Taxation of profit shares paid to Slovakia
The closing of the accounts for the previous year and the compilation of the statements is in full swing. This is often linked to decisions about profit-sharing payments. How to proceed from a tax perspective?
HOW ARE DIVIDENDS PAID IN THE CZECH REPUBLIC TAXED?
Unfortunately, the payment of a profit share is subject to taxation, namely a withholding tax of 15%. If the dividend is paid to another legal entity, it may be exempt from withholding tax under certain conditions. However, when it is paid to an individual, withholding tax cannot be eliminated.
HOW ARE DIVIDENDS PAID TO SLOVAKIA TAXED?
What if the owner of the company paying the dividend is a foreign entity, e.g. an individual living in Slovakia? In these situations, a double tax treaty between specific countries may help at first glance. Unfortunately, however, this treaty allows for a reduction of the tax rate, again only in the case of legal entities.
So if you pay a dividend to an individual, the withholding tax of 15% remains unchanged. The withholding tax must therefore be withheld and paid to the Czech tax authorities (all provided by the entity paying the dividend). Furthermore, the withholding tax must be reported to the tax authority and subsequently accounted for. The recipient of the dividend should submit a certificate of tax domicile and a declaration of beneficial ownership of the income.