents are liable to tax on their worldwide income, including investment income and capital gains, in the Czech Republic. Individuals who are not Czech resident for tax purposes are subject to tax only on their income from Czech sources.

Basically, income in the form of interest, dividends, settlement shares, and silent partners’ shares has tax withheld at the source, if from Czech sources.

Dividends, interest, and rental income

Interest and dividends earned by Czech tax resident are generally taxable in the Czech Republic.

Interest and dividends from Czech sources are subject to 15 percent flat tax rate, which is withheld at the source by the payer of the income (bank, financial institution, etc.).

Interest and dividends derived from sources abroad are to be declared and taxed through personal income tax return, where they are included in a separate tax base subject to the flat rate of 15 percent or alternatively they can be included in the general taxpayer’s tax base subject to the progressive tax rates. . Double tax avoidance is applied according to the relevant double tax treaty.

Rental income (gross amount) can be reduced either by actually incurred expenses according to the Czech tax legislation or by 30 percent lump sum, maximum annual amount of lump-sum expenses is CZK600,000.

Gains from stock option exercises

Residency status

Taxable at:

 

Grant

Vest

Exercis e

Resident

N

N

Y

Non-resident

N

N

Y*

Other (if applicable)

N/A

N/A

N/A

* Provided that between the grant and vest/exercise (depending on the SOP Plan) of the stock option, the employee was working in the Czech Republic and the stock option relates to the work performed within this period; then a proportion of the income from the stock option (attributable to the time spent in the Czech Republic) should be taxed in the Czech Republic.

Generally, the granting of stock options is not a taxable moment, provided that the option is granted for free and the employee does not have any rights to dispose of the option/shares. The vest is not a taxable moment, assuming that the employee does not acquire the shares automatically at the vest.

The taxable moment is the exercise of the option that is when the employee actually acquires shares. The taxable amount is the market value of the shares at the moment of exercise, or the difference between the market value at the moment of exercise reduced by an amount paid by the employee for the shares. Income from stock options granted by the employer is taxable as employment income.

Foreign exchange gains and losses

The foreign exchange gains realized are tax exempt generally, provided that they are not realized as a result of trading with currencies.

Principal residence gains and losses

Gains from a sale of principal residence realized by Czech tax resident are taxable as other income and as such included in a general tax base (subject to progressive tax rates).

The taxable amount is determined as the sales price reduced by the original acquisition price. Any losses incurred can be offset only against gains from sale of other immovable properties and cannot be carried forward.

Gains from sale of principal residence are tax-free provided the individual lived in this residence for at least two years right before the sale or provided funds from the sale are used for buying his/her other principal residence under certain conditions.

Capital gains and losses

Capital gains on disposal of securities are tax-free only after the securities have been held more than 3 years. Any capital gains realized on the disposal of securities up to annual gross sale amount of CZK100,000 are tax exempt for the taxpayer.

The capital gains realized on the sale of ownership interest in business companies (limited liability company) are tax-free only after the ownership interest has been held more than 5 years.

The capital gains are taxed in the Czech Republic through the tax return, where they are included in the taxpayer’s general tax base (subject to progressive tax rates).

Any capital losses from sale of securities can be offset against gains from sale of other securities only and cannot be carried forward.

Gifts

The gift tax was abolished as of 1 January 2014 and it was implemented into the Czech Income Tax Act. Income Tax (at the progressive rates ) is generally imposed on assets donated. The tax legislation allows for an exemption from income tax of gifts between relatives, between the persons living in the same household for a period at least 1 year before the gift was provided and exemption applies under certain circumstances in case of gifts provided to the trust. Moreover, the gifts up to the annual value of CZK15,000 are generally exempt from the income tax. Gifts provided abroad are generally subject to 15 percent withholding tax (in case of EU residents, EEA residents, bilateral double tax treaty country/territory residents or residents of a country/territory having a bilateral agreement on exchange of information in tax matters concluded with the Czech Republic) unless the relevant double tax treaty does not provide otherwise. Otherwise, 35 percent withholding tax is applicable.

Additional capital gains tax (CGT) issues and exceptions

Are there additional capital gains tax (CGT) issues in the Czech Republic? If so, please discuss?

Not applicable.

Are there capital gains tax exceptions in the Czech Republic? If so, please discuss?

Capital gains on disposal of securities are tax-free only after the securities have been held more than 3 years. However, the capital gains realized on the disposal of securities up to the annual amount of CZK100,000 are tax exempt for the taxpayer.

The capital gain realized on the sale of ownership interest in business company (limited liability company) is tax-free only after the ownership interest has been held more than 5 years.

General deductions from income

What are the general deductions from income allowed in the Czech Republic?

The Czech tax legislation provides for the following deductions up to limits stipulated by the Czech tax legislative from tax base. The following deductions can be claimed by Czech tax resident and also by Czech tax non-resident who have more than 90 percent of the worldwide income from Czech sources and who is the tax resident in other EU Member country/territory or EEA country/territory.

  • Interest on mortgage provided in the Czech Republic or abroad, provided that further conditions stipulated by the Czech tax legislation are met (particularly that the mortgage has to be used for financing own permanent housing/accommodation of the individual or family members).
  • Contributions paid by an individual to a private pension fund in the Czech Republic or private pension insurance scheme in another EU (EEA) country/territory, provided that further conditions stipulated by the Czech tax legislation are met.
  • Contributions paid by an individual to a private life insurance scheme or private pension insurance scheme in the Czech Republic or in another EU (EEA) country/territory, provided that further conditions stipulated by the Czech tax legislation are met.
  • Cash or non-cash charitable contributions made to defined Czech entities and individuals as well as similar entities and individuals registered in another EU (EEA) country/territory.

Tax reimbursement methods

What are the tax reimbursement methods generally used by employers in the Czech Republic?

Tax reimbursements can be grossed up on an accrual basis or on the year rollover basis.

If accrual basis is used, the company incurs a liability to pay taxes on behalf of the employee. Such taxes can be included in taxable income in the year in which they accrue, regardless of when paid.

Calculation of estimates/prepayments/withholding

How are estimates/prepayments/withholding of tax handled in the Czech Republic? For example, Pay-As-You-Earn (PAYE), Pay-As-You-Go (PAYG), and so on.

Pay-as-you-go (PAYG) withholding

The income of an individual paid by a Czech entity based on a local contract with a Czech employer (Czech entity or Czech branch) or working in the Czech Republic under the economic employer is subject to monthly wage tax withholdings. The withholdings are made by the Czech / economic employer through a payroll agenda. Similarly, the foreign entity employing individuals in the Czech Republic for more than 183 days or foreign entity having a permanent establishment (other than created due to rendering of services) in the Czech Republic will have the duty to register as a payroll agent and make monthly wage tax withholdings.

PAYG installments

Czech and foreign employees employed and paid by a foreign employer with no branch in the Czech Republic must make tax installments (except for employees of foreign employer that is liable to act as payroll agent; see above). The amounts payable and the payment frequency are determined by reference to the tax liability of the previous year; it follows, that the prepayments are not due in the first year of the individual’s activities in the Czech Republic.

  • If the tax liability of the previous years was CZK30,000 or less, the tax is payable in a single installment by the due date for filing the tax return; no prepayments are due in the following year.
  • If the tax liability of the previous year was higher than CZK30,000 but less than CZK150,000, the tax prepayments are payable biannually in an amount of 40 percent of the previous year’s tax liability. The first prepayment is due by the 15th day of the sixth month after the deadline for filing the tax return (tax liability payment).
  • If the tax liability of the previous year was higher than CZK150,000, the tax is payable quarterly in an amount of 25 percent of the previous year’s tax liability. The first prepayment is due no later than by the 15th day of the third month after the deadline for filing the tax return (tax liability payment).

Any balance outstanding is payable by the due date for filing of the tax return.

When are estimates/prepayments/withholding of tax due in the Czech Republic? For example: monthly, annually, both, and so on.

Please see above.

Relief for foreign taxes

Is there any Relief for Foreign Taxes in the Czech Republic? For example, a foreign tax credit (FTC) system, double taxation treaties, and so on?

The Czech Republic has a broad network of double tax treaties - both former Czechoslovakian and the new Czech treaties are in force. Beneficiaries of income tax treaties may be exempt from income tax on certain income but such exempt income must be reported in a tax return. The method of bilateral relief from double taxation depends on the particular treaty. However, from 2008 tax period the taxpayer may also choose the method of exemption with progression with respect to employment income from a treaty country/territory under the local Income Tax Act regardless of the double avoidance method stipulated by the respective double tax treaty whichever is more favorable for them, i.e. the double taxation avoidance under the treaty or under the local ITA, providing that certain conditions are met.

General tax credits

What are the general tax credits that may be claimed in the Czech Republic? Please list below.

The following tax credit can be claimed in the Czech Republic.

  • Tax credit of CZK27,840 per year for the taxpayer.

The following credits can be claimed by Czech tax resident and also by Czech tax non- resident who have more than 90 percent of the worldwide income from Czech sources and who is at the same time tax resident of other EU Member country/territory or EEA Member country/territory.

  • Tax credit of CZK15,204 annually per dependent child, CZK19,404 for a second dependent child and CZK24,204 for third and each subsequent dependent child living with taxpayer in the common household in EU Member country/territory or EEA Member country/territory..
  • Tax credit of CZK24,840 for a spouse whose own worldwide income does not exceed CZK68,000 per year.

Sample tax calculation

This calculation assumes a married taxpayer resident in the Czech Republic with two dependent children whose 3-year assignment begins 1 January 2019 and ends 31 December2021. The taxpayer’s base salary is 100,000 US dollars (USD) and the calculation covers 3 years. The spouse’s income does not exceed CZK68,000 per year.

 

2019

USD

2020

USD

2021

USD

Salary

100,000

100,000

100,000

Bonus

20,000

20,000

20,000

Cost-of-living allowance

10,000

10,000

10,000

Housing allowance

12,000

12,000

12,000

Company car

6,000

6,000

6,000

Moving expense reimbursement

20,000

0

20,000

Home leave

0

5,000

0

Education allowance

3,000

3,000

3,000

Interest income from non-local sources

6,000

6,000

6,000

Exchange rate used for calculation: USD1.00 = CZK22.00.

Other assumptions

All earned income is attributable to local sources.

Bonuses are paid at the end of each tax year and accrue evenly throughout the year. Interest income is not remitted to the Czech Republic.

The company car is used for business and private purposes and originally cost USD50,000.

The employee is deemed resident throughout the assignment. Tax treaties and totalization agreements are ignored for the purpose of this calculation. This means that the taxpayer is subject to Czech social security scheme.

Calculation of taxable income

Year-ended

2019

CZK

2020

CZK

2021

CZK

Days in the Czech Republic during year

365

365

365

Earned income subject to income tax

 

 

 

Salary

2,200,000

2,200,000

2,200,000

Bonus

440,000

440,000

440,000

Cost-of-living allowance

220,000

220,000

220,000

Net housing allowance

264,000

264,000

264,000

Company car*

132,000

132,000

132,000

Moving expense reimbursement

440,000

0

440,000

Home leave

0

110,000

0

Education allowance

66,000

66,000

66,000

Taxable employment income

3,762,000

3,432,000

3,762,000

Other income - interest

132,000

132,000

132,000

Total taxable income

3,894,000

3,564,000

3,894,000

* Assuming it is a car benefit, that is car available for business and private purposes, assessed in an amount of 1 percent from the acquisition price (USD50,000) per each month that is USD6,000(CZK132,000) per 12 months.

Calculation of tax liability

 

2019

CZK

2020

CZK

2021

CZK

Taxable income subject to partial tax base

3,762,000

3,432,000

3,762,000

Social security (employer's part)

730,968*

723,556*

760,470*

Social security (employee's part)

271,311

263,125

279,866

Tax base from employment income

4,492,968

4,155,556

3,762,000

Interest income

132,000

132,000

132,000

Total tax base

4,624,968

4,287,556

3,894,000

Solidarity tax increase**

153,472 

123,195

N/A

Czech Republic tax thereon

693,735

643,125

759,509

Total income tax

847,207

766,320

759,509

Foreign tax credits

0

0

0

Less:

 

 

 

Domestic tax rebates (dependent spouse rebate)

 

 

 

Per dependent children

34,608

34,608

34,608

Per individual

24,840

24,840

27,840

Per dependent spouse

24,840

24,840

24,840

Total Czech Republic tax

762,919

682,032

672,221

Social security (employee's part)

271,311

263,125

279,866


** Applicable on income exceeding annual cap for social insurance for 2019 and 2020. From 2021 the solidarity tax and taxation based on the super-gross calculation was abolished, instead the progressive tax rates of will apply on annual income

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Special considerations for short-term assignments

Residency rules

Are there special residency considerations for short-term assignments?

Not applicable.

Payroll considerations

Are there special payroll considerations for short-term assignments?

Not applicable.

Taxable income

What income will be taxed during short-term assignments?

The scope of taxation would depend on the residence status of the assignee.

If the assignee is a Czech tax non-resident, their employment income might be tax exempt, provided that the individual spends less than 183 days in any 12-month period (or as modified by the applicable double tax treaty) the Czech Republic, the salary would not be paid or recharged to the Czech entity and there would be no permanent establishment of the foreign entity in the Czech Republic. If at least one of these conditions is not met, the non- resident is liable for tax in the Czech Republic for the Czech-source income.

Should the assignee be considered a Czech tax resident (which is not likely), in the Czech Republic, his/her worldwide income earned during the period of Czech tax residence would be taxable.

Additional considerations

Are there any additional considerations that should be considered before initiating a short- term assignment in the Czech Republic?

None.

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Other taxes and levies

Social security tax

Gift, wealth, estate, and/or inheritance tax

Real estate tax

Sales/VAT tax

Unemployment tax

Other taxes

All additional tax information is summarized by KPMG Ceska republika, s.r.o., the Czech Republic member firm of KPMG International, based on the Act 357/1992 Coll., on Inheritance, Gift and Real Estate Transfer Taxes and on the social and health security legislation (Act No. 592/1992 Coll., No. 589/1992 Coll. and No. 54/1956 Coll.)

Social security tax

Are there social security/social insurance taxes in the Czech Republic? If so, what are the rates for employers and employees?

Employer and employee

Type of insurance

Paid by employer

Paid by employee

Total

Social security

24.8.0%

6.5%

31.5%

Pension insurance

21.5%

6.5%1

28.0%

Sickness insurance

2.1%

0.0%

2.3%

Unemployment insurance

1.2%

0.0%

1.2%

Health insurance

9.0%

4.5%

13.5%

Total

33,8%

11.0%1

44.8%

 

The above contributions (except for health insurance contributions) are calculated from the social security assessment base, which is subject to cap. For 2021, the annual cap amounts to CZK 1,701,168.

There is no cap for health insurance contributions as of 1 January 2013.

Since the accession of the Czech Republic to the EU as of 1 May 2004, the EC Regulation on Social Security is also applied, if relevant.

Seconded expatriates may be exempted from the obligatory contributions under certain conditions, only if their employer is from a country with which the Czech Republic did not conclude a bilateral agreement on social security. For these purposes the EC Regulation represents a bilateral treaty, that is, the assignees, who are EU member nationals working in the Czech Republic are generally liable to make Czech obligatory contributions to the Czech scheme. Under certain conditions, they may be exempt from this obligation. For these purposes, the A1 certificate should be obtained.

As of 1 January 2012, remuneration paid to both statutory bodies of a limited liability company (jednatel) and to the members of a statutory bodies of joint-stock companies (members of board of directors, supervisory boards) for their executive activities shall be subject to health and social insurance. Obligation to pay social insurance contributions (sickness and pension insurance) however arises only if remuneration received for such statutory activities exceeds amount of CZK3,500 monthly (for 2021).

Gift, wealth, estate, and/or inheritance tax

There is no wealth, estate and inheritance t tax in the Czech Republic.

The gift tax is implemented into the Czech Income Tax Act. Income Tax (at the progressive tax rates) is generally imposed on assets donated.

The tax legislation allows for an exemption from income tax of gifts between relatives, between the persons living in the same household for a period at least 1 year before the gift was provided and exemption applies under certain circumstances in case of gifts provided to the trust. Moreover, the gifts up to the annual value of CZK15,000 are generally exempt from the income tax.

Gifts provided abroad are generally subject to 15 percent withholding tax (in case of EU residents, EEA residents, bilateral double tax treaty country/territory residents or residents of a country/territory having a bilateral agreement on exchange of information in tax matters concluded with the Czech Republic) unless the relevant double tax treaty does not provide otherwise. Otherwise, 35 percent withholding tax is applicable.

Real estate tax

Are there real estate taxes in the Czech Republic?

This tax is paid by house and landowners.

The tax on land is based on the acreage and the prices of land in various parts of the Czech Republic. The tax rate for agricultural land ranges from 0.25 percent to 0.75 percent of the tax base, depending on the type of land and from CZK0.20 to CZK5 per m2 for other land. For building land (value of CZK per m2), the rate is further multiplied by coefficient determined by the size of the appropriate municipality; it varies from one to five.

The tax on houses and flats is based on the floor space.

The tax rate ranges between CZK2 to CZK10 and has to be increased by CZK0.75 for each other floor. The rate is further multiplied by a coefficient determined by the size of the appropriate municipality; it varies from one to five.

The final tax liability (for land as well as houses and flats) can be multiplied by local coefficient of two, three, four, and/or five if determined by municipality in the generally mandatory public notice.

Sales/VAT tax

Are there sales and/or value-added taxes in the Czech Republic?

There are two types of indirect taxes: value-added tax (VAT) which is charged on most supplies of goods and services; and excise duties which is charged on supplies of specific goods such as fuels, beer, wine, spirits, and tobacco.

Unemployment tax

Are there unemployment taxes in the Czech Republic?

Employer’s are obliged to pay unemployment contributions which are part of obligatory social security contributions.

Part of the contributions on social security is intended for a state policy of employment.

Other taxes

Are there additional taxes in the Czech Republic that may be relevant to the general assignee? For example, customs tax, excise tax, stamp tax, and so on.

Local tax

There are no local taxes in the Czech Republic.

Land tax

There are taxes on land and buildings imposed on owners in the Czech Republic. These taxes are due annually. Please see the real estate tax section.

Nevertheless, it is not usually applicable to foreign nationals as their ability to own property in the Czech Republic is limited. For EU citizens, it was possible to own real estate in the Czech Republic since 1 May 2004 if certain conditions were met (such as the individual has a long- term residence permit in the Czech Republic). As of 1 May 2009 however, EU citizens and third country nationals are able to own property in the Czech Republic without any restrictions.

Other taxes

The tax on the transfer of immovable property (mainly a sale of property) was abolished during 2020 with the effects as of December 2019.

Foreign Financial Assets

Is there a requirement to declare/report offshore assets (e.g., foreign financial accounts, securities) to the country/territory’s fiscal or banking authorities?

There is no specific duty of the taxpayer to report their offshore assets to the banks or to the tax administrator.

The individual taxpayers are obliged to report to the tax administrator their income higher than CZK5,000,000 if such income is exempted from personal income tax by the end of the period for filing an annual tax return.

Under certain circumstances the taxpayer is obliged to provide based on the tax administrator’s or Czech National Bank’s request with a declaration of the origin of their income. The tax authority is entitled to require such reporting in cases where the tax administrator has reasonable doubts that the taxpayer’s income reported do not correspond to their consumption.

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Disclaimer

All information contained in this publication is summarized by KPMG Česká republika, s.r.o., the Czech Republic member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. The information contained in this publication is based on the Income Taxes Act No. 586/1992 Coll. as subsequently amended, Act 280/2009 Coll.onTax Administration and on the social and health security legislation (Act No. 592/1992 Coll., No. 589/1992 Coll., No. 48/1997 Coll. and No. 54/1956 Coll.).