Czech Republic cuts India Inc tax rate

NEW DELHI: The Czech Republic is going all out to woo investors by offering an array of tax sops including a five-year tax holiday.

Pitching the East European nation as an attractive investment destination for Indian companies, Czechinvest South East Asia executive director Jaromir Cernik said, ”The government is proposing to bring down corporate tax rates from 24% at present gradually to 19% by 2010. This is besides a five-year tax holiday”.

These tax proposals have already been approved by the country’s parliament and are expected to be inked by President by mid-October or November, he said.

Investors setting up base in the Czech Republic would also be eligible for exemption on dividend. The withholding tax (tax deducted at source) rate which is at 25% at present is being brought down to 5% from next year. This means that when any investor repatriates income other than dividend which is tax exempt, it would be subject to lower tax rate of 5%.

Companies investing in research and development would also be able to claim 100% deduction for the expenditure. Moreover, the industrial parks offer land to companies at reduced rates. There is no restriction on foreign investment in the country except certain sectors like weapon manufacturing and mining.

A large number of Indian companies like Tata Tea, Ashok Leyland, Vectra group, Alok Industries, Infosys and Glenmark have already established their base in the country which became a part of EU in 2004.

“Czech Republic offers a gateway to Europe. Since, it is a part of the European Union, goods from Czech Republic can enter Europe without encountering any barrier of customs. It would soon become a part of the Schengen visa regime,” he said.

For companies in IT and ITES segment catering to European clients, the country also offered language as well as time-zone advantage.