The Czech Republic has signed double tax treaties with the following countries: Albania, Armenia, Australia, Austria, Azerbaijan, Belarus, Belgium, Bosnia and Herzegovina (the former treaty was signed with Yugoslavia, but is applicable), Brazil, Bulgaria, Canada, China, Croatia, Cyprus, Denmark, Egypt, Estonia, Ethiopia, Finland, France, Georgia, Germany, Greece, Hungary, Iceland, India, Indonesia, Ireland, Israel, Italy, Japan, Jordan, Kazakhstan, Korea, Kuwait, Latvia, Lebanon, Lithuania, Luxembourg, Macedonia, Malaysia, Malta, Mexico, Moldova, Mongolia, Montenegro, Morocco, Netherlands, New Zealand, Nigeria, Norway, Philippines, Poland, Portugal, Romania, Russia, Serbia, Slovakia, Slovenia, South Africa, Singapore, South Korea, Spain, Sri Lanka, Sweden, Switzerland, Syria, Tajikistan, Thailand, Tunisia, Turkey, Ukraine, United Arab Emirates, United Kingdom, United States of America, Uzbekistan, Venezuela, Vietnam and has draft agreements waiting to be signed with many more.
Hong Kong and the Kingdom of Bahrain are the last jurisdictions to which the Czech Republic has signed double tax treaties.
More details on the double taxation agreements available in Czech Republic are presented in the following video:
The reason of concluding these treaties is avoiding the double taxation of incomes and capital and minimizing the withholding taxes on dividends, interests and royalties paid by foreign legal entities in Czech Republic and in the country were they reside.
There are two ways to apply the treaties’ regulation regarding the taxation of capital and income: through exemption, when the reduction is applied directly at source and the company doesn’t pay any tax in the Czech Republic, and through credit, when the company is paying the taxes, but they are deducted in the country of residence.
The withholding taxes on dividends, interests and royalties are ranging from 5% to 10% depending on the capital owned by the foreign shareholders and the receiver and the payer of them.
For example, the treaty signed with China specifies that the dividends are taxed with 5%, if 25% of the capital is owned by the Chinese residents, and 10% in all other cases. The interests are taxed with 0% when they have as a source the governmental institutions and 7.5% in all other cases and the royalties are taxed with 10%.
In some cases, the above rule is not applicable. For example, in the last treaties signed with Hong Kong and Bahrain it is specified that the withholding taxes on dividends are 5%, on interests are 0% and on royalties are 10%, regardless the recipient, the payer or the amount of capital owned by the foreign legal entity.