Expatriate tax ebook - Czech Republic

What Taxes?

Capital gains tax
Inheritance, estate and gift taxes
Investment income
Local taxes
Real estate taxes
Social security taxes
Stock options
Wealth taxes
Other specific taxes

Capital gains tax
Capital gains arising from the sale of stocks, bonds or real estate are generally taxed as income for companies and individuals in the Czech Republic. The difference between a higher selling price and a lower purchase price is taxed at the 15% tax rate for individuals and 20% tax rate for corporations.

Gains arising to a foreign shareholder on the sale of a shareholding in a Czech company are regarded as Czech sourced income. However, in many cases a Double Taxation Treaty overrides Czech tax legislation.

A sale of the main private dwelling is tax exempt if held by an individual for at least 2 years or at least 5 years if not used as main residence.

Inheritance, estate & gift taxes
The tax residence of surviving relatives is not important for the inheritance tax; citizenship and permanent stay of the testator is important. Inheritance tax is levied on property located on the Czech territory irrespective of the nationality or home address of the testator.

An expat in the position of acquirer is a gift tax payer if he has a permanent stay in the Czech territory and acquires assets in the Czech Republic.

The inheritance tax and gift tax depend on the tax bracket, which is determined by the degree of relationship. No inheritance and gift tax is payable in the first and second bracket. The tax rate in the third bracket is 7 % to 40 %.

There is a standard 3 % real estate transfer tax which must be paid by the seller.

Investment income
Dividends and interest income are taxable in the CR, just like ordinary income, when received.  Dividends from taxable Czech corporations are taxed at a rate of 15% through a withholding mechanism, unless a lower rate is stated in a double tax treaty. Income from a trust, royalties and similar income are taxed as received or allocated, depending on the circumstances. If an individual holds the securities longer than 6 months and other conditions are fulfilled, the gain from the sale of securities is tax free.

Local taxes
There are no other local taxes on income or property, with the exception of real estate tax (see below).

Real estate tax
There are local taxes charged to individuals who own real estate located in the CR. The tax is assessed on the area of real estate and the rates differ significantly depending on the type of real estate and its physical location within municipalities.

Social security taxes
Expatriates of EU member states should have the A1 or (E101) form to ensure they continue to pay social security contributions in their home countries.

It is decisive for expatriates from non-EU member states whether the Czech Republic has a social security contract concluded with those states, and also the period of secondment.

Social insurance rates: the employer contributes 25% on behalf of the employee; 6,5% is withheld from the employee's salary.

The maximum basis of assessment for year 2011 is 1,781,280 CZK.

Basic rules for the health insurance are the same as for the social insurance. The maximum basis of assessment is also the same.

Health insurance rates: Employer 9%, employee 4,5%.

Stock options
Stock option benefits are taxable, in general, when the option is exercised. The benefit is equal to the difference between the fair market value of the stock, on the date of exercise, and the option exercise price.

Wealth tax
Wealth tax is not applicable in the Czech Republic.

Other specific taxes
No other specific taxes would apply to expatriates in addition to those described above.

Information about Czech Republic:

• introduction
• facts and figures
• basis of taxation
• what taxes?
• tax planning opportunities