A draft amendment presented to the chamber of deputies would transpose, into Czech law, an amendment reflecting an EC Directive on the mandatory automatic exchange of information in the field of taxation. The draft amendment introduces the automatic exchange of information concerning tax rulings with cross-border elements. In the Czech Republic, this would only involve the exchange of advance pricing agreements (APAs), since other types of binding rulings do not include a cross-border element.
The deadline for transposition is 31 December 2016. Consequently, the Czech government has proposed to “fast-track” this draft amendment in the chamber.
In the Czech Republic (as well as other EU countries), taxpayers may ask the tax authority to assess and issue a ruling concerning transfer prices applied between related parties within a group of companies. The European Commission’s recent inspections show, however, that some European tax authorities’ decisions in this respect may have affected the distribution of profit between or among various EU Member States. In some instances, the EC had considered that such rulings may constitute a breach of EU public aid rules. With the directive, EU Member States automatically will have information about APAs affecting their tax revenues at their disposal.
The automatic exchange of information would involve, apart from other information, the identification of the entities involved in the APA, the APA’s content in summary form, a description and value of a transaction, the selected transfer pricing method as well as the designation of the EU Member State that may be affected by the APA. The APA’s full text would only have to be submitted to the appropriate tax authority on demand.
The amendment is expected to be effective 1 January 2017. Tax authorities within the EU would begin to exchange information about all APAs issued in the period from 1 January 2012 to 31 December 2016 and effective on and after 1 January 2014, on a one-off basis. The deadline for conducting this one-off exchange would be 31 December 2017. After that, the automatic exchange of information would occur regularly, always twice a year. The Czech General Financial Directorate would be responsible for processing received information regarding APAs issued abroad as well as APAs affecting Czech entities.
In August 2016, the Ministry of Finance submitted for public comments an amendment to the Czech law concerning implementation of country-by-country (CbC) reporting—another type of automatic information exchange. Under this provision, corporate groups would be required to prepare reports and disclose information relevant to an assessment as to whether the group’s tax base has been justly distributed between the separate EU Member States and jurisdictions.
The EC has expressed its position that CbC reporting will help introduce fairer economic competition among multinational groups. The CbC reporting obligation would apply to groups whose ultimate parent entity is located in the EU, as well as to groups that are managed from non-EU countries, but only to multinational corporate groups that have consolidated income for the entire group of €750 million (approximately CZK 20 billion) or more. This legislative amendment is proposed to be effective from 5 June 2017.
Read an August 2016 report [PDF 575 KB] prepared by the KPMG member firm in the Czech Republic
The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.