New reporting duty for taxpayers

One of the amendments of the approved tax package effective from 1 April 2019 is the introduction of a reporting duty for taxpayers in respect of income paid to Czech non-residents which has its source in the Czech Republic, is subject to withholding tax, but effectively is not taxed (either based on the local legislation or based on the international double tax treaties).

This may include, for example, dividends, interest on loans or royalties paid to foreign corporations, but also remuneration for the performance of a function paid to non-residents or gratuitous income.

These transactions, if not effectively taxed by the withholding tax, will have to be newly notified by the taxpayer to the relevant tax office by the end of the month following the date of payment of such income (i.e. the income paid in April 2019 must be reported by the end of May 2019).

The new notification of income paid abroad will replace the current notification on withholding tax (the relevant form is already published on the website of Czech Financial Administration:
https://www.financnisprava.cz/assets/tiskopisy/5478_15.pdf?201904121105).

Exceptions to the reporting duty (except for the already existing exception on employment income taxed by the withholding tax) apply to income not exceeding CZK 100,000 per month (the limit is applied to one type of income to one foreign beneficiary). Furthermore, in case of serious reasons, the tax administrator may waive the reporting duty to the taxpayer for up to 5 years. The current exemptions from reporting duty will remain in effect one year after the law amendment comes into effect (but only for income from which the tax is withheld).

Taxpayers are liable for fines of up to CZK 500,000 for non-fulfillment of the reporting duty, and sanctions for violating the compulsory electronic form may be even higher for entities that have to report electronically (audited entities and entities with a data box).