Useful information for investors: How bonds are taxed

A bond is a security that, for income tax purposes, is partly subject to the general tax regime applicable to securities and partly to a special regime applicable exclusively to bonds.
Income from an investment in bonds may take two forms:

• income from a bond paid by the bond issuer,
• income from the transfer of a bond, where the taxable income is the positive difference between the income received from the transfer and the expenses incurred to acquire the bond.

Below we provide information on the taxation of income from bonds issued by an issuer domiciled in the Czech Republic, structured as follows:

• Income of a Czech tax resident and its taxation in the Czech Republic: individual, legal entity
• Income of a Czech tax non-resident and its taxation in the Czech Republic
• Income of a Slovak tax resident and its taxation in the Slovak Republic: individual, legal entity.

CZECH tax resident

Individual
Interest on bonds paid by the bond issuer is income subject to withholding tax at a rate of 15%. The tax is withheld by the issuer, and the investor receives the interest after tax has been deducted. This income is not reported in the tax return.
Interest on bonds paid by the bond issuer is not subject to public health or social insurance contributions.
Income from the transfer of a bond is subject to tax at a rate of 15% or 23%, depending on the total amount of the tax base. The investor includes it in the partial tax base for other income. The income may be reduced by demonstrably incurred expenses related to its generation. The investor is required to report the income in the tax return for the year in which it was actually received.
However, income from the transfer of bonds may be exempt from tax if one of two conditions is met.