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8.2.2. Withholding Taxes

Below is a discussion of domestic withholding tax rules for most of the common cross border payments.

Dividend

Generally, dividend payments to non-residents are subject to a 15% withholding tax. A higher rate of 35% applies to payments derived by recipients who are not resident in another EU Member State or an EEA country; or a country with which the Czech Republic has concluded (1) a tax treaty, (2) a tax information exchange agreement (TIEA), or (3) a multilateral agreement providing for an exchange of information to which both the Czech Republic and that country are a party.

Under the domestic law in the application of the EU Parent-Subsidiary Directive, dividend payments by a Czech subsidiary to its EU parent are exempt from withholding tax, subject to the following conditions:

  • The recipient of the dividends has a minimum holding of 10% in the capital of the distributing company for at least 12 months;
  • Both the parent and the subsidiary have one of the legal forms listed in the Annex to the EU Parent-Subsidiary Directive; and
  • The parent and the subsidiary are not exempt from corporate taxation or may not elect to be exempt, and the tax rate applicable to their income is greater than 0%

Interest

Generally, interest payments to non-residents are subject to a 15% withholding tax. A higher rate of 35% applies to payments derived by recipients who are not resident in another EU Member State or an EEA country; or a country with which the Czech Republic has concluded (1) a tax treaty, (2) a tax information exchange agreement (TIEA), or (3) a multilateral agreement providing for an exchange of information to which both the Czech Republic and that country are a party.

Royalty Copyright

Generally, royalty copyright payments to non-residents are subject to a 15% withholding tax.A higher rate of 35% applies to payments derived by recipients who are not resident in another EU Member State or an EEA country; or a country with which the Czech Republic has concluded (1) a tax treaty, (2) a tax information exchange agreement (TIEA), or (3) a multilateral agreement providing for an exchange of information to which both the Czech Republic and that country are a party.

Royalty Patent

Generally, royalty patent payments to non-residents are subject to a 15% withholding tax. A higher rate of 35% applies to payments derived by recipients who are not resident in another EU Member State or an EEA country; or a country with which the Czech Republic has concluded (1) a tax treaty, (2) a tax information exchange agreement (TIEA), or (3) a multilateral agreement providing for an exchange of information to which both the Czech Republic and that country are a party.

Royalty Trademark

Generally, royalty patent payments to non-residents are subject to a 15% withholding tax. A higher rate of 35% applies to payments derived by recipients who are not resident in another EU Member State or an EEA country; or a country with which the Czech Republic has concluded (1) a tax treaty, (2) a tax information exchange agreement (TIEA), or (3) a multilateral agreement providing for an exchange of information to which both the Czech Republic and that country are a party.

Service Management

Generally, payments made to non-residents for management services are subject to a 15% withholding taxon payments made by a Czech Republic resident for management services performed in the Czech Republic by a non-resident without a Czech Republic permanent establishment. A higher rate of 35% applies to payments derived by recipients who are not resident in another EU Member State or an EEA country; or a country with which the Czech Republic has concluded (1) a tax treaty, (2) a tax information exchange agreement (TIEA), or (3) a multilateral agreement providing for exchange of information to which both the Czech Republic and that country are a party.

Service Technical

Generally, payments made to non-residents for technical services are subject to a 15% withholding taxon payments made by a Czech Republic resident for technical services performed in the Czech Republic by a non-resident without a Czech Republic permanent establishment.A higher rate of 35% applies to payments derived by recipients who are not resident in another EU Member State or an EEA country; or a country with which the Czech Republic has concluded (1) a tax treaty, (2) a tax information exchange agreement (TIEA), or (3) a multilateral agreement providing for an exchange of information to which both the Czech Republic and that country are a party.

Capital Gains

Capital gains from the sale of shares in a private resident company by non-residents are subject to tax at the rate of 19%. Capital gains derived by EU resident companies are exempt from tax if the dividends relating to such shares would have qualified for the participation exemption at the time of the share sale.

The following table shows the most up-to-date standard domestic withholding tax rates.

Capital Gains 19.0 %
Dividends 15.0 %
Interest 15.0 %
Royalty Copyright 15.0 %
Royalty Patent 15.0 %
Royalty Trademark 15.0 %
Sales 0.0 %
Service Management 15.0 %
Service Technical 15.0 %

* Rates are current as of 02 October 2022