Could Czech tax changes affect your firm?
The Czech Republic is changing tax rules for managing directors of limited liability companies that are not resident in the country for tax purposes.
Until now managing directors have been taxed as employees, but changes taking effect this year will mean they are taxed as members of statutory bodies of joint stock companies.
“This change results in the reallocation of income into a different article of a double taxation treaty,” explains Robert Koleňák, tax advisor at MGI’s new member firm in Prague, LTA Tax s.r.o.
It will mean the entire income of the managing director received from the Czech company will become subject to taxation in the Czech Republic, not just income derived from activities performed in the Czech jurisdiction.
In an update explaining the changes, he says: “Income of Czech tax non-residents will become subject to withholding tax. The nominal tax rate is the same for both the advance tax and the withholding tax (15 per cent), however the change in the manner of taxation will have an impact on the overall tax burden.”
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