DIE ERSTE österreichische Spar-Casse ... - ERSTE Stiftung

interest paid (with the exception of interest paid to a Czech permanent establishment). The
withholding tax rate may be reduced by an applicable double taxation treaty.
If the interest is considered as income of a permanent establishment, the withholding tax does
not apply and the individual or corporation having the permanent establishment has to pay tax
on the interest income in the same way as tax residents (see the section on residents above).
Under the EU Interest Royalty Directive, the interest paid by the Czech company to related
company located in EU countries or in the Switzerland, Denmark or Iceland may be exempt
from withholding tax if certain additional conditions are met.Capital gains
Income from the sale of the Notes payable by a Czech tax resident or by a permanent
establishment of a Czech tax non-resident located in the Czech Republic to a non-resident
shall be treated as Czech source income taxable in the Czech Republic. The income may be
exempt from taxation under an applicable double taxation treaty.
If no double taxation treaty applies, the following Czech taxation should be taken into account:
Individual investors
Capital gains from the sale of the Notes are exempt from Czech personal income tax if an
individual has held the Notes as a non-business asset for an uninterrupted period of more
than six months. This time limit only applies to investment securities where a shareholding
comprises a maximum of 5%. Otherwise, the individual must hold the Notes for an
uninterrupted period of more than five years for the personal income tax exemption to be
applicable. Either way, the exemption only applies if the Notes have not been included in the
individual’s business assets at any point in time prior to their sale.
If capital gains from the sale of the Notes held by individuals as a non-business asset are not
tax-exempt, they are subject to personal income tax at a flat rate of 15%, the tax base being
calculated as the income from the sale of the Notes reduced by the purchase price of the
Notes and charges related to their acquisition. A loss from the sale of the Notes may be offset
against gains from the sale of the Notes or other securities in the same fiscal period.
In the case of individuals holding the Notes as a business asset the capital gain from the sale
of the Notes is included in their general income tax base and taxed at a flat rate of 15%. A
loss from the sale of the Notes may be offset against overall taxable income (other than
employment income) in the current fiscal period and the following five fiscal periods.
Corporations
Capital gains from the sale of the Notes held by corporations are included in their general
income tax base and taxed at a flat rate of 19% in 2011. A loss from the sale of the Notes
may be offset against profits in the current fiscal period and the following five fiscal periods.
Purchase of the Notes from a non-EEA resident
A Czech resident who purchases the Notes from a resident from outside the European
Economic Area is obliged to withhold and pay a tax security advance at a rate of 1% of the
purchase price for the Notes to the Czech tax authorities unless the respective double
taxation treaty provides tax exemption of the capital gain in the Czech Republic.
If no double taxation treaty is applicable, the seller should file a Czech corporate/personal
income tax return, in which the withheld tax security advance is deducted from the final tax
liability assessed at regular tax rates. If no tax return is filed, the tax security advance withheld
will be treated as the final tax.
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