Czech Republic legal and accounting and tax considerations in 2023
Healy Consultants can assist our Clients with their tax obligations in the Czech Republic. Our Accounting Department will assist our Client to discharge their annual accounting and auditing obligations efficiently.
- All business entities may choose either a calendar year or accounting year as its tax year of assessment;
- Tax returns must be filed within 3 months of the end of the tax period. Any extension is granted if:
- The taxpayer is represented by a registered tax agent or;
- The taxpayer is subject to statutory accounting audit;
- Payments for taxes are due on the same date of the filing deadline;
- Business losses in Czech Republic can be carried forward for the next 5 years. However, carry back of losses is not allowed;
- There is no statutory tax audit cycle. However, entities are selected by the Tax Authority based on selected criteria including tax loss position, marketing costs or randomly.
VAT and corporate tax
- VAT is levied in Czech Republic at a standard rate of 21%;
- All businesses must register for VAT if its annual remittances in Czech Republic exceeds US$46,000;
- VAT returns are due by the 25th of the following month;
- All companies and foreign branches in Czech Republic are subject to a general corporate income tax rate at 19%; There is no branch remittance tax;
- The Czech Republic accesses the EU One Stop Shop (OSS) system that allows for a supplier to pay VAT in one region instead of two when a supplier is sending products to another EU country. While not compulsory, the OSS simplifies the fulfilment of VAT obligations.
Other tax considerations
- Withholding tax at a standard rate of 15% is applicable on i) dividends ii) royalties and iii) interests payable to non-resident companies;
- A higher rate of 35% withholding tax is applicable to companies residing in blacklist tax haven jurisdictions;
- Capital gains tax exemption applies if the seller is an EU/EEA resident company that holds at least 10% of the company for an uninterrupted period of 12 months or more;
- Corporate tax exemption on dividends received from a subsidiary is applicable under the following conditions:
- The distributing company is based in EU and our Client’s business has held 10% of its share capital for over 1 year or;
- The recipient company is tax resident in a country that has concluded a tax treaty with Czech Republic, has corporate tax rate of at least 12%, and holds 10% of its share capital for 1 year;
- Czech Republic has signed double taxation treaties with 81 countries, including i) United Kingdom ii) UAE and iii) China;
- Employers are required to remit a social security contribution of 9% to the health insurance and 25% to the social security fund based on their employees’ gross salary;
- In general, salaries in the Czech Republic are taxed at 15%.
Legal and compliance
Healy Consultants’ Compliance Department can assist our Clients to ensure that their company’s administrative and statutory obligations are met.
- All businesses in Czech Republic must comply with the new requirements for ‘founding deeds’ documents in accordance with Czech Act on Business Corporations 2014;
- For all legal transactions done on behalf of our Client through an attorney or local agent, a Power of Attorney form needs to be notarized through a Czech notary public;
- In accordance with the new Czech Business Corporations Act 2012, the minimum capital deposit is CZK1 (approximately US$0.50), instead of CZK 200,000 (approximately US$8,700);
- The Memorandum of Association may permit the representation of ownership interest in the form of certified security called a common certificate (in Czech “kmenový list”).
Investing in Czech Republic
On 1st May 2015, amendments on investment incentives in Czech Republic came into effect. As a strategic goal to stimulate the economy, increase production capacities and raise the standard of living in selected regions, the government of Czech Republic has made investment incentives available via the online platform CzechInvest, to include more investors for i) new businesses ii) production expansion iii) technological centres.
- Corporate income tax relief
- Full income tax relief can be applied for a period of ten years up to the amount of the state-aid ceiling;
- Partial income tax relief can be applied for a period of ten years up to the amount of the state-aid ceiling. Part of the tax due is calculated as the average for the three taxation periods preceding fulfilment.
- Cash grants for job creation
- Special regions will be evaluated every 6 months based on unemployment rate by the government;
- Cash grants will be available for businesses that creates jobs based on the following special regions:
- special industrial zone;
- regions with unemployment rate more than 50% of the national average;
- regions with unemployment rate more than 25% of the national average.
- Exemption from Property Tax
- Companies are eligible for property tax exemption for up to 5 years, upon approval by the municipality; The municipality determines the extent of the property-tax exemption.
- Cash Grants for Acquisition of Assets
- Cash grants will be extended to companies with strategic investments in the manufacturing industry or technology centres;
- The cash grants given is up to 10% of the eligible investment costs;
- For combined strategic investment in industry and technology centres, cash grants will be provided up to 12.5% of eligible investment costs.
- Corporate income tax relief