DT5554 - Czechoslovakia: Dividends

The Czech or Slovakian tax deducted from dividends at the agreement rate of 15 per cent (5 per cent if the recipient is a United Kingdom company which controls at least 25 per cent of the voting power in the company paying the dividend) qualifies for credit as a direct tax (see INTM164010(c)). The reduction to the above rates is not given where the dividend is effectively connected (see INTM153110 fifth sub-paragraph) with a permanent establishment or fixed base which the United Kingdom resident recipient has in Czech Republic or Slovak Republic.

However, the EC Parent-Subsidiary Directive applies to both Czech Republic and Slovak Republic from 1 January 2005. This bars the imposition of withholding taxes on dividends paid by a company resident in one Member State of the Community to a company resident in another Member State, where the company receiving the dividends holds a minimum of 20 per cent (from 1 January 2005)of the capital of the company paying the dividend. The level of control required to gain exemption will be 15% from 1 January 2007 and 10% from 1 January 2009.

Where a Czech or Slovakian company pays a dividend to a United Kingdom company which controls, directly or indirectly, at least 10% of the voting power in the Czech or Slovakian company, credit may also be given for the underlying tax (see INTM164010(d)) (Article 22(1)(b)).