Shareholder Loan to a Czech s.r.o.: Interest, Thin-Capitalisation Limit and Withholding Tax
You can fund a Czech s.r.o. with a simple written shareholder loan: no notary, no court filing, no minimum interest if you are the lender. Three tax rules decide whether it works. Interest on related-party debt above four times the company’s equity is not deductible. Interest paid abroad is subject to 15% Czech withholding tax unless a treaty or the EU exemption applies. And a sole shareholder must sign the contract with certified signatures.
Updated: 2026-10-16 · Tax year 2026. Based on Czech law in force in 2026. General information, not tax or legal advice. Treaty rates depend on the lender’s country of residence.
Why owners lend instead of raising share capital
A Czech s.r.o. can be founded with CZK 1 of share capital, so most new companies are funded by their owners in some other way. A loan is the fastest: it is repaid whenever the company has cash, repayment of principal is not taxed, and nothing changes in the Commercial Register.
The alternative is a contribution outside share capital (příplatek mimo základní kapitál). It is equity and carries no interest.
| Shareholder loan | Contribution outside share capital | |
|---|---|---|
| Legal form | written loan agreement (smlouva o zápůjčce) | shareholder’s contribution with the director’s consent |
| Interest | optional | none |
| Counts as equity | no | yes |
| Getting money back | per contract | general meeting decision, only above accumulated losses |
| Effect on the 4:1 limit | increases debt | increases equity |
What the contract needs
Czech law calls a money loan between non-banks a zápůjčka (Civil Code, § 2390). The agreement should state the amount, currency, interest rate (or that there is none) and maturity date.
Two points catch foreign owners:
- No maturity date means six weeks’ notice. If the contract is silent, either side can terminate with a six-week notice period (§ 2393). Fix a date, or agree your own notice terms.
- Sole shareholder: certified signatures. A contract between a single-member company and its only shareholder must be in writing with officially certified signatures, unless it is concluded in the ordinary course of business on usual terms (Business Corporations Act, § 13). A founder’s loan is rarely that.
The loan is not registered anywhere. It shows only as a liability in the annual accounts the company publishes.
Can the loan be interest-free?
Yes, when the lender is the shareholder. Czech transfer-pricing rules require arm’s-length prices between related parties, but the Income Taxes Act makes an explicit exception where interest is lower than the market rate and the lender is a non-resident, a Czech-resident member of the company, or an individual (§ 23(7)).
On the borrower’s side, the benefit of not paying interest is exempt up to CZK 100,000 a year per lender (§ 19b(1)(d)). Above that, the company adds the benefit to its tax base and deducts it again if the money finances taxable business (§ 23(3)(a)(14) and (c)(8)): neutral in an operating company, but it must appear in the return.
Your home country may see it differently and expect market interest.
The 4:1 thin-capitalisation limit
If you do charge interest, the company deducts it only within limits. Under § 25(1)(w), interest on loans from related parties is non-deductible on the part of the debt that exceeds four times the company’s equity (six times for banks and insurers). A shareholder with at least 25% of the capital or voting rights is a related party.
Equity means accounting equity (vlastní kapitál): share capital, contributions and retained profits, less accumulated losses. A start-up with CZK 1 of capital and first-year losses has zero or negative equity, so none of the interest on its shareholder loan is deductible. Interest-free loans are left out of the calculation.
A separate test caps net borrowing costs at the higher of 30% of tax EBITDA or CZK 80 million (§ 23e); small companies stay far below it.
Worked example
An EU parent company owns 100% of a Czech s.r.o. with equity of CZK 500,000. It lends the s.r.o. CZK 3,000,000 at 7% for the whole of 2026.
| Item | Amount |
|---|---|
| Interest charged for 2026 (7% of CZK 3,000,000) | CZK 210,000 |
| Debt allowed under the 4:1 limit (4 × CZK 500,000) | CZK 2,000,000 |
| Excess debt | CZK 1,000,000 |
| Non-deductible interest (7% of the excess) | CZK 70,000 |
| Deductible interest | CZK 140,000 |
| Extra corporate tax at 21% on the non-deductible part | CZK 14,700 |
| Czech withholding tax at 15% on CZK 210,000, before any relief | CZK 31,500 |
If the parent first converts CZK 250,000 of the loan into a contribution outside share capital, equity rises to CZK 750,000 and debt falls to CZK 2,750,000. The limit becomes CZK 3,000,000 and all remaining interest is deductible.
Withholding tax on interest paid abroad
Interest paid by a Czech company to a non-resident is Czech-source income. The s.r.o. withholds tax when it pays or credits the interest and remits it by the end of the following month (§ 38d).
| Lender | Czech withholding tax on interest |
|---|---|
| Resident of an EU/EEA state or a country with a tax treaty or information-exchange agreement | 15%, reduced if the treaty sets a lower rate |
| Resident of any other jurisdiction | 35% |
| EU company directly holding at least 25% for 24 months, with a tax-office decision | exempt (§ 19(1)(zk)) |
| Czech-resident individual | no withholding; the lender declares interest in their own return |
Check the treaty with your country before the first payment and keep a tax-residence certificate on file. The EU exemption is not automatic: the lender must obtain a decision from the Czech tax office (§ 38nb). Even exempt or treaty-protected interest paid abroad has to be reported (§ 38da).
If the lender is an individual who does not keep accounts, the company deducts the interest only once it is actually paid, not as it accrues (§ 24(2)(zi)).
FAQ
What interest rate should I charge my Czech company?
The rate an unrelated lender would charge a comparable borrower. Lower or zero is accepted on the Czech side when the shareholder lends; above-market interest is not, and the excess is not deductible.
Can the s.r.o. lend money to me as the shareholder?
It can, but the exception for low interest does not cover this direction. The company should charge market interest, and a sole shareholder again needs certified signatures on the contract.
Is it better to take profit as loan interest or as a dividend?
Interest reduces the company’s 21% tax base within the limits above; a dividend does not. Both normally carry 15% withholding. The full comparison is in salary vs dividends in a Czech s.r.o..
Set the financing up before the first transfer
We book the loan and interest correctly and handle the withholding tax filings. See our accounting services in the Czech Republic or start with company formation.