Österreichische Volksbanken-Aktiengesellschaft ... - Volksbank AG

Where the interest are made on Notes originated from sources abroad or the income on difference
between the nominal value paid for a bond and its issue price at the time of issue is originated
from sources abroad, this income including tax withheld abroad and not reduced by the
relevant expenses constitutes a partial tax base taxed by 15 per cent.
Capital gains (i.e. the difference between the sales price and the acquisition cost of the bonds)
realized upon sale of the Notes are subject to income tax at a marginal rate of up to 32 per cent.
pursuant to sec. 7 of the Czech Income Tax Act.
Corporations subject to unlimited corporate income tax liability in the Czech Republic are subject
to corporate income tax on all interest payments resulting from Notes at a rate of 24 per
cent.
Capital gains (i.e. the difference between the sales price and the acquisition cost of the bonds)
realized upon sale of the Notes are subject to corporate income tax at a rate of 24 per cent. A
different regime may be applied to certain corporate entities (e.g. pension funds).
Non Residents
Payments of interest on Notes to non-residents of the Czech Republic are subject to Czech
withholding tax amounting to 15 per cent. The amount of withholding tax could be reduced by
the relevant double tax treaty.
The difference between the nominal value paid for a bond and its issue price at the time of issue
should be also subject to Czech withholding tax amounting to 15 per cent. (please note that in
the case of repurchase before maturity the redemption price shall be used instead of the nominal
value).
Capital gains from sale of bonds to Czech tax residents and Czech permanent establishments of
foreign companies are subject to Czech taxation with specification mentioned in the relevant
double tax treaty. If double tax treaty was not concluded or if capital gains may be subject to
Czech taxation under the relevant double tax treaty, capital gain should be included in general
tax base of the non resident seller (subject to marginal tax rate of 32 per cent. in the individual´s
case and 24 per cent. in the company´s case) and tax return shall be filed. Only if the seller is
not tax resident in EU and EEA, 1 per cent. securing tax should be withheld from the selling
price by the Czech purchaser and this securing tax might be regarded as final taxation.
EU withholding tax in the Czech Republic
The provisions of Council Directive 2003/48/EC of 3 June 2003 on taxation of savings income
(Interest-Savings Directive) in the form of interest payments implemented into national law in
the Czech Income Tax Act states that the Czech tax payer who is a Czech paying Agent must
take steps to establish that the recipient of the payment is the beneficial owner and tax resident
of the relevant state.
At the moment when the provisions of the relevant double tax treaty are applied, the payer of
the interest income should receive documentation confirming that the recipient is the beneficial
owner of the interest and tax resident in the relevant state.
These facts can be established as follows:
� Certificate of tax residence in the particular state issued by a foreign tax authority;
� Declaration of the foreign entity that it is the beneficial owner of the income and that the
payment is regarded as its income under the its domestic legislation;
� Evidence showing that other conditions in the individual double taxation treaty or in the
domestic tax law have been met.
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