Beware of the taxation of the rewards of executives - non-residents of the Czech Republic

The rewards of the members of corporate bodies are taxed as income from employment, or subjected to the same rules as apply to employees (i.e. subject to advance tax; section 6 of the Income Tax Act). But this does not apply to the members of the corporate bodies who are not residents of the Czech Republic; their income is subject to withholding tax (sections 22 (1g) and 36 of the Income Tax Act). (Note: A resident is simply one who has permanent residence or usually resides in the Czech Republic).

With effect from the date of force of the new Civil Code, i.e. from 1 January 2014, it is no longer necessary to differentiate between a person that is a corporate body and a person that is a member of a corporate body. It follows from here that already in the 2014 tax period, for instance, the executive of a domestic limited liability company (s.r.o.) - tax non-resident should have been considered as a member of a corporate body and his income should have been subject to withholding tax. The financial administration, however, for 2014 shall not contest situations where incorrect advance tax was paid in respect of the rewards of tax non-residents. However, from 2015 onwards, it is necessary only to pay only withholding tax on the rewards of non-residents - members of the corporate bodies (i.e. including executives).

The KODAP tax advisers are ready to provide details.

publikováno 06.02.2015

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