Corporate Tax 2010 - BMR Advisors

Salans
Czech Republic
5.2 If so, is the rate of tax imposed upon capital gains
different from the rate imposed upon business profits
6.3 How would the taxable profits of a local branch be
determined
There is no different rate and the standard corporate income tax rate
applies unless the relevant capital gain is exempt (see question 5.1).
5.3 Is there a participation exemption
Yes, similarly as in the case of exemption connected with the
dividend payments (see question 3.1), a participation exemption
will generally apply in the Czech Republic to income derived by the
Czech resident shareholder or a company resident in another EU
Member State or Norway or Iceland from the sale of shares
(ownership interests) in a Czech subsidiary or other subsidiary
resident in the EU or Norway or Iceland, or a country with which
the Czech Republic has concluded a double taxation treaty
(irrespective of the actual text of such treaty).
The above exemption relating to the sale of shares (ownership
interest) requires the participation of the selling shareholder on the
subsidiary of at least 10% for an uninterrupted period of 12 months.
As for the sale of shares in a foreign non-EU/EEA subsidiary, in
addition to the foregoing participation requirement the following
pre-requisites must be met: (i) the subsidiary is a resident of a
country with which the Czech Republic has concluded a double
taxation treaty; (ii) the subsidiary has a legal form similar to a
Czech joint stock company, limited liability company or
cooperative; and (iii) the subsidiary is subject to corporate tax
comparable to the Czech Republic taxation (generally, at a rate of at
least 12% and on a similar basis).
5.4 Is there any special relief for reinvestment
In principle, Czech tax regulations do not link the capital gains
exemptions or similar tax relief to reinvesting company’s profit,
e.g., into the acquisition of the same category of capital asset.
In case of a branch, generally only the income gained from its
Czech-related activity is subject to income tax. This means that
generally the same rules and regulations apply (e.g., the
admissibility of tax expenses of the branch, the rate of tax, the list
of items increasing and reducing the tax base, admissibility of a tax
loss) unless Czech tax law provides otherwise. An important
difference resides in the fact that the tax base on a branch can be
determined on the basis of other criteria than just profits shown in
the branch’s corporate accounts (e.g., a commission on sales by the
branch, the gross amount of the branch’s expenses, the number of
the branch’s employees, etc.). The level of so-determined tax base,
however, cannot be lower than that of Czech resident companies
involved in the same business activity.
6.4 Would such a branch be subject to a branch profits tax (or
other tax limited to branches of non-resident companies)
There is neither a special tax set in the Czech Republic for branches
nor any special rate under the existing income tax.
6.5 Would a branch benefit from tax treaty provisions, or some
of them
While many of the benefits under tax treaties apply only to income
not generated through a branch (e.g., dividends, interest, royalties
or capital gains) there are still considerable advantages provided by
tax treaties to branches such as the application of the nondiscrimination
principle. On the basis of tax treaties, for example,
a branch in the Czech Republic may not be imposed a larger tax
liability than a Czech company involved in the same type and extent
of business, it may deduct from its tax base, in addition to its own
expenses, also relevant expenses incurred by the head office outside
of the Czech Republic.
Czech Republic
6 Branch or Subsidiary
6.1 What taxes (e.g. capital duty) would be imposed upon the
formation of a subsidiary
Formation of a company in the Czech Republic is not subject to any
capital or other tax.
6.2 Are there any other significant taxes or fees that would be
incurred by a locally formed subsidiary but not by a
branch of a non-resident company
6.6 Would any withholding tax or other tax be imposed as the
result of a remittance of profits by the branch
Remittance of net profits by the branch of a non-resident company
to (the head office of) such non-resident company is treated as intracompany
financial transfer and as such is not subject to any
withholding tax or other tax. As described under question 6.3,
Czech tax law sets forth rules regarding calculation of the tax base
of the Czech branch preventing such branch from transferring its
profits to its head office without such profits being first duly taxed
at the branch.
In principle, the taxation of a Czech subsidiary and a Czech branch
of a non-resident is subject to identical rules. The only material
difference is that in some cases the tax base of a branch (but not a
subsidiary) may be determined on the basis of other criteria than
profits based on commercial accounts. Such determination is made
by the tax authorities only after the formation of the branch and is
therefore not of much use for advance tax planning.
In case of a Czech branch of a non-EU resident or non-EEA
resident, the deduction from the income paid to it has to be made;
such deduction serving as a tax security and it is offset against the
final Czech tax liability of the branch. Such deduction is not
required in case of payments to a Czech subsidiary of a non-EU
resident or non-EEA resident.
7 Anti-avoidance
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7.1 How does the Czech Republic address the issue of
preventing tax avoidance For example, is there a general
anti-avoidance rule or a disclosure rule imposing a
requirement to disclose avoidance schemes in advance of
the company’s tax return being submitted
Czech tax law contains very few specific provisions relating to
avoidance schemes (e.g., anti-avoidance rules for the utilization of
losses carried forward, for tax-neutral mergers, de-mergers and
corporate reorganisation, etc.) and the issue of preventing tax
avoidance is regulated mainly on a general level only (e.g., by
means of the substance-over-form rule or the transfer pricing
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