For a year, our colleagues at RSM UK have monitored the development of Brexit and its impact on the business environment in the UK. Businesses have been preparing for this milestone for months and are, surprisingly, in a rather positive mood in this context.
However, what worries them most is the uncertainty of the government’s approach to the “extent” of Brexit. More details about the surveys and analyses are available HERE.
As for the impact on Czech businesses that are members of UK holding companies and pay dividends, interest or royalties to UK companies, these relationships will no longer benefit from exemptions under EU Directives after Brexit. As a result, Czech companies will be obliged to rely on the Czech Income Taxes Act and the Czech Republic-UK Double Taxation Convention which does not exempt such payments from tax in full (unlike EU Directives) but only limits the amount of Czech withholding tax that may be applied to such payments by the Czech Republic.
The current Czech Republic-UK Double Taxation Convention provides for the following taxation limits in the state of the source of income (withholding tax):
- 5 per cent of the gross amount of the dividends if the recipient is a company which controls at least 25 per cent of the voting power in the company paying the dividend (15 per cent in all other cases); and
- 10 per cent for industrial royalties (such as the use of any patent, trademark, and know-how) and no possibility of taxation in the state of source in the case of copyright; and
- no possibility of taxation in the state of source in the case of interest.
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