Effective from 1 April 2019, an amendment to the Czech Income Taxes Act was introduced. This amendment imposes a new reporting duty for taxpayers. The new rule stipulates that income that is subject to withholding tax in the Czech Republic, newly including income that is tax exempt or excluded from taxation in the Czech Republic according to the relevant double tax treaty must be reported to the tax administrator.
Income and conditions
This new reporting duty relates to taxpayers that pay off income (or account for the obligation to pay off the income). The most relevant types of income are dividends, interest and royalties, however, under certain conditions also other income might be subject to the new obligation.
If the total sum of income of the same type (e.g. dividends, interest, royalties) to be reported in particular month does not exceed CZK 100,000 the taxpayer has no duty to report such income.
If such income is paid or the liability to pay is booked by the payer during April 2019, the first report should be filed already by the end of May 2019.
The taxpayer can also file a request for exemption from the reporting duty to the tax administrator which can be valid up to 5 years. In the application, the taxpayer must state so-called legitimate reasons; however, it is unclear what reasons will be considered by the tax administrator as relevant.
What is the risk of not meeting obligations?
If the taxpayer does not comply with the new reporting obligation, the tax administrator can impose a penalty for breaching a procedural obligation of non-pecuniary nature up to CZK 500,000.
How Accace can help you?
First of all, we recommend performing an analysis of company’s payments (or obligations) in order to determine which payments fall within the scope of the new reporting duty. On the basis of the analysis, additional steps shall be taken. Accace team will be pleased to assist you with this.