Corporate income tax

Tax exemption for income from subsidiary

The Amendment widens tax exemption of income by the parent company from its interests in a subsidiary and income from transfer of its interest in a subsidiary (e.g. share disposal) on conditions similar to those applicable to tax-exemption of shares in profit.

Under the new rules, tax exemption on shares in profit and income from transfers of interests in subsidiaries will also apply where a subsidiary is not an EU resident, if it complies with the requisite conditions (double taxation treaty with the Czech Republic, the company has a legal form corresponding to a joint stock company (a.s.), limited liability company (s.r.o.) or a co-operative, the subsidiary is subject to corporate tax at a rate of a minimum 12%, etc.).

For the tax exemption to apply, the parent must at all times be the genuine owner of the subsidiary. Tax on income from transfers of interests in a subsidiary will not be exempt from tax if the interests have been acquired as part of the acquisition of a business or part thereof.

Corporate tax rate

The corporate rate tax is reduced from the existing rate of 24% to 21% (effective 1 January 2008), 20% (effective 1 January 2009) and 19% (effective 1 January 2010). On this point please note that the Amendment also changes the rules on application of the tax rate. Hitherto the tax rate has been the rate effective as of the last day of the tax period but from 2008 on, the applicable tax rate is the rate effective as of the first day of the tax period.