Termin pro oznameni osvobozenych prijmu se blizi

The deadline for reporting exempt income paid abroad approaches

A taxpayer who is the payer of income subject to withholding tax to a foreign tax resident but exempt from tax or which is under an international treaty not subject to taxation in the Czech Republic, is obliged, under certain conditions, to file a notification of such exempt income paid abroad.

The deadline for reporting of exempt income paid abroad is 31 January of the following calendar year. In today's alert, we would like to remind you of the changes concerning the filing of notifications of exempt income paid abroad that have occurred under the so-called consolidation package.

According to the Income Tax Act effective until 31 December 2023, a taxpayer was obliged to file a notification of exempt income paid abroad (e.g. dividends, interest, royalties, but also remuneration for services rendered in the Czech Republic) if the income of the same type (dividends, royalties, interest, services, etc.) in the aggregate for one recipient exceeded CZK 300,000 per calendar month.

The amendment to the Income Tax Act, with came into effect on 1 January 2024, has modified the scope of this reporting obligation. According to the new rules, notification is only required for exempt/non-taxable income paid abroad in the form of interest, dividends and royalties. However, on the other hand, the monthly limit of CZK 300,000 applies only to interest. In the case of royalties and dividends, the notification report must always be made, regardless of the amount of exempt/non-taxable income.

According to the transitional provisions, the procedure under the amendment can be applied for 2023 as well. Therefore, taxpayers can choose which version of the law to follow in the case of the notification for 2023.

For the sake of completeness, we would like to add that the above brief commentary cannot replace a detailed tax assessment of a specific situation.

If you have any questions, please contact the authors of this article or the EY tax team with whom you regularly work.

Authors:

Ladislava Zamazalová

Iuliia Potridennaia