Standard refund - eligibility, documentation, deadlines - Czech equities

20.10.2016

Who can apply for a standard refund?

A standard refund of withholding tax on dividends from Czech equities is available through Clearstream Banking for the following beneficial owners, if the required certification has not been provided within the relief at source or quick refund deadlines.

Note: The standard refund is not available for Czech residents through Clearstream Banking. Czech residents should introduce their request directly to the Czech Tax Authorities.

Eligible beneficial owners

Effective tax rate after refund

Tax refund available

Residents of Double Taxation Treaty (DTT) countries

DTT rate or maximum 15%

35% minus DTT rate or minimum 20%

EU/EEA residents

15%

20%

EU/EEA pension funds

0%

35%

Central Banks

0% (if granted by the DTT)

35% (if granted by the DTT)

International and Supranational Organisations

0%

35%

Documentation requirements

In order to benefit from a standard refund of withholding tax on income from Czech equities, customers must ensure that we receive the following documents. The templates of the documents are available on our Tax forms to use section.

All beneficial owners regardless of their residency and status and applying for standard refund on Czech equities

  • Letter of Request for Reclaim

The Letter of Request should be duly completed and signed by Clearstream’s customer. It authorises us to process the reclaim with the Czech Tax Authorities on the customer’s behalf. Additionally, it specifies the payment details and the beneficial owner information.

The document should be provided for each reclaim application.

  • Credit Advice

A credit advice is required from each intermediary financial institution between the beneficial owner and Clearstream Banking’s customer.  The document identifies income payment details, including the security type, gross amount of payment, date of payment and amount of tax withheld.

The Credit Advice must reconcile with the information in the Letter of Request for Reclaim and should be provided for each reclaim application.

In addition, and depending on the beneficial owners’ status,

1. Non-residents beneficial owners

  • Declaration of Beneficial Ownership

An original Declaration of Beneficial Ownership should be completed and signed by the final beneficial owner.

Should the beneficial owner be a Legal Entity, the certification must be either on the company letterhead paper or stamped.

Should the Declaration be completed by a third party, a clear statement also needs to be added to the Declaration, confirming that the third party was appointed as the beneficial owner’s attorney-in-law with authority to complete and sign the declaration on the beneficial owner’s behalf.

The document must be provided once before the first applicable standard refund deadline and remains valid until revoked.

  • Certificate of Residence

An original Certificate of Residence must be issued in Czech or English by the beneficial owner’s local tax authorities. The name mentioned on the Certificate of Residence should match the name specified in the Declaration of Beneficial Ownership.

The document is valid one calendar year and should cover the record date of the income payment for which it is to be used.

  • Power of Attorney

A Power of Attorney should be provided if a third party is completing the Declaration of Beneficial Ownership on behalf of the beneficial owner.

The document must be provided once before the first applicable standard refund deadline and remains valid until revoked.

2. EU/EEA Pension funds

  • Declaration of an EEA Pension fund

An original Declaration of an EEA Pension fund should be completed and signed by the final beneficial owner’s authorised representative(S). It should be provided either on the company letterhead paper or stamped. It confirms that the final beneficial owner is a pension fund operation in the EU, Norway or Iceland and whose income is not attributable to a permanent establishment of the company in the Czech Republic.

Should the Declaration be completed by a third party, a clear statement also needs to be added to the Declaration, confirming that the third party was appointed as the beneficial owner’s attorney-in-law with authority to complete and sign the declaration on the beneficial owner’s behalf.

The document must be provided once before the first applicable standard refund deadline and remains valid until revoked.

  • Certificate of Residence

An original Certificate of Residence must be issued in Czech or English by the beneficial owner’s local tax authorities. The name mentioned on the Certificate of Residence should match the name specified in the Declaration of an EU/EEA pension fund.

The document is valid one calendar year and should cover the record date of the income payment for which it is to be used.

  • Power of Attorney

A Power of Attorney should be provided if a third party is completing the Declaration of EU/EEA Pension fund on behalf of the beneficial owner.

The document must be provided once before the first applicable standard refund deadline and remains valid until revoked.

3. International and Supranational Organisations

  • Declaration of Beneficial Ownership for International and Supranational Organisations

An original Declaration of Beneficial Ownership for International and Supranational organisations should be completed and signed by the final beneficial owner. It should be provided either on the company letterhead paper or stamped.

Should the Declaration be completed by a third party, a clear statement also needs to be added to the Declaration, confirming that the third party was appointed as the beneficial owner’s attorney-in-law with authority to complete and sign the declaration on the beneficial owner’s behalf.

The document must be provided once before the first applicable standard refund deadline and remains valid until revoked.

  • Power of Attorney

A Power of Attorney should be provided if a third party is completing the Declaration of Beneficial Ownership for International and Supranational organisations on behalf of the beneficial owner.

The document must be provided once before the first applicable standard refund deadline and remains valid until revoked.

Important note:

Should the Czech Republic be a member of the International/Supranational Organisation and should this organisation be listed on the website of the Czech Ministry of Finance, no further documentation is required in order to benefit from the tax exemption. Should the Czech Republic not be a member of the International/Supranational Organisation and/or should this organisation not be listed on the website of the Czech Ministry of Finance, the following document is also requested:

  • A proof of the International/Supranational organisation status

This proof of status should be provided along with the “Declaration of Beneficial Ownership for International and Supranational organisations” and can either be:

  • A certification from the tax authorities confirming that the entity is an International/Supranational organisation eligible for tax exemption; or
  • The international treaty, the foundation document or any other document proving that the entity is an International/Supranational organisation eligible for tax exemption.

The document must be provided once before the first applicable income payment and remains valid until revoked.

  • Additional documentation

For the purposes of the tax procedure described above, the tax authority or/and the Czech issuers may, at their own discretion, request additional documentation to prove that the beneficial owner is indeed the beneficial owner of the securities and is eligible to obtain tax relief.

Deadline for receipt of documents

  • For payments processed until 30 June 2017

The statutory deadline for reclaiming withholding tax is three years after the year in which the respective income payment was made.

  • For payments processed as of 1 July 2017

The statutory deadline for reclaiming withholding tax is two years (24 months) from the income payment date.

The deadline by which we must receive the documentation for a standard refund application is at the latest two months before the statutory deadline. We will process all standard refund applications received after this deadline on a “best efforts” basis. However, in such a case, we will apply an extra charge and accept no responsibility for forms that have not reached the Czech Tax Authorities by the date considered to be the statute of limitations deadline.

Reduced statutory deadline(only for certain payments processed until 30 June 2017)

In rare cases, the statutory deadline may be reduced from three years to 60 days, depending on the issuer. According to Czech Tax Code, Article 237 of the Act nr. 280/2009, if the receiver of the income has any doubts or questions related to the tax withheld, a request can be sent to the institution (in this case, the issuer) within 60 days from the payment date. If this deadline is met, the issuer has a 30 days period to answer/process the request.

Some issuers have decided to reduce their administration associated to the dividend payments and to apply this 60 days deadline. Even though this deadline represents a deviation from standard market procedure, it remains compliant with the local legislation as previously explained. Should this situation occur, we will inform our customers accordingly via a SWIFT notification.

With respect to tax reclaims in general, customers are reminded that we accept no responsibility for their acceptance or non-acceptance by the tax authorities of the respective country. It is the customer’s responsibility to determine any entitlement to a refund of tax withheld and to complete the forms required correctly and calculate the amount due.

Receipt of refunded amounts

The estimated time for receiving a standard refund is six to twelve months from the date on which the standard refund application was received by the Czech Tax Authorities, although this can vary depending on when the application was filed and the complexity of the information supplied in the reclaim form.

Notes on tax reclaims

Customers warrant the completeness and accuracy of the information they supply to Clearstream Banking.

It is the customer's responsibility to determine any entitlement to a refund of tax withheld, to complete the forms required correctly and to calculate the amount due. Clearstream Banking is under no obligation to carry out any investigation in respect of such information.

With respect to tax reclaims in general, customers are reminded that Clearstream Banking accepts no responsibility for their acceptance or non-acceptance by the tax authorities of the respective country.