Tax Haven in the Middle of Europe
1.11.2011Company: Amcham
It is expected that those who were coupon holders during 1992-1994 will soon become shareholders.
The government is proposing, having faced no obstacles so far, that dividends become entirely exempt from income tax. To date, only a precious few companies enjoyed the exemption. This proposal is unique within Europe, just like the natural person´s income tax of 15% or a single VAT. The author of this article is proud to be a tax consultant in the jurisdiction which literally showers the world of tax with innovations and news.
It almost seems that VAT and payroll tax will become the cornerstones of the Czech tax system. A number of Czech business customs will probably change too. Dividends rather than a higher pay might become a much more useful way to pay out a part of the salary, for example management bonuses. Therefore it is necessary to draft suitable share ownership programs for employees. Mainly the big groups which own the holdings operating abroad will gain the practical and flexible means of rewarding their employees. More and more company owners will arrive at a logical conclusion that it is better to pay out dividends instead of increase salaries.
Interestingly, the planned tax exemption applies only to revenues obtained in 2013. With a little bit of care, however, it will probably be possible to apply the exemption to the earlier revenues as well. You only have to act in time.
Investment and share funds (including qualified investor funds) will be subject to the zero tax rates. However, a tax rate of 19% will apply to the dividends paid out by these funds. The funds seemingly face bleak prospects but there is one detail. Today the withholding tax is decreased proportionately according to the amount of income which the fund receives from the particular listed resources (e.g. dividends). To put it simply, if the fund´s income originates only from dividends and interests, the dividends paid out from SUCH fund will be subject to the zero tax rate. Further changes to the taxation of the funds can be found in the “right” international treaties on avoidance of double taxation. After all, the prospects are not that bleak.
Pessimists will ask, of course, whether it is not an “up a blind alley method” and who is actually going to pay the taxes. However, we are not pessimists. This is good news for our clients and we like to bring such news to them.
Daniel Kovačovič, Tax Consultant
Mobil: +420 739 182 283
E-mail: daniel.kovacovic@rsm-tacoma.cz
