As we have communicated earlier in June 2017, amendment to the Income Tax Act introduced a 2 year statute of limitation applicable to withholding tax. The market participants expected the new statute of limitation period to be applicable to withholding taxes related to all payments made as from 1 July 2017.
The Ministry of Finance has however stated that the amendment contains a transitional provision, under which, with respect to tax duties for a tax period falling before the effective date (1 July 2017), the previous legislation shall be applied. The new legislation will be applied to the first next new tax period, which for most individuals and legal entities would be a calendar year of 2018.
The Ministry of Finance has argued that the reason why the transitional provision shall apply is that the withholding tax is a form of income tax, which although collected differently from other forms of income tax, should not be detached from the customary tax period applicable to the particular tax payer.
The Ministry of Finance therefore sees the date 1 January 2018 as the date from which the new statute of limitation shall apply, as this is when the first next full tax period for the majority of the individuals and the legal entities starts.
UniCredit GSS Czech Republic continues to push for more clarity and will update you once new information becomes available.
Impact on investors:
The new statute of limitations of two years from the payment date is most likely to be only applicable to withholding tax paid on securities income as from 1 January 2018.