• Service: Tax, International Executive Services, Global Compliance Management Services, International Tax
  • Type: Regulatory update
  • Date: 5/22/2013

Czech Republic - Proposals for dividends, stock gains, increased R&D 

May 22: The Czech Republic government in April 2013 submitted to the Chamber of Deputies its long-discussed proposals to “re-codify” the tax laws. The legislative proposals are now being considered by the Chamber during its May session, with a proposed effective date, generally, of 1 January 2014.

Certain proposals, however, would not be effective until later (i.e., not beginning in 2014).

Apart from technical changes that would reflect the enactment of a new Civil Code in the Czech Republic, the proposed tax law amendments would make a number of changes that could affect the scope of taxation—including limitations on tax relief and tax credits for non-residents from “third countries” (i.e., countries other than the EU, Iceland, and Norway).

Dividends, capital gains on sales of stock

Taxpayers (both individuals and cooperate entities) may regard a proposed tax exemption for dividends paid between Czech residents and residents of the EU (or residents of Switzerland, Norway, and Iceland) as the most important “taxpayer-favorable” change.

For individuals who are not engaged in conducting a business, the positive effect of this change could be slightly mitigated by an extension of the holding period for an exemption of tax on capital gain realized on the sale of securities—with the holding period being increased from six months to three years.

R&D proposals

Companies conducting research and development (R&D) also could view as favorable the broader range of expenses that could be included in the R&D account under the proposals. Also viewed as favorable by such companies would be the possibility also to include expenses paid to major research institutions and public universities under their R&D accounts.

Compared to the R&D rules from prior years, there also would be increased availability and support under the proposals for allowable expenses relating to previously started projects. These changes could further enhance the significance of the R&D deductible items.

Read a May 2013 report [PDF 251 KB] prepared by the KPMG member firm in the Czech Republic: Financial Update (May 2013)

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