Exemptions from paying corporate income tax (exempt income or income that is not subject to tax)

The following text provides information on exemptions from income taxation in the Czech Republic, such as income that is not subject to tax and exempt income.

In general, for legal entities, all income is subject to taxation in the Czech Republic. The law provides for exemptions where selected income is not subject to tax or is exempt income.

Here we must point out that the costs related to such income cannot be applied to the tax base.

Income not subject to taxation

Legal entities in the Czech Republic exclude from income tax, for example, income from privatisation and income from restitution. Some other income may be excluded by health insurance companies and associations of unit owners.

Much more commonly you will encounter the exclusion of income from taxation by publicly beneficial taxpayers. These taxpayers do not tax, for example:

• income from subsidies and other public support,
• income from non-business activities, if these activities are loss-making,
• income from the lease and sale of state property,
• tax income, fees and similar performances accruing to a municipality or region,
• …

Exempt income

If you, as a legal entity, are a recipient of the following income in the Czech Republic, you will not include this income in your tax base. This is tax-exempt income.

For example:

• income from membership fees at associations, trade unions,
• income from rent in housing cooperatives,
• a foundation's income from assets invested in the endowment principal,
• interest income from public collection funds,
• income related to volunteer service,
• profit shares paid by a subsidiary to its parent company,
• income from royalties accruing to a business corporation that is a resident of an EU state,
• interest income accruing to a health insurance company,
• …

In addition, you will not tax certain types of gratuitous income. This is income for which there is no consideration from the recipient. As examples of this income, we can mention:

• income from an inheritance or bequest,
• income from property benefit in the case of interest-free loans, loans or precarious loans up to CZK 100 000, and
• donations received for charitable and humanitarian purposes,
• donations received as part of a public collection,
• income of non-profit organisations used for public benefit purposes (e.g. education, culture, social and environmental purposes).

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