Czech Republic: Change in taxation of Eurobonds - update
Note: This announcement initially published on 2 December 2021 has been updated to clarify Clearstream Banking's offering. The updates have been highlighted.
Clearstream Banking1 would like to inform customers that effective
1 January 2022
bonds issued abroad by Czech issuers (Czech Eurobonds) will be taxable at the default tax rate applicable to Eurobonds with a possible exemption for certain foreign investors.
The Income Taxes Act amended at the end of 2020 abolished the tax emption to non-residents investing in Eurobonds. A new amendment of the Banking Act no. 353/2021 Coll. approved in September 2021 maintained, in a modified form, exemptions or reduced tax rates on Eurobonds issued after 31 December 2021 if paid to certain non-Czech residents, as follows:
An exemption will be available to foreign legal entities and individuals that are not directly or indirectly economically or legally connected with the issuer (that is, have a direct or indirect control over 25% or more or the issuer’s capital and/or voting rights).
The foreign investors that have a direct or indirect connection with the issuer will only have the possibility to apply for double taxation treaty rates or to 15% if they are resident of EU/EEA/TIEA countries.
Czech resident individual investors will be granted a reduced tax rate of 15% while corporate investors will need to include the interest income in their annual tax returns.
Impact on customers
Currently Clearstream Banking does not offer any tax service on Czech Eurobonds but is following-up this case with different Czech Eurobond market participants, specifically to assess the certification requirements to benefit from tax exemption. Until this is clarified, the interest proceeds, whether taxable or not, will be paid to the customers based on the amounts received from the issuers.
Clearstream Banking was so far not informed of any procedure in place in the market to grant the above-mentioned exemptions/reduced rates at source or through a refund and cannot assist in these regards.
Customers wishing to obtain such exemptions/reduced rates must seek the advice of their tax advisors.
We continue to monitor the situation and will inform customers as soon as further information is available.
For further information, please contact the Clearstream Banking Tax Help Desk, Clearstream Banking Client Services or your Relationship Officer.
1. Clearstream Banking refers collectively to Clearstream Banking S.A., registered office at 42, avenue John F. Kennedy, L-1855 Luxembourg, and registered with the Luxembourg Trade and Companies Register under number B-9248, and Clearstream Banking AG (for Clearstream Banking AG customers using Creation Accounts), registered office at 61, Mergenthalerallee, 65760 Eschborn, Germany and registered in Register B of the Amtsgericht Frankfurt am Main, Germany under number HRB 7500.