These modifications include an introduction of the new notification duty for tax payers with respect to income exempt from tax or income non-taxable in the Czech Republic pursuant to international Double Taxation Treaties. However, this relates to income generated by tax non-residents from sources in the Czech Republic which are subject to withholding tax.

Form and manner of notification

• Notifications should be made in a similar manner as in the case of income which is currently subject to withholding tax. The payer thus has to identify the income recipient and report data concerning the income
• Audited entities and entities with a data box will have to make the filing via a data box. Unaudited entities may use a printed form issued by the Ministry of Finance of the Czech Republic or its own output including all statutory requisites.
• Notifications should be made until the end of the month following the one in which the income was paid. A payer’s failure to comply with this non-monetary duty may result in a penalty of up to CZK 500,000, or higher if the filing was not made in electronic form where the payer was required to do so.

Exceptions

• The above-specified income of the same type not exceeding CZK 100 thousand in a calendar month is to be exempt from this duty.
• For serious reasons, the tax administrator may release a payer from the notification duty for a period of up to five years.

Practical implications of the new duty

Among other things, the notification duty will predominantly apply to dividends, interest and licence fees paid by Czech businesses to foreign parent companies or other foreign entities.

The tax administration was already able to obtain the majority of required data; nevertheless, additional administrative burden is placed upon payers, including the accurate interpretation of Double Taxation Treaties.

The data received by the tax administration should also be used for international information exchange with other jurisdictions.

The article is part of dReport – June 2018, Tax news; Grants and investment Incentives