Daně a legislativa ČR
How to Tax Dividends from Foreign ETFs
Key takeaways
- Dividends are always taxed at 15% — the time test does not apply to them.
- Foreign withholding tax can be credited (within treaty limits) against Czech tax liability.
- Accumulating ETFs pay no dividends — you are taxed only on the gain when you sell.
- You must file an income tax return if dividend income exceeds the statutory threshold.
- Consult an advisor when dealing with significant foreign dividend income.
Dividends from foreign ETFs are taxed at 15% in the Czech Republic, and the time test does not apply to them — they are taxed every time, regardless of how long you've held the fund.
How foreign withholding tax works
When a distributing ETF pays a dividend, the fund or broker in the country of domicile (most often Ireland or Luxembourg) typically withholds tax at source. The amount depends on the fund's country of domicile and the applicable double-taxation treaty. Irish-domiciled UCITS ETFs typically pay dividends with no (or minimal) Czech withholding due to fund structures. More on the advantages of Irish domicile in why UCITS ETFs with Irish domicile.
Foreign withholding tax can be credited in a Czech tax return — but only up to the rate permitted by the relevant double-taxation treaty (typically 15%). If the foreign withholding is exactly 15%, the Czech tax liability is covered and no additional payment is due. If it's lower, you pay the difference.
When and how to file a tax return
Foreign dividend income is reported in a tax return under § 8 (income from capital assets). You must file if this income exceeds the statutory threshold for filing (verify the current figure on the Financial Administration website).
- You need a dividend statement from your broker (amounts, dates, withholding).
- Convert foreign amounts to CZK — using the Ministry of Finance uniform rate or the CNB rate (verify the current methodology).
- Keep documentation of foreign withholding tax in case of an audit.
Double taxation and treaties
The Czech Republic has double-taxation treaties with most countries where ETF funds are domiciled. The treaty determines how much of the foreign withholding tax can be credited in the Czech Republic. More details are in crediting foreign dividend withholding tax. A full overview is in taxes on ETFs in the Czech Republic. This article does not constitute tax advice — verify current rules or consult a tax advisor.
FAQ
Are dividends from an ETF taxed even after three years of holding?
Yes. The time test applies only to gains from selling securities — it does not apply to dividends. A dividend is always taxed at 15%, regardless of holding period.
How do I deduct foreign withholding tax?
In your tax return. Foreign withholding tax can be credited as a foreign tax credit, but only up to the rate permitted by the double-taxation treaty — usually up to 15%.
Why are accumulating ETFs more tax-efficient than distributing ETFs?
Because they pay no dividends. There are no annual taxable dividend receipts to report, and you are taxed only upon sale, when the three-year time test may apply.
What do I need for a tax return on dividends?
A dividend statement from your broker (date, amount, withholding), conversion to CZK, and confirmation of foreign withholding tax. Keep documentation in case of a tax audit.