New taxation on bonds and coupons

UniCredit Bank Czech Republic and Slovakia,a.s.
New taxation on bonds and coupons entered into force on January 1, 2021
Mon, 04/01/2021

On 31 December 2020 the Czech Parliament has approved the following new rules on bonds and coupons. Effective date is 1 January 2021.

Zero-coupon bonds:  Income paid from zero-coupon bonds at maturity will not be subject to withholding tax (WHT), instead investors will have to register to the tax authorities in Czech Republic and file a tax return in Czech Republic. The tax base will be calculated as the difference between the nominal value (or early repayment price) and the discounted price at which the investor acquired the bond,  income from bonds paid to a non-resident outside the EU/EEA will be subject to a so-called “tax collateral/tax securing” of 1 percent calculated from the nominal value of the bond. This tax collateral/tax securing will be withheld by the issuer of the bond and it will be transferred to the respective Tax Authority. 

Coupon bonds:  Coupons will remain subject to WHT. In case the investor buys the coupon bond for a price lower than its nominal value, the positive difference paid at maturity will not be subject to WHT, but it will be subject to the same treatment as described for zero-coupon bonds (i.e. tax return will have to be filed in Czech Republic and income will be subject to tax collateral, unless the double tax treaty prevents Czech Republic from taxing the income). 

Redemption/early redemption of bonds: (Early) redemption of bonds (e.g. the issuer buys the bond back but the bond remains existing) will not be subject to WHT, instead it will be treated as a sale of the bond. 

Government bonds:  Yields from bonds issued by Czech Republic as well as other EU/EEA member state will be exempted from tax in Czech Republic. 

Limitation of exemption of income from sale of securities:  The exemption for an individual’s income from the sale of securities (including an equity certificate), or income from a share attributable to a participation certificate in the event of dissolution of the mutual fund, is newly limited to CZK 20 million for one taxation period. 

For more detailed information please contact the UCB CZ Relationship Management Team: 

Impact on investors: Clients need to evaluate the potential impact on their coupons and bonds processing.