"Taxation of one-crown bonds" - Income Tax Act amendment effective from 01/01/2020

UniCredit Bank Czech Republic and Slovakia,a.s.
Mon, 20/01/2020

UniCredit Bank Czech Republic would like to advise its clients of the recently amended sections of the Income Tax Act that deals – amongst others – with the taxation of government issued bonds having the nominal value of one Czech crown.

The amendment to some tax laws aiming to increase revenues of public budgets, referred to as a rate package, was submitted to the deputies’ chamber in June and was passed by the end of 2019 with effective date set for January 1st 2020.

The bill also stipulates the taxation of one-crown bonds in a transitional provision applicable to Section 36 (3) of the Income Tax Act (which, however, remains unchanged by the proposed amendment).

In the taxation periods following the amendment’s effective date, interest income from bonds with a low nominal value issued before 2013 would no longer be rounded (down) for each individual security; this treatment in effect meant not taxing this income at all. Under the amendment, the generally applied rounding whereby the tax base (i.e. the interest income) is not rounded, and only the final tax is rounded, for each taxpayer, would apply to all bonds, regardless of the date of issue.


Impact on investors: The amended Tax Law would have an impact on all investors having the position or planning to open a position in the a.m. government issued securities.