Czech corporations are required to withhold tax on payments of dividends, interest, and royalties as follows (please note that this overview is indicative only and cannot be relied upon without checking the particular DTT, as each DTT has its own definition of dividends, interest, and royalties):
|Dividend (1)||Interest (2)||Royalties (3)|
|Non-resident corporations and individuals:|
|China, People’s Republic of||5/10||7.5||10|
|Democratic People’s Republic of Korea||10||0/10||10|
|Ireland, Republic of||5/15||0||10|
|Korea, Republic of||5||0/5||0/10|
|Serbia and Montenegro||10||0/10||5/10|
|United Arab Emirates||0/5||0||10|
- The lower rate applies if the recipient is a company that owns at least a certain amount of the capital or a certain amount of the voting shares of the company paying the dividend directly. Non-treaty residents: Dividends paid to residents of countries outside of the European Union and European Economic Area, and countries with which the Czech Republic does not have an enforceable DTT or TIEA, are subject to 35% WHT.
- Under domestic law, interest income from governmental bonds issued after 31 December 2020 are exempt. The lower rate applies mostly in situations when the interest is received by the government or a state-owned institution or is paid by the government. Non-treaty residents: Interest paid to residents of countries outside of the European Union and European Economic Area, and countries with which the Czech Republic does not have an enforceable DTT or TIEA, is subject to 35% WHT.
- The lower rate applies mostly to cultural royalties. Non-treaty residents: Royalties paid to residents of countries outside of the European Union and European Economic Area, and countries with which the Czech Republic does not have an enforceable DTT or TIEA, are subject to 35% WHT.
- In case that Switzerland (based on the Swiss law) does not levy any WHT on royalties paid to the Czech tax resident (not only Swiss tax residents), then the Czech Republic is allowed to reduce 10% WHT (as stated in Article 12 of the CZ-CHE DTT) to 5% WHT rate as a reciprocity provision with regard to 0% WHT in Switzerland.
- As Taiwan is not a separate country, a law (instead of a DTT) was introduced to implement the WHT rates vis-a-vis Taiwan.
Apart from dividends, interest, and royalties, Czech tax residents or Czech PEs are obligated to withhold tax vis-a-vis non-residents, inter alia, in the following cases:
- Payments for services provided by a non-resident in the Czech Republic.
- Provision of gifts and similar consideration-free transfers.
This treatment has to be applied unless an applicable DTT stipulates otherwise.