New reporting obligation as of January 2022

New reporting obligation in January 2022: do not forget to report income paid abroad 

Lucie Javorová
12/01/2022
New reporting obligation as of January 2022
By the end of January 2022, there must be for the first time submitted an announcement on income paid abroad for the entire calendar year 2021. This obligation concerns only income paid to non-residents from Czech sources which are tax-exempt (e.g. dividend payment by a subsidiary to the parent company) or not subject to taxation in the Czech Republic under the relevant double tax treaty (DTT) (e.g. interest income if the right to tax such income is assigned to the State of the recipient of such income). Such income must be reported once a year as of 31 January of the calendar year which follows the calendar year in which the taxpayer would have been obliged to withhold the tax (provided that the income was subject to withholding tax).

In accordance with § 38da of Czech Income Tax Act, individuals as well as corporate entities are obliged to report income paid abroad from Czech sources provided that income is subject to withholding tax. Please note that the reporting obligation is applicable also in cases when such income paid abroad is tax exempt or not taxed due to the application of relevant DTT.

However, there are the following exceptions from the reporting obligation provided that:

  1. the total amount of the same type of income (which is tax exempt or not taxed under the relevant DTT) to the same non-resident recipient does not exceed CZK 300,000 in a calendar month; or
  2. income is to be reported to the Tax Administrator under the Act on International Cooperation in Tax Administration.

Further, the taxpayer may apply by the tax administrator for an exemption from the reporting duty which may be valid up to 5 years. On the contrary, breaching of the reporting obligation may by sanctioned with a penalty up to CZK 500,000.

To be complete, we would like to mention that the reporting of income that is taxed using withholding tax and paid abroad remain unchanged, i.e. it is reported on a monthly basis (with the deadline by the end of a calendar month which follows the calendar month in which the taxpayer was obliged to withhold the tax).

Are you not sure whether you are required to report income paid abroad with the deadline by 31 January 2022, or which payments fall within the scope of reporting duty? Please do not hesitate to contact us, we will be pleased to assist you with this matter.

Tax advisory

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Jiri Sindelar
Jiří Šindelář
Tax Manager
Crowe