Let us remind you of the two changes in income tax with an international element, which already have or are soon expected to come into effect (or to the end of the applicable time limit).
1. Controlled foreign company rule – the duty to “additionally” pay taxes in the Czech Republic for certain foreign subsidiaries (both direct and indirect), generally if they do not carry on a substantive economic activity and the respective foreign tax is lower than a half of the Czech tax that would apply if the subsidiary’s tax base were subject to Czech tax and its income generated in the Czech Republic. The rule is applied for the first time to the tax period that is the fiscal year starting after 31 March 2019 and the calendar year of 2020.
2. Obligatory reporting to the tax authority of cross-border structures (potentially) providing a tax advantage – a precise description including the given tax advantage must be provided to the tax authority; this will apply retroactively to structures implemented from 25 June 2018! Depending on the time aspects of the specific structure or its changes, the report must be submitted by 30 January, 28 February or 30 April 2021.
Do not hesitate to contact us regarding this matter. Our experts will examine your particular situation and we will find the best solution/remedy, or assess the risks.
By David Nevesely, Partner, David Krch , Tax Partner, and Josef Zaloudek, Counsel, Havel & Partners