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TAXATION OF TAXATION OF INDIVIDUALS IN INDIVIDUALS IN THE CZECH THE CZECH REPUBLICREPUBLIC

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Individuals are subject to income Individuals are subject to income tax.tax.

Taxable income and tax liability Taxable income and tax liability of individuals are determined of individuals are determined under the Income Tax Law.under the Income Tax Law.

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Taxable personsTaxable persons

1.1. ResidentsResidents

2.2. Non-residentsNon-residents

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1. Residents1. Residents

An individual is considered to be a An individual is considered to be a resident of the Czech Republic:resident of the Czech Republic:

permanent home (residential permanent home (residential address) address)

> 183 days in the Czech Republic > 183 days in the Czech Republic in relevant calendar year, except in relevant calendar year, except stay for studies or medical stay for studies or medical treatmenttreatment

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Taxable incomeTaxable income

Resident individuals are subject Resident individuals are subject to tax on their to tax on their worldwideworldwide income income received in monetary or non-received in monetary or non-monetary income.monetary income.

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Following income and capital gains are Following income and capital gains are subject to income tax:subject to income tax:

employment income (salary/ benefits in employment income (salary/ benefits in kind, pension, director’s remuneration)kind, pension, director’s remuneration)

business and professional income business and professional income (royalties and licence fees)(royalties and licence fees)

income from capital (investment income from capital (investment income, capital gains)income, capital gains)

rental income andrental income and other incomeother income

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Other income:Other income:– income from occasional activities income from occasional activities

> CZK 20,000> CZK 20,000– capital gains on the sale of non-capital gains on the sale of non-

business assets, unless exemptbusiness assets, unless exempt– sale of property rightssale of property rights– alimony payments and pensions if not alimony payments and pensions if not

exemptexempt– settlement payments and liquidation settlement payments and liquidation

proceeds of companies and proceeds of companies and partnershipspartnerships

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Every individual is taxed separately.Every individual is taxed separately.

The net result (income minus The net result (income minus deductible expenses) is subject to deductible expenses) is subject to progressive tax rates.progressive tax rates.Certain items of income are taxed Certain items of income are taxed separately by way of a final separately by way of a final withholding tax at a lower rate. withholding tax at a lower rate.

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Personal deductions, allowancesPersonal deductions, allowances

A.A. DeductionsDeductions

B.B. Allowances (tax credits)Allowances (tax credits)

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A.A. DeductionsDeductions

Following items are deductible:Following items are deductible: donations for charitable purposes, donations for charitable purposes,

described by law and deductible after a described by law and deductible after a threshold. Including established in EU, threshold. Including established in EU, Norway and Iceland. Norway and Iceland.

mortgage interest for the main mortgage interest for the main residence up to CZK 300,000 per yearresidence up to CZK 300,000 per year

premiums paid for private life insurance premiums paid for private life insurance up to CZK 12,000 per year.up to CZK 12,000 per year.

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B.B. Allowances (tax credits)Allowances (tax credits)

Resident and non-resident Resident and non-resident individuals may deduct from their individuals may deduct from their aggregate income a basic aggregate income a basic personal allowance for spouse personal allowance for spouse and children.and children.

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LossesLosses

Any negative result of a category can Any negative result of a category can be set off against positive results of be set off against positive results of other categories. However, other categories. However, employment income cannot be employment income cannot be reduced by losses of any other reduced by losses of any other income category. If the aggregate income category. If the aggregate income (excluding employment income (excluding employment income) is negative, losses may be income) is negative, losses may be carried forward for five taxable carried forward for five taxable periods. periods.

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Tax ratesTax rates

The tax rates consist of a flat rate The tax rates consist of a flat rate of 15%.of 15%.

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Withholding taxWithholding tax

Following items of income derived Following items of income derived by by residentsresidents from domestic from domestic sources and are subject to a final sources and are subject to a final withholding tax at a rate of 15%:withholding tax at a rate of 15%:

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dividends and other distributionsdividends and other distributions silent partner’s profit sharessilent partner’s profit shares interest on bondsinterest on bonds settlement amounts paid out on the settlement amounts paid out on the

termination of the participation of a termination of the participation of a member in a LLC or on the termination member in a LLC or on the termination in a cooperative, reduced by the in a cooperative, reduced by the acquisition cost of the participationacquisition cost of the participation

liquidation surplus payments, reduced liquidation surplus payments, reduced by the acquisition cost of the by the acquisition cost of the participationparticipation

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Taxable periodTaxable period

Income tax is assessed annually. Income tax is assessed annually. The taxable period is generally The taxable period is generally the calendar year. Entrepreneurs the calendar year. Entrepreneurs deriving income from agriculture deriving income from agriculture or trade may choose a different or trade may choose a different financial year upon approval of financial year upon approval of the authorities.the authorities.

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2. Non-residents2. Non-residents

Individuals who do not have their Individuals who do not have their permanent residence in the Czech permanent residence in the Czech Republic are treated as non-Republic are treated as non-residents.residents.

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The income of non-residents is The income of non-residents is generally taxed according to the generally taxed according to the rules applicable to residents, rules applicable to residents, unless a law or tax treaty provides unless a law or tax treaty provides otherwise. otherwise.

If 90% is derived from Czech If 90% is derived from Czech sources he is entitled to deductions sources he is entitled to deductions which residents are entitled to.which residents are entitled to.

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Non-residents are entitled to the Non-residents are entitled to the basic personal allowance.basic personal allowance.

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Non-residents are subject to the Non-residents are subject to the general withholding tax unless general withholding tax unless special rules apply:special rules apply:

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Remuneration paid to non-Remuneration paid to non-resident members of statutory resident members of statutory executive and supervisory bodies executive and supervisory bodies of resident legal entities is subject of resident legal entities is subject to a final withholding tax at a rate to a final withholding tax at a rate of 15%.of 15%.

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Income from independent Income from independent activities and from services activities and from services provided in the Czech Republic is provided in the Czech Republic is subject to a final withholding tax subject to a final withholding tax at a rate of 15%.at a rate of 15%.

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A rate of 15% applies to royalties A rate of 15% applies to royalties and to income from the leasing of and to income from the leasing of movable assets.movable assets.