Amendment of bond income tax regime being prepared
Authors: JUDr. Ing. Miloš Olík, Ph.D., LL.M., FCIArb, Mgr. Martin Dolnák, Mgr. Simona Mlýnek Štursová
Substantial changes to the tax regime for income from bonds have been proposed as part of the upcoming amendment to the Income Tax Act, which is to be discussed by the Czech Senate in the course of the closely monitored tax package for 2021.
In this respect, the upcoming legislation provides that in case of natural persons and tax non-residents, only income from so-called coupon bonds would be subject to income tax deduction, whereas income from zero-coupon bonds will be exempted from tax (currently the income from both types of bonds is subject to tax deduction). In case of zero-coupon bonds, the income is received upon redemption of the bond.
Furthermore, income from government bonds should have been completely exempted from taxation, yet tax non-residents will not be exempted from taxes on income from bonds issued by Czech issuers abroad (so-called Eurobonds).
According to the Income Tax Act, 15% tax is deducted (up to 35% in some cases), but these rates can later be modified by an effective double taxation treaty with a particular contracting state.
This amendment is part of the tax package currently being discussed by the Czech Senate.