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| April 6, 2021

Reporting of income going abroad and changes from the year 2021

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Act no. 609/2020 Coll. has newly adjusted the stipulation of article 38da of the Income Tax Act (“ITA”), which stipulates the obligation to announce income going abroad. Under article 38da of the ITA, legal entities as well as natural persons announce income, which they pay to non-residents from sources on the territory of the Czech Republic and from which retention tax according to a special tax rate is collected, even in case this income is exempted from tax or is not subject to taxation on the territory of the Czech Republic under a respective double taxation treaty.

The changes implemented by the amendment may be summarised into two points. In case of income, which is exempted from or is not subject to taxation in the Czech Republic under a respective double taxation treaty, the following changes:

  1. this income will only be announced once a year, at the end of the month of January for the previous calendar year;
  2. the limit, up to which this income need not be announced, is being raised to CZK 300,000 for income of the same type per calendar month.

Income that is subject to retention tax, which actually needs to be withheld, continues to be announced according to the original monthly regime.

The above-mentioned changes apply as of 1 January 2021, even to entities, which use a fiscal year (according to transitional provision no. 5 of act no. 609/2020 Coll.).

The stipulation of article 38da paragraph 7 of the ITA, which enables exemption from the obligation of submitting a report on income going abroad, continues to apply. Exemption is granted by the tax administrator based on a request in justified cases.