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||0/7.5||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|
General note: The WHT rates stipulated by the relevant DTT can, in most cases, be applied by the Czech tax-resident corporation without the need to seek for a pre-approval or similar procedure with the Czech tax authorities. The Czech corporation must be prepared the prove to Czech tax authorities that the DTT provisions were applied correctly; usually the minimum requirement for the Czech corporation is to have available the tax residency certificate of the non-resident recipient of the income and confirmation that the recipient is the beneficial owner of the respective income.
- The general WHT rate for dividends is 15% (35% for dividends paid to residents of non-EU and non-EEA countries with which the Czech Republic does not have an enforceable DTT or TIEA in place). If the DTT provides for two rates, the lower rate applies if the recipient of the dividends is a company that directly owns at least a certain amount of the capital or a certain amount of the voting shares of the company paying the dividend.
- The general WHT rate for interest paid to non-residents is 15% (35% for interest paid to residents of non-EU and non-EEA countries with which the Czech Republic does not have an enforceable DTT or TIEA in place). If the DTT provides for two rates, the lower rate applies mostly in situations when the interest is received by the government or a state-owned institution. Under domestic law, interest income from Czech governmental bonds is exempt. Furthermore, interest from bonds issued by Czech companies abroad (i.e. issued under foreign law) is also exempt from the WHT, provided that the bondholder is not a related party of the issuer.
- The general WHT rate for royalties paid to non-residents is 15% (35% for royalties paid to residents of non-EU and non-EEA countries with which the Czech Republic does not have an enforceable DTT or TIEA in place). If the DTT provides for two rates, the lower rate applies mostly to cultural royalties.
- 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.
- There is no DTT in place with Taiwan. A special law was introduced by the Czech government (instead of a DTT) to implement the WHT rates with respect to Taiwan.
Apart from dividends, interest, and royalties, Czech tax residents or Czech PEs are obligated to withhold tax from Czech-source income of non-residents, among others, 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.